May 2019, London
Europe's biggest event for commercial and digital travel execs
Nordic Choice ‘not at war with OTAs’ over blockchain
As the first guests book hotel inventory using the Winding Tree platform, should the current distribution heavyweights be alarmed? Pamela Whitby takes look
Christian Lunden, the director of future business at Nordic Choice Hotels, is a nice guy. When the big hotel chains, OTAs, providers of revenue systems and so on ring him up to “find out what the heck we are doing,” he is happy to share knowledge. After all, if the decentralised, blockchain-based distribution platform that Nordic Choice has been working on with Winding Tree for the past 18 months is to succeed, it will need widespread industry support and buy-in. So far that hasn’t happened.
This week, however, Winding Tree and Nordic Choice announced the execution of the first ever hotel reservation on a public blockchain at the Swedish chain’s Hobo hotel in Stockholm.
The move is hardly significant if you consider that virtually nobody will remember the time when the first hotel booking was made over a global distribution system (GDS) or, for that matter, the World Wide Web! What is significant, interesting and, potentially disruptive, however, are the possibilities arising from distributing travel products and services on a public blockchain. As Winding Tree, COO, Pedro Anderson, says: “There are many efforts by travel industry middlemen to create private permission-based blockchains, which maintains their control and does not remove any layers, but what’s the point of so-called ‘decentralised’ technology if it is regulated by an entity?
While much of the rhetoric around blockchain has been around the ‘war with the OTAs’ over high commissions this is not Nordic Choice’s main motivation. “Of course it’s a good thing if we can in some way lower our distribution costs. But we like to pay companies to help us sell our rooms and doing it this way means that no one owns the platform and can’t be too dominant in the market,” Lunden says.
So, at Hobo, Nordic Choice is playing middleman to test the platform directly with the consumer, but this B2C angle is not the main reason for the group’s blockchain efforts, and is not the recipe for succcess.
What’s the point of so-called ‘decentralised’ technology if it is regulated by an entity
Instead, Nordic's efforts are focused on getting its inventory in one place so that innovative start-ups can access it. Today this is not possible thanks to the market dominance of big distribution platforms in both the B2B and B2C space. However, Lunde says that when his out meeting different start-ups, “what they inevitably want is access to our inventory so they can prove their service”.
As it stands, it’s just too costly and cumbersome for start-ups which today need to, for example, request API integration for every single hotel. “For these companies, it would be awesome to be able to pick inventory from many different hotels that are all in one central place,” he says.
Never mind hotel inventory, if airlines, ground transportation, and even retail services join the blockchain, then this opens endless possibilities for dynamic packaging for the end user.
To sum up, Lunde sees three main B2B opportunities for an open, public blockchain:
- Giving many more companies, including start-ups various ways to access travel inventory and/or services
- Lowering the cost of third-party reservations that currently must go through an OTA
- Controlling the distribution costs meted out by today’s third parties. In an already margin tight industry, this makes it harder than ever for start-ups to thrive.
One of the reasons for Nordic’s B2B focus is that it acknowledges the struggle for consumer adoption. In fact, it is now widely acknowledged that any B2C platform must just work; the consumer doesn’t need to hear the blockchain hype. That’s why the B2C test, now underway at the Hobo in Stockholm, also gives consumers the option to book in fiat currency.
Explaining the reason for creating a live environment for consumers, Lunde says: “It allows us to try out the technology and see if the process is working.” In parallel, the group has called on eRevMax, its partner that currently distributes Nordic’s inventory to the OTAs, to build an interface to the Winding Tree platform. “This means that today we have room availability integrated on the blockchain for one hotel but we can, more or less, press the button and we will have it for all our 170 hotels,” he adds.
The next step will be to see what other products and services third parties could add to the platform for the benefit of Nordic’s end users.
A new paradigm
A major criticism of blockchain is the vast computing power required to handle large numbers of transactions. But Lunde doesn’t see technology hiccup as an issue - in the 1990s dial-up modems were, for example, excruciatingly slow, but this quickly improved. “In more or less two or three years we will see something that will scale. It is still early days, we are still trying to figure out how it works and when the technology will be mature enough to start using,” he says.
In more or less two or three years we will see something that will scale
Matt Baer, CEO of KeyoCoin, another company building a blockchain market place, agrees: “There’s a healthy skepticism in the hospitality industry around this nascent technology, and that needn’t be a bad thing. The industry is still ironing out the best way to integrate it with a very mature hospitality market, so it is a little early to be expecting industry-wide adoption quite yet.”
Nevertheless, Baer, who contributed to EyeforTravel’s loyalty white paper, believes that “blockchain offers a new paradigm for data ownership. It gives consumers the opportunity to share their data with the companies they want to, and get paid when they do”.
In the hot seat
Nordic Choice, which has been a digital company for three years, and now has 150 people focused on the digital transformation journey, is ahead of the game in trying new things. While this is helped by having an owner who supports a first-mover approach, that might not be enough. “For me it is really important that the whole industry does something together. If we are alone on the platform, then it won’t be of much use to us. We need to be very many hotels, airlines and so on for this to have value, for it to become a great thing.”
For some it is still too early to take the plunge, while others fear disintegration of existing business models. But, it’s not just blockchain that is keeping people awake at night. In fact, some would argue that Google, Apple and Amazon pose an even big threat, especially when voice-activated search eventually goes mainstream. B2B research firm Markets and Markets says the industry says the voice and speech recognition market is expected to grow by $7.5-bn in 2018 to $21.5-bn by 2024.
Very soon then, travel buyers may want to sit in a car and book their holiday via Alexa, and when they do, that inventory is going to come from somewhere, and it is not going to be an OTA. Whether this comes from a Winding Tree type platform or Google itself, Lunde does “not have a clue”, but he is pretty confident that within five years the distribution landscape will look completely different.
With our London event over next week, it’s now time to look ahead to upcoming shows. Join us in Chicago (Oct 28-29) or Amsterdam (Nov 28-29) to hear more about how the rapidly evolving, fragmented travel industry is evolving