Web3 is to Web2 what Punk Rock is to Disco Music — understanding Decentralization in the Travel and Hospitality Industry
An Over-Centralized Industry
The Cambridge Dictionary defines decentralization as “The act or process of decentralizing an organization, involving the transfer of control from a single central authority to multiple smaller entities.” This concept holds particular significance in our industry, which is currently highly (over?) centralized.
Here are some eerie examples:
- Room distribution is primarily controlled by three major players: Booking Holdings (NASDAQ: BKNG), Expedia Group, and Hotelbeds (source: D-EDGE Hospitality Solutions );
- The situation is even scarier when we look at hotel reviews, where 81% are in the hands of three key companies: Booking (once again), Google, and Tripadvisor (source: Shiji Group / Shiji ReviewPro);
- The challenges become even more significant in the metasearch spece, with 99% of the traffic dominated by Google, TripAdvisor, and trivago (source: Mirai).
Centralize Et Impera
Be the disruptor, not the disrupted.
I don’t want to “techsplain,” but I think it’s helpful to start this article with a brief history lesson to grasp the distinctions between Web1, Web2, and Web3 in the travel and hospitality industry. These distinctions might appear as semantics (and, to be honest, they are), but they play a pivotal role in understanding the evolution of the web and technology, which is often far from linear. Nevertheless, categorizing them serves a purpose by offering us a broader perspective and a coherent narrative, so allow me this oversimplification:
- Web1 marked the era of static travel websites with limited online booking capabilities. Content creation was primarily in the hands of hotels, personalization was minimal, and privacy was relatively low;
Web1: The era of static travel websites with limited online booking capabilities
- Web2 ushered in the rise of e-commerce websites and the introduction of mobile apps. This era saw a significant shift towards user-generated content, providing higher levels of personalization but also being a pivotal moment for web centralization;
Forget about 1984: Big Brother started in 2004!
- Web3 focuses on asset tokenization and strongly emphasizes interoperability and decentralization. It integrates decentralized social content, offering extreme levels of personalization while emphasizing data ownership, a significant departure from the previous iterations.
In the travel and hospitality industry, we’ve witnessed missed opportunities in the past, including the e-commerce revolution of the late 90s, the rise of social networks in the mid-2000s, and the Online Travel Agency (OTA) revolution in the early 2010s. It’s imperative that we take advantage of the current transformative shift in technology this time. For once, we should be the disruptors rather than the disrupted.
For once, we should be the disruptors rather than the disrupted.
Understanding Web3 in Travel: DeFi
Let’s demystify one of the critical concepts of Web3 that may seem esoteric to many, by putting it into context: DeFi (aka Decentralized Finance). The combined value of all existing cryptocurrencies now exceeds $800 billion, with approximately $320 billion of that value attributed to Bitcoin. It’s not surprising, therefore that, according to Deloitte, 93% of businesses that have embraced cryptocurrency have reported growth in their customer base, increased revenue, and an enhanced brand image.
Now, let’s explore the benefits of integrating cryptocurrency into our business operations:
- More Secure Transactions: Cryptocurrency transactions eliminate the need for traditional financial intermediaries, making payments cheaper and less fraud-prone.
- Minimal Fees: Cryptocurrency transactions typically involve minimal fees compared to traditional payment methods, such as credit cards or bank transfers. This can result in cost savings for businesses.
- Preventing Intermediaries as Gatekeepers: By adopting cryptocurrencies, we can bypass traditional gatekeeper forms of payments (such as OTAs’ virtual cards) that control access to customer information, such as email addresses and contacts. This empowers both businesses and customers by ensuring greater control over their data.
- Reducing Costs Without Reducing Value: Cryptocurrencies offer cost-effective solutions without compromising the quality or value of the services provided.
Some companies are already making noteworthy strides in this space, such as Travala.com and Concierge.io. And, even if you might perceive this as a futuristic concept, it’s worth noting that almost every Online Travel agency out there is already exploiting the opportunity. Booking, Expedia Group, and Agoda, to name a few, have all partnered with Travala to accept crypto payments, while Despegar has formed a partnership with Binance . Booking.com has also partnered with Crypto.com, highlighting the growing acceptance of cryptocurrencies within the travel industry.
