Some think blockchain can help decentralize travel distribution, which has historically been dominated by a small handful of players. These entrenched companies, however, see blockchain as a technology that can help fix some of the inefficiencies in the travel distribution marketplace without fully disrupting the status quo.
Whatever you think of blockchain’s transformative potential in the travel space, it’s now clear that some of the biggest companies in the sector are working to implement the technology in the near future.
From TUI to Travelport, major players are experimenting with blockchain to solve some of the most intractable problems in the ecosystem. While they don’t want to decentralize travel distribution, they are keen on using blockchain to make distribution more affordable for fringe players.
Travelport’s chief architect Mike Croucher has been overseeing the distribution technology company’s blockchain efforts, and thinks blockchain has more of a chance to streamline hotel distribution than revolutionize how flights are sold and packaged for travelers. He should know; Croucher spent more than a decade in a variety of roles at British Airways before joining Travelport in 2014.
“If you look at an individual airline reservation, I don’t believe they’ll put it on a blockchain,” said Croucher. “People think that blockchain’s going to distribute inventory across airlines. I don’t think it will in a hurry because the infrastructure that the airline sits where they’ve got the inventory, they’ve got their revenue management, they’ve got their passenger records. It’s a heritage infrastructure, it’s run by the airlines probably for the last 30 odd years. It’s the heart of the airline and any major change to that would be a major undertaking by any airline to try to take that processing out.”
Skift spoke to Croucher about how blockchain fits into Travelport’s overall technology strategy, its promise for solving payment issues, and why private blockchains will likely be embraced by travel companies going forward.
This interview has been edited for length and clarity.
Skift: Blockchain is only one part of what your technology operation is working on. How do you view the technological changes in the marketplace and what areas are your team most invested in?
Mike Croucher: I think we’ve gone, like most companies, on a digital journey over the last 3 to 4 years. I’d say you’ve got that [layer] of the Internet of Things that’s interacting with the traveler. Then, wider than that, the artificial intelligence and data analytics that is within that ecosystem, then, how do I react? And, what’s the next best action for the traveler? Personalization, wait time, and all that.
Then, we’ve invested heavily in cloud computing and the hybrid cloud to really drive that abundance of compute power that allows you to go into that whole digital era.
When you look at that, as a company, we then say that traditionally, we’ve been a B2B process, heavily around owning the system of records and the [passenger name record] and the ability to actually synchronize everything. The systems of records and processes there, we still feel fundamental to our business model going forward. But, everybody’s putting on top of that in a digital way and we’re doing the same. We’re pushing it quite heavily.
Apart from the systems of record, you’ve got your systems of intelligence. If you think what Uber is, it’s a system of intelligence. It uses data, analytics, and artificial intelligence to connect suppliers and the consumer world. So we’re looking at that systems intelligence layer. The systems intelligence layer’s got that type of technology in it. I think it includes blockchain as one of those technologies within that system’s intelligence.
And then, above that, we’re now looking at what we call systems of engagement. That’s new channels to engage, not just the web channel where it’s been traditionally, not just the mobile; but social media, virtual reality, and augmented reality. Finding the people going to new channels of engagements; Snapchat, Instagram, things like that. You need to be in the channel people are in to engage with them. To do that effectively, you need the right systems intelligence below.
Skift: Crypto enthusiasts and crypto Twitter are keen to point out that private blockchains don’t push forward the goal of decentralized networks and marketplaces. I assume when you’re talking about what Travelport is working on, you’re focused on private blockchains, right?
Croucher: The public blockchains are your classics where you’ve got the cryptocurrencies going and Bitcoin. To be frank, I dismiss that slightly for us as an organization. I’m a lot more interested in the private blockchain. Why the public blockchain? Because, it needs to be distributed across multiple nodes, so many nodes. The cost of finding the next cryptocurrency key is very expensive.
If you get into the private Blockchains, you can compromise a bit on that in the generation of crypto keys, the numbers of nodes you have and things like that. That means that you can implement across that a number of small contracts. Where we really see the benefit of blockchain in travel is the smart contract used in the technology. That means using blockchain in that systems of intelligence layer [because] it gives that ability to put a smart contract across a distributed ledger.
Skift: So less about just putting data in the ledger, and more about being one component of a larger system. How far along are you on your experimentation with blockchain, and what have your takeaways been so far?
Croucher: We’ve looked at it and we’ve gone through the concept and we’re moving forward to a minimum viable product. By implementing a smart contract, [settling payments] can be taken care of within the blockchain. I think that the first learning for us on blockchain was that blockchain’s no more than a database technology that’s distributed. I think a lot of people are chasing Blockchain to put it in [their services] because it sounds like you ought to. So, there’s a hype around it.
If you can find a use case for blockchain where it takes out a significant amount of processing that you do today, because it manages diverse ledgers across multiple companies in a way that takes manual processing and other processing out, then you’ve got a good use case of blockchain. We’ve certainly seen that as one instance in low-cost content where you’re actually removing large processing costs. You’re having transparency, it’s very key so that there’s transparency to the transaction and there’s a trust across that that works. And, you put that trust transparency across it, it reduces the processing costs.
