Opinion.

Exploring the impact of blockchain technology

Dr. Andriew Lim, Professor of Technopreneurship and Innovation at Hotelschool The Hague, discusses the foreseeable opportunities for blockchain in the hospitality industry

by Dr. Andriew Lim, Professor of Technopreneurship and Innovation Hotelschool The Hague

Topic: Innovation

Click. Takeaway

  • Blockchain is a digital chain made of different bundles of data and information that is then encrypted and extremely difficult to compromise
  • There are two types of blockchain: private (permissioned) and public (permissionless). An example of public would be blockchain, whereas private is governed by a single entity
  • There are foreseeable opportunities for blockchain in the hospitality industry, including smart contracts and optimised purchasing processes
  • For hospitality businesses wanting to experiment with blockchain, it could be worthwhile teaming up with technology companies that are already developing these solutions

In general, when people talk about blockchain they immediately associate it with cryptocurrency, but the truth is cryptocurrency is only possible because of blockchain – since it’s the technology behind it. Beyond bitcoin though, there are a number of other opportunities for the hospitality industry.

But firstly, what is blockchain? Literally, blockchain is a digital chain made of different bundles of data and information (called ledgers). These blocks of data register and store transactions between individuals, encrypting the information so that it cannot be overwritten. This makes the data incredibly secure and extremely difficult to compromise.

Fatos Bytyqi, Unsplash

Photo: Fatos Bytyqi, Unsplash

It’s important to mention that there are two types of blockchain: private (permissioned) and public (permissionless). An example of the public blockchain would be bitcoin, where everyone can get involved, exchange data and keep some of that data with them – the transactions are completely transparent. Every time something’s changed, your data will also be automatically updated. Because of that, your data will keep increasing and can also be exchanged with others. Therefore the data has value which, in this example, also becomes the value of bitcoin.

On the other hand, private blockchain is an invitation-only network that’s monitored by a single entity. It’s almost the same as the public one in terms of operations, the difference being that the administrator needs to approve anyone who wants to join. This platform would be more suitable for hotels since access can be restricted and confidentiality of an individual’s personal information can be protected.

What are the potentials for blockchain?

At the moment, I see three main potentials for blockchain in the hospitality industry – smart contracts being one of them. With traditional contracts, there is a lot of manual checking and moving back and forth between middlemen – such as lawyers and banks. If this happened in a blockchain setting, however, then parties can set the conditions and the contract will be created autonomously. The smart contract is then able to execute and enforce the agreement. As long as the requirements of the contract are fulfilled (for example: if X occurs, do Y) every time there is a new set of data submitted, then that eliminates the need for middlemen on a recurring basis.

For the hospitality industry in particular, this type of application would be particularly useful when managing different properties. Take a hotel chain, for example, who manage numerous properties. With each one I can imagine there are countless agencies and third parties involved when dealing with their contracts. If they utilised the blockchain instead, it would save them a lot of cost and create much more efficient processes.

Still based on the idea of smart contracts, the second possibility is optimising the purchasing process. For instance, a hotel chain that’s part of an international franchise group may also have a list of preferred suppliers they like to buy their goods from in order to ensure specific levels of quality. If all the franchisees are using a blockchain network to buy from a specific supplier, then all orders can be recorded by the brand and reduce the cost because of the bulk buy – allowing the chain to create a better bargaining position with the supplier.

We still have some way to go before we start to see blockchain disrupting the hospitality industry

This also helps with the auditing process, as everything would be automated, meaning much more efficiency and fewer auditing activities involved. The blockchain would record the process of the supply chain, monitoring information about the product and ensuring the quality standards are met. In terms of a hotel’s internal business process, blockchain has the potential to streamline.

Finally, blockchain also has the potential enhance existing loyalty programmes. This has two benefits for the guest: firstly, they can pay for their accommodation using the points they’ve built within the company’s blockchain network. Secondly, if they think “well, I don’t need these points, but it would be nice to sell them”, then they can just transfer the value or make some kind of exchange within the network as well.

We still, however, have some way to go before we start to see blockchain disrupting the hospitality industry. The industry in general is quite a traditional one. It has more of a wait-and-see attitude, observing how other industries are adopting this new technology before putting anything in motion. It’s being looked into, but there’s not been a lot of action at this point.

For those interested in getting started with blockchain, I’d recommend collaborating with technology companies that are already developing these solutions, instead of trying to reinvent the wheel. Why? Well, not every hospitality company will have an in-house systems expert, so it might be worthwhile looking at partners with whom they can develop these existing systems further instead.


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Hero image: credit to Andre Francois Mckenzie, Unsplash. 

Dr. Andriew Lim is the Professor of Technopreneurship and Innovation at Hotelschool The Hague.

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