93% of businesses that have embraced cryptocurrency have reported growth in their customer base, increased revenue, and an enhanced brand image.
Understanding Web3 in Travel: Blockchain
When it comes to blockchain, we face a typical chicken and egg problem: Which came first: crypto or blockchain? From a mere historical angle, Bitcoin started it all, but -at least in our industry- we’re more interested in the infrastructure enabling crypto than the currency itself, as blockchain could democratize a highly non-democratic sector such as ours.
Here are just a few advantages:
- Secure and Transparent Data: Blockchain ensures secure, decentralized, and transparent data recording. This can be leveraged to track and distribute rewards points, coupons, or loyalty program benefits, enhancing customer engagement.
- Identity Management: Blockchain can verify customer identities securely, preventing fraud and streamlining processes like check-in. It also provides travelers with control over their personal information.
- Supply Chain Efficiency: Blockchain can improve supply chain management, ensuring the authenticity of products like food and beverages, reducing fraud, and enhancing the traceability of goods.
- Room and Seat Management: In the hospitality and airline sectors, decentralized systems can optimize the distribution of hotel rooms and flight seats, leading to better pricing, inventory management, and potentially increased revenue.
Several companies, including Lockchain, BeeToken Project, and Winding Tree, have been exploring and implementing blockchain in travel. These efforts have gained momentum in recent years, showcasing the technology’s potential beyond the initial hype.
When it comes to blockchain, we face a typical chicken and egg problem: Which came first: crypto or blockchain? From a mere historical angle, Bitcoin started it all, but -at least in our industry- we’re more interested in the infrastructure enabling crypto than the currency itself.
Understanding Web3 in Travel: Decentralized Marketplaces
Why consider starting to put some room inventory on secondary markets? If anything, because there’s a lot of money involved… Let’s look at the ticketing industry, for example. The global secondary tickets market, which includes movies, theaters, live events, and sporting events, is valued at a stunning $2.6 billion, according to Straits Research.
So, why sell rooms on decentralized marketplaces as tokenized assets? Here are some benefits:
- Enable Diverse Trading: Tokenized rooms allow for trading in various directions, including B2B (business to business), B2C (business to consumer), C2C (consumer to consumer), and C2B (consumer to business).
- Earn Income through Web3: Businesses can generate income through Web3-based platforms by participating in decentralized marketplaces, potentially increasing revenue streams.
- Enhance Travel Experience: Tokenization adds an extra layer of excitement to the travel experience, as travelers can buy, sell, and trade room tokens, adding a gamified element to their bookings.
The primary aim of these blockchain-driven marketplaces is to reduce friction in hotel bookings, create booking liquidity, and offer travelers and hotels more flexibility. They aim to democratize travel by reducing reliance on third-party platforms like OTAs and wholesalers. Decentralized marketplaces could revolutionize room distribution, creating value for travelers and hotels and they might (and, probably, will) follow a trajectory similar to ticketing, evolving from primary to secondary markets.
Tokenization adds an extra layer of excitement to the travel experience, as travelers can buy, sell, and trade room tokens, adding a gamified element to their bookings.
Understanding Web3 in Travel: Immutability, Brand and Rate Laeakage
Over the last year or so, I’ve talked to dozens of startups and more established companies operating in the Web3/Travel space, and the term that comes more often is always the same: “Control.” Web3 empowers businesses to regain control over their data, pricing, and distribution strategies, safeguarding their brand reputation and revenue. Addressing brand and rate leakage, in particular, is a significant challenge in the travel and hospitality industry, costing hotels over $1 billion annually in lost direct revenue, at least according to a Triptease study. Even in this case, Web3 applications offer a promising solution to regain control over rate parity and distribution by:
- Prevent Unfair ARI Manipulation: Web3 applications can help prevent unfair manipulation of Availability, Rates, and Inventory (ARI) by ensuring transparency and immutability in pricing and availability data. This reduces the likelihood of unauthorized rate changes leading to brand and rate leakage.