It’s putting the ability for the producer to self-serve on uploading, contracting and administration within that Blockchain rather than somebody actually managing and owning that which is normally the expensive part of transactions.
Skift: So you hope to get more of that long-tail hotel content in your systems by making it more affordable for hotels to join. Why has the distribution landscape been so inefficient at dealing with these issues?
Croucher: The supply chain in travel is quite diverse. And, each supplier in travel has their own way they operate. So, if you’ve got your travel content, you’ve got to understand all those [systems] and pool them together.
From a traveler’s perspective or a buyer’s perspective, do you want the data normalized? Do you want to understand the flow? So, you want common flow and a common process so you normalize that. Secondly, you actually want to normalize the content so that you can understand the content and compare the content. So, I think travel’s become very expensive because the end consumer needs the simplicity of access, yet the product description at the back end, the way you contract it and the way you process it, is handled differently by every supplier in the travel chain.
On a blockchain you can harmonize that in the contracting, the processing of what I would call long-tail content which is very low-value content. So, if you’re going to put a large administration fee on it, a large segment sell fee on it, you’re not going to really be able to afford to put it on that type of a large, worldwide distributing platform like that. If you put it into a blockchain which is actually administrating that for you, you take the cost of processing out, you’re making it very cheap to upload, very cheap to consume, and the processing costs for us become quite low.
You can distribute it at a very different price point.
Skift: We’ve mostly talked about hotel distribution so far. Do you see an opportunity for blockchain in the air ticket distribution marketplace, as well?
Croucher: If you look at an individual airline reservation, I don’t believe you’ll put it on a blockchain. It’s a system of records: this is the reservation, it sits with our airline. People think that blockchain’s going to distribute inventory across airlines. I don’t think it will in a hurry because the infrastructure that the airline sits where they’ve got the inventory, they’ve got their revenue management, they’ve got their passenger records. It’s a heritage infrastructure, it’s run by the airlines probably for the last 30 odd years. It’s the heart of the airline and any major change to that would be a major undertaking by any airline to try to take that processing out.
Blockchain needs an ecosystem of airlines to do it. Therefore, they’ve all got to go at the same pace together and I just don’t think that’s going to happen. So, I don’t see blockchain heavily being used in that respect and I know many people in the industry are saying it’s going to change the way airlines put inventory and distribute inventory. I, personally, don’t see it. I think, not in the next five to seven years at least. I think where you may see Blockchain being used in the airline industry is in the way we do settlement.
There’s plenty of other uses for blockchain out there and other more valuable things to go after than solely attacking that. I think where you will see blockchain being used is not so much the change of inventory between the airlines, but for the individual traveler. If you think of yourself as an individual traveler, somebody will eventually come up with a traveler wallet or traveler identity-type concept where the traveler has the distributed inventory pooled together in the blockchain, all their items in a trip. Today, if you book on five or six different suppliers, you personally have to manage that itinerary or trip across those things.
There’s a potential application of Blockchain that says, “Actually, we use it from a customer point of view to join together that distributed ledger.” The ecosystem becomes the partners that you’re working with before your trip and there’s an opportunity there. I think we’re looking at proof for concepts along that concept, as well, to say, “Can we take it from the customer angle rather than the supplier angle?”
If you take that slightly further, you would say, “As a customer, I’ve got distributed ledger or distributed inventory with many suppliers around my loyalty points. Why don’t I join those together for loyalty points on blockchain?” I can join them together and therefore I can make payments and contract from a combination of loyalty points rather than from one.
Skift: So how far along is Travelport when it comes to putting one of these efforts into action?
Croucher: We built proof of concepts around Christmas last year, probably pushed it around internally to understand it over the last three to four months. Currently, we’re entering the next phase which is building our minimum viable product with IBM. To be frank, what customer group we are going to target with that minimum viable product, we haven’t worked through yet. We’re beginning talks in the latter part of the year; we imagine having a button-ready capability in blockchain that we could pilot with a set of people, if we can find the right commercial model.
Blockchain’s interesting, but it’s a piece of technology. Cool, if you go back to what I was saying, the digital disruption that’s happening is a lot more interesting [overall] and if I get to the view that says nowadays, people go on a trip for the experience. Companies in the past have looked at how to sell travel to somebody. What we need to sell now is the trip and the experience.
In that experience, how much more can I offer up to make it worthwhile? Blockchain could bring in a lot of long-tail content that allows us to add to the experience things that we wouldn’t have before and a lot more of an open marketplace of that type of content that that could build into the trip.
To your point, serving that up to an individual in a way that’s consumable means that we’ve got to use the personalization, artificial intelligence, and systems of intelligence I talked about that understand what to serve up. There’s so much content there and unless we have a total system of intelligence, having the data alone is not the answer.
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Photo Credit: An NH Hoteles lobby. Bloomberg