Though overhyped, blockchain holds promise in travel

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Photo Credit: Robsonphoto/Shutterstock

Pedro Anderson, founder and COO of the nonprofit travel distribution platform Winding Tree, is something of an evangelist for open-source computer code, calling it "the only way to truly innovate." 

It's also a foundational value of Winding Tree, which develops in blockchain, an open-source technology.

"If you look at most of the innovations that we're used to and so comfortable with today -- email, phones, for example, even Macs and Apple and Android devices -- those are all built on open-source technology," he said. "Without open-source technology, you can't accelerate at the same pace."

Unlike proprietary code, open-source code is made freely available and may be redistributed and modified. That means that if a developer is working to solve an isolated problem, others can use the resulting code and build upon whatever progress that developer makes.

At the moment, the industry is just beginning to explore the potential of blockchain in travel solutions. Winding Tree, for example, is one of a number of industry players, including IATA, that are mulling how blockchain-based technology will impact airlines. 

Its ultimate uses are unclear, as is its possible impact on travel advisers, which depends heavily on how it is ultimately adopted and applied by suppliers.

Whatever that eventuality, Phocuswright analyst Norm Rose thinks blockchain has already been hyped to excess.

"I think that the reality of blockchain is like every emerging technology," he said. "It's been overhyped, and now it's kind of sliding down that Gartner Trough of Disillusionment."

Rose was referencing research company Gartner's theory of a new technology's hype cycle. According to that theory, innovation is triggered and leads to a Peak of Inflated Expectations, then drops dramatically to the Trough of Disillusionment before slowly rising again until the technology is used productively and its promise matches expectations.

Rose, who is also an adviser to Winding Tree, added, "I actually think [blockchain] has been overhyped so much already that now we're looking for actual, practical issues here."

Winding Tree's foray into the blockchain-and-airlines space began last month with a hackathon that brought together startups, airlines and more.

The key thing for agents to watch for is someone creating a desktop solution for agencies that employs blockchain technology to access more content.

Blockchain was initially created more than a decade ago to execute and secure transactions of the cryptocurrency bitcoin, but many believe its technology has potential in other areas. 

A blockchain database stores information in blocks across multiple computers on a peer-to-peer network. Transactions are verified by "miners" who are compensated for verifying transactions, which are then immutable.

Winding Tree has recently entered into several airline partnerships, such as with Air France-KLM, which joined the company at the hackathon. Anderson said the event was successful largely due to the fact that it drew a wide variety of participants -- airlines, startups, blockchain experts -- thanks to the open-source nature of Winding Tree's platform.

Evidence of collaboration was clear when the team from Air France included an application programming interface from competitor Lufthansa, another participant, as part of a solution it created to aggregate airline inventory and make it accessible on a website. The solution isn't complete, but it will contribute to further development, Anderson said.

"The roundtable saw very lively discussions around the future of the platform, the role of open source in the industry and the business cases for suppliers specifically," he said. 

As identified during the roundtable, the areas of the airline industry that could be most impacted by blockchain were distribution cost, the pace of innovation, the barrier to entry for startups and the level of control that airlines have over the distribution process, said Anderson, who added that he believes blockchain will have applications in distribution, aggregation, settlement and other areas.

Rose pointed out that transactions completed via blockchain are still very slow, with only a handful taking place every second, in stark contrast to the thousands of credit card transactions that can occur every second. Regarding airlines, he sees the most near-term applicability being loyalty programs: storing and tracking data and sharing it across alliance partners.

IATA is exploring several uses of blockchain, according to Houman Goudarzi, manager of innovation, financial and distribution services. Like Phocuswright's Rose, Goudarzi maintains there is still a lot of hype around blockchain, but he argues that it does have benefits related to integrity and immutability.

IATA began looking at blockchain in 2014, investigating ways to use the technology to solve existing problems. For example, he said, IATA is looking to make its own financial systems more efficient so airlines benefit from faster transactions.

IATA is also looking at applying blockchain to digital identity management, which would help limit exposure to risk. For example, think of an airline issuing a ticket to an agent. It's important that the carrier knows who the agent is, and blockchain could securely authenticate a user's identity.

The first substantial wave of blockchain implementation in the travel industry will likely be for settlement and recording, according to panelists at ARC's Travel Connect conference outside of Washington last month.

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Goudarzi said IATA is also considering "smart contracts" that explicitly state guidelines, are triggered by an event and fulfill contractual terms. 

For example, he said, when a plane lands, the airline pays a fee to the airport based on a formula the airport sets, usually taking into consideration the type of aircraft. A smart contract knows the type of aircraft that is landing and the formula for charges, so the plane's landing is the event that triggers the contract to be executed.

"This way, you're getting rid of the enforcing of contract, monitoring compliance, the reconciliation, billing and invoicing," Goudarzi said. "It's all pretty much avoided."

It's difficult to predict how long it will take to introduce blockchain technology to the airline industry at scale, Goudarzi said. Implementation also faces challenges in governance, scalability and the cost of transactions.

Winding Tree hopes to have distribution infrastructure for airlines in place next year. It already has infrastructure in place for hotels, which is nearly complete.

Blockchain's impact on agents depends on the uses that can eventually be adopted at scale, Goudarzi said. For example, agents would likely recognize efficiencies from digital identity management that leverages blockchain technology, and they would also be better protected from fraud.

Rose said blockchain technology could also change the settlement process.

"There might be a faster payment rather than [what] exists today and maybe settlement directly with the airlines," he said. "I think that area of payment and speed -- whether it's speed collecting commissions or speed of just resolving and finalizing a transaction -- is going to benefit the travel agents."

The key thing for agents to watch for, he said, is someone creating a desktop solution for agencies that employs blockchain technology to access more content, perhaps in the form of an app for an existing workspace, such as Sabre Red. 

"I think that's where the focus has to be from the travel agent's side," Rose said.

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