- Control Beyond Primary Sales: With Web3 technology, hotels can extend their control over inventory and pricing beyond their primary sales channels (brand.com and direct channels). This means they can have a more comprehensive view and management of their room rates and availability across various platforms and distribution channels.
- Prevent Room Sales Abusing Market Value: Hotels can use blockchain’s immutability to prevent room sales significantly above or below market value. This ensures their rooms are sold fairly, protecting their brand’s reputation and revenue.
BUK and Arise Travel are two companies successfully operating in this space, offering solutions to address brand and rate leakage through Web3 technology.
Tf you control price and inventory, you control the type of clients that show up at your door.
Understanding Web3 in Travel: Reviews 3.0
Receiving fake reviews is a common concern in various industries, including the travel and hospitality sector. According to some studies, between 30% and 40% of online reviews are fake or not genuine, which can significantly impact consumers’ trust and decision-making.
Tokenizing reviews is an innovative approach that can address this issue and bring several benefits:
- Authentic Reviews: Tokenization can ensure that reviews are tied to actual stays (proof-of-stay / proof-of-attendance) or experiences, making it more challenging for fake reviews to increase. Each review would be linked to a unique token (an NFT) representing a genuine transaction.
- Proof-of-Stay: Using NFTs or other tokens as proof of stay provides a verifiable record of a guest’s visit to a hotel or destination. This enhances the review’s credibility and assures potential guests that the reviewer indeed had the experience they are describing.
- Increased Transparency: Using blockchain and tokens increases transparency in the review process. It becomes easier for consumers to trace the source of reviews and assess their legitimacy.
- Verify and Tokenize Feedback Data: Feedback data can be tokenized and stored on a blockchain, allowing users to access a secure and immutable record of reviews. This can be particularly useful for businesses and travelers looking to verify past experiences.
- Incentivize Honest Reviews: Token-based systems can incentivize travelers to provide honest and detailed reviews. They could earn tokens or rewards for their feedback, enhancing the quality of reviews.
Imagine receiving an NFT whenever you sleep at a hotel or visit a destination. This NFT could serve as a “digital stamp” of your experience, complete with details such as check-in and check-out dates, room type, and any additional services used during your trip. Several blockchain-based projects and startups, such as Triend, are exploring the idea of tokenizing reviews to combat fake comments and enhance trust in online platforms. By implementing such systems, the travel and hospitality industry can promote more genuine and reliable feedback, benefiting both businesses and consumers.
Imagine receiving an NFT whenever you sleep at a hotel or visit a destination. This NFT could serve as a “digital stamp” of your experience, complete with details such as check-in and check-out dates, room type, and any additional services used during your trip.
Understanding Web3 in Travel: Universally Unique Identifiers
Decentralized identity management through wallets is another intriguing concept with significant potential benefits in our industry, where guest and traveler profiles are scattered across various siloed software platforms. Here are some advantages of implementing decentralized identity management through Web3 wallets:
- Protect Sensitive Information: With decentralized identity management, travelers can have more control over their data. They can choose what information to share and with whom, reducing the risk of breaches or misuse of their data.
- Enhance Transparency: Decentralized identity management systems offer greater transparency. Users can track when and where their data is accessed, providing more visibility and accountability.
- Reduce Fraud and Disputes: By creating an immutable record of all bookings and payments on the blockchain, resolving disputes and preventing fraud becomes easier. Travelers and service providers can access a tamper-proof history of transactions.
- Universally Unique Identifiers: Decentralized identity systems can generate universally unique identifiers (UUIDs) for individuals, making it easier to link various accounts and profiles across different platforms accurately. This can lead to a more seamless user experience.
- Access D-Apps Using Web3 Identity Wallets: Web3 identity wallets can extend their functionality beyond identity management. Travelers can use their wallets to access decentralized applications (D-Apps) related to travel and hospitality, such as booking services, loyalty programs, etc.
