Skift Take

Decentralized applications for hotel distribution will soon live side-by-side with existing channels.

Much of the existing literature about blockchain is very surface level so Skift Research decided to go deeper, and look at its potential to disrupt online distribution for hotels.  The result was our latest Skift Research report, The Future of Blockchain in Travel Distribution 2018, which we published last week.

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Below are some snippets of insights from the report:

Blockchain technology has started to permeate the travel ecosystem. Companies like German tour operator TUI have reportedly taken bold steps to migrate at least part of the company’s hotel data infrastructure onto a private blockchain. Whether we see wider-scale adoption of blockchain as a platform for distribution will depend on direct and indirect switching costs from existing systems.

For instance, development teams and administrators will need to retool with new coding skills to build and manage decentralized applications. Talent acquisition could prove challenging as blockchain tech competes for high performers who could earn more working with existing languages and protocols.

Nevertheless, the hotel industry is screaming for alternatives to the status quo in distribution.  Blockchain could be one answer to reducing the total cost of doing business.

The bigger opportunity for blockchain platforms could be with the independent pool of global hotel properties. On the whole, this segment is much more dependent on third parties for distribution and also tends to pay a commission premium, due to a lack of bargaining power.

On the high end, independent properties pay as much as 25 percent commission on an online travel agency booking.

Figure 10: Large Chain vs. Independent Property Commission Payout Across Channels

Source: Skift Research, The Future of Blockchain in Travel Distribution 2018

Hotels also capture a large share of their travel through direct channels. That includes websites and corporate contracts. Other channels beyond online travel agency and digital-direct can amount to a significant portion of total bookings.

Global distribution systems, travel management companies, traditional travel agencies, as well as non-digital direct bookings, including group and conventions bookings, walk-ins and room reservations, account for 40 to 60 percent of total bookings. Hoteliers will also factor these costs when allocating budget to blockchain initiatives.

What you will learn from the report

  • The basics of blockchain and how this nascent technology applies to the current travel distribution landscape
  • Learn about the more promising pilot programs and applications of blockchain in travel distribution
  • Gain a detailed understanding of the current hotel distribution landscape including the friction points that blockchain could resolve
  • Learn how the industry is thinking about blockchain in terms of timeline for adoption
  • Learn which hotel distribution channel cost breakout and why hotels choose one or the other

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Tags: blockchain, distribution, hotels, otas, skift research

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