Benefits of Blockchain in Integrated Hotel Management Systems

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Benefits of Blockchain in Integrated Hotel Management Systems

06/01/2018

This thought leadership article from Mindtree discusses the benefits of blockchain for hospitality companies. 

Blockchain technology is radically challenging the status quo in the travel and hospitality ecosystem using math and cryptography. Blockchain is an open and decentralized datastore, where each transaction – whether financial, digital, online, inventory – is stored, linked and made secure with cryptography.  Blockchain technology is disrupting the status quo and optimizing processes from catering to customer preferences and personalizing experiences, to streamlining loyalty program and hotel distribution strategies.

Coalition Loyalty – Integrate Loyalty into Full Experience
A recent McKinsey study[1] found that, “Market capitalization for companies that greatly emphasize loyalty programs has outpaced that of companies that don’t. This may reflect the hope that deep and meaningful loyalty programs can drive long-term value –and perhaps that the information that companies with a high focus on loyalty have amassed will pay dividends in due time”.  Still, why do many loyalty programs fail to deliver long-term value? The average U.S. household has 18 loyalty memberships, but only uses one-third of them regularly.

When it comes to loyalty programs in the travel and hospitality industry, guests want a seamless experience across the journey and want to easily earn and burn points. To meet these expectations, companies must understand the wants of their guests and create an innovative loyalty program that allows customers to collect and use points at multiple providers, in real-time.

Coalition Loyalty, powered by Blockchain, is a solid stepping-stone towards this effort.  Blockchain technology can help expand single-brand loyalty programs into a multi-brand coalition loyalty partnership. Guests can leverage rewards with a range of brands within the partnership ecosystem and make use of their points in entirely new ways. Distributed Blockchain ledger technologies facilitate faster on-and-off boarding of partners, and allows companies to reconcile and audit transactions faster with the help of smarter contracts.  Additionally, coalition loyalty programs offer brands more ancillary revenue opportunities, with access to a  variety of partner products and experiences in the mix.

To fully optimize loyalty programs, customers can choose to earn cryptocurrency – founded on blockchain technology – in lieu of loyalty points or rewards. They can use earned cryptocurrency make outside transactions and purchases beyond the loyalty ecosystem.

Guest Insights and Consumer Privacy
An effective digital strategy begins and ends with understanding the needs and wants of the customer at every step of the journey and developing a strategy across multiple channels. Travel companies have started to adopt foundational big data and analytics capabilities to better understand consumer buying behavior.  This data, when properly segmented and analyzed, can yield critical insights to deliver targeted marketing, sense-and-respond messaging decisions. W This approach requires companies to collect customer data through internal capabilities or external third-party intermediaries. In order to capture quality customer insights, while ensuring privacy, travel and hospitality companies have started to explore Blockchain-based decentralized search solutions.  

Blockchain-based solutions record customer behavior –through past experiences, searches or transactions– and generates a personal identity map. This ‘persona’ allows brands to cater to individual guest preferences and habits, and leverage it across multiple brands for hyper-personalized services.  These Blockchain solutions allow each brand to ‘own’ data collected from guest interactions, but guests are in full control of deciding who else owns that data and can opt-in to sharing data across brands. When they choose to share, hotel companies can respond with relevant and targeted promotions and offerings. This incentivizes guests to share and control their own privacy preferences.

Social media and search companies are facing regulatory pressure to protect consumer privacy. Recent developments at ePrivacy Directive[2]  and the General Data Protection Regulation (GDPR)[3] in the European Union (EU) highlight the emerging trend of governments enforcing technology companies to build-in consumer privacy by design.  It is clear that actionable customer data has intrinsic value for travel and hospitality corporations.  Blockchain creates limitless opportunities for companies and ensures compliance with new regulations, allowing customers to share information in a more controlled, private manner.

Minimize or Make Travel Intermediaries Redundant
A travel company can differentiate itself from competitors in one of two key ways: Provide a superior customer experience or offer the lowest price.  Superior customer experiences can be accomplished in the previous two use-cases. For the latter, companies must reduce operating costs to lower prices. With online travel agencies (OTA) proliferating every day, booking a hotel reservation has never been easier.  However, OTAs make a commission on each reservation, which increases hotel operating costs and reduces profitability. In addition, companies don’t have full visibility into customers via OTA channels.  Hotel corporations are trying to strike a balance between pricing for visibility on major OTA channels and pricing for profitability on their own direct channels.

Blockchain creates an opportunity to eliminate transactional intermediaries such as global distribution systems, online travel agents and travel management companies. Blockchain distributed systems can enable direct transactions between travel companies and customers, enabling real-time transactions with no added fees. Real-time transaction visibility helps hospitality companies manage inventory, offer real-time pricing and streamline revenue management techniques.

Hotel Inventories on Blockchain
Blockchain ledgers can hold inventory and availability of hotel rooms, tickets and other finite offerings/services, which allow both businesses and consumers to purchase/block inventory and check availability in real-time.  When and if this inventory is connected to search and booking systems, smart contracts on blockchain can provide supply chain visibility to track transactions. End Result: Improving Customer Loyalty, Impacting the Bottom Line

Hospitality companies that excel in delivering a better cumulative customer experience tend to win in the marketplace.  Blockchain technology has entered mainstream and is very compelling because it offers a prescribed solution to some of the daunting issues within the travel and hospitality industry. Blockchain enables brands to understand their customers and personalize offerings.  When hospitality companies integrate Blockchain into their current processes, they can bolster customer experiences at every stage of the customer journey. This strongly correlates with loyal customers, faster revenue growth and stronger brand preferences.

 

[2] https://ec.europa.eu/digital-single-market/en/news/proposal-regulation-privacy-and-electronic-communications .

[3] http://www.eugdpr.org