Projects like PassiveBolt, working on decentralized identity management can contribute to a future where travelers can authenticate themselves via a single Web3 wallet rather than managing numerous accounts and passwords. This streamlines the user experience and reduces the friction associated with online interactions, making it more convenient for travelers and service providers.
One ring, ehm… WALLET to rule them all.
Understanding Web3 in Travel: Loyalty Programs
McKinsey & Company states that the average American consumer belongs to 16.7 customer loyalty programs, and on average, a person has between 90 and 120 accounts that require some form of online identity management. It’s a brain scratch! Decentralized Loyalty Programs can help travelers navigate complicated loyalty program systems and redeem rewards agnostically across multiple providers. My friends at the Le Bristol Paris are doing this in a smart way with their VIP Web3 Loyalty Program (Héritage Club).
They minted a collection of NFTs (each selling at 8 ETH), unlocking a 5-year membership of ultimate perks to enjoy Le Bristol Paris like never before. Some of the perks include:
- Weekly access to the hotel’s “guest only” rooftop swimming pool (the only one in Paris).
- Access to Le Bristol events throughout the year;
- Access to a secret cocktails menu at Le Bar du Bristol.
- Access to Eric Frechon’s secret Signature dishes.
- Dedicated and personalized merchandising.
- Being whitelisted for future activations and collaborations.
- A day in a vineyard with Le Bristol Paris Head Sommelier to discover the art of winemaking and wine tasting.
- A cooking masterclass in the hotel’s 3 Michelin-star restaurant’s kitchen.
- A gourmet barbecue on the hotel rooftop terrace.
The exclusivity and the gamification aspects of this VIP Web3 loyalty program can be of great inspiration for other brands, especially in the luxury sector, exploring the possible applications of loyalty tokenization.
Decentralized Loyalty Programs can help travelers navigate complicated loyalty program systems and redeem rewards agnostically across multiple providers.
Understanding Web3 in Travel: DeSoc and the future of travel influencers
Were you aware that all of Myspace’s user media from its first 12 years of existence were completely erased during a server migration? It’s a sobering fact. Now, let’s contextualize this within our industry: Consider a hotel that has achieved the top spot on TripAdvisor through hard work and dedication. My friend, ADELE Gutman Milne, CHBA, CHDM, once told me that, when she was working at the Library Hotel Collection Library Hotel by Library Hotel Collection, she wasn’t spending one dollar on marketing, as being number 1 on TripAdvisor was all she needed to get guests at the hotel’s door, so that’s a more than viable strategy. But picture this: you worked your *ss out, and one day, you find yourself unexpectedly kicked out from TripAdvisor. You’re now unable to transfer your hard-earned reputation to another medium and are effectively held hostage by the platform. Far-fetched? Not quite. A similar, disconcerting situation unfolded in art influence involving Thea-Mai Baumann.
Thea-Mai Baumann, an Australian artist, experienced an unsettling ordeal when she was blocked from an account documenting nearly a decade of her life and work. In 2012, she initiated an Instagram account with the handle @metaverse. Through this account, she chronicled her life in Brisbane, where she pursued fine art studies, and her journeys to Shanghai, where she established an augmented reality company called Metaverse Makeovers. On November 2, 2021, when she attempted to log in to Instagram, she discovered that her account had been disabled due to allegations of “pretending to be someone else.”
On December 2, an Instagram spokesperson admitted to The New York Times that the account had been “incorrectly removed for impersonation” and promised reinstatement, expressing regret for the error. Two days later, the account was once again accessible. While this story ultimately concludes on a positive note, it’s essential to recognize that not all stories have such a happy ending, do they?
Luckily, we are witnessing a shift from centralized to decentralized social media. This shift could enhance:
- Data Ownership;
- Bring followers with you to each app, agnostically;
- Censorship resistance;
- No closed-source algorithms.
We moved from company-generated content (Web1) to user-generated/yet centralized content (Web2) and are now -eventually- moving to user-generated and decentralized content (Web3).
Social media already taking the shift are Minds, Mastodon, Threads, Only1, and Steemit. The World Wide Web Consortium ( W3C ) also created an open standard protocol (ActivityPