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Blockchain Disruption – Tough times ahead for travel and tourism’s middlemen?

Are we truly ready for blockchain disruption in the travel industry? Or do even have to worry about it yet?

Disruption and Blockchain.

These two words have been used interchangeably quite often ever since Bitcoin crossed $10,000 mark.

And there’s a good reason why – blockchain has the transformational power like the internet – it can easily bring people together, create trust between them and connect them across the globe.

Blockchain 101

What blockchain offers is a distributed, online ledger or database that records every transaction taking place between the participating parties. Every transaction taking place is verified through the collective consensus of the participants within the system. Thereby making the transactions immutable and leaving no chance to fraudulent transactions.

Blockchain is still relatively new to the travel industry. This makes it very difficult to see how it will really “disrupt” everything in the long term. But one thing that everyone points to is the distribution.

So how blockchain does disrupts travel industry?

Consider the fact that hotels can create an ecosystem where doors of their rooms are opened and locked through “smart contracts” made over blockchain directly with their customers.

This means that there won’t be any need of conventional means of getting a room through online travel agencies (OTAs) like Booking.com or travel management agencies.

Not only would this work for customers who would be working directly with the suppliers but in fact hotels would love it since they won’t have to pay extra commission to consumer aggregators like Expedia.com to get customers. It’s a win – win situation.

But the real question is – are we getting ahead ourselves?

While blockchain is formidable and its impact has been far reaching in variety of industries, its effect on travel industry still seems foggy.

Consider the OTAs, which themselves are known to disrupt the travel industry. They serve as the perfect middle men between customers and hotels, airlines and rental companies. According to PhocusWright, OTAs were responsible for more hotel bookings than the gross booking made directly with hotels in 2016 for the first time.

Serving as gatekeepers, they are funnelling customers that are looking for travelling solutions and connect them to the hotels, airlines and other companies for commissions. While OTAs are very much trusted by customers, that’s not the reason why they are being prominently being used.

First, suppliers want to advertise on OTAs since they aggregate their customers on a single platform. Even if they are not getting customers, a listing on a popular OTA like Expedia.com can offer billboard effect, having your name in front of the millions visiting the website.

The problem for them is that 100% of zero is zero. If they don’t opt to work with OTAs, they are not going to get the customers that they would otherwise. Secondly, customers frequent OTAs not because their trust them, but because of the ease of use, best prices listed in front of them and the fact they can easily do it from the comfort of their living room

Another factor that plays here is the “confidence” customers seek in making their decision. They want to get the best deals on their travels, whether it’s the hotel room at Marriott or a seat on Emirates. They can find this trust on the OTAs where all the best prices are listed in front of them, just like searching on Google but in a more detailed and aesthetically superior interface.

But there’s a dark side to OTAs as well.

Both Expedia and Priceline own almost 95% of the online travel market and also in other regions like Asia and Europe. And there’s no stopping them. They have immense bargaining power that allows them to gain more prominence in travel industry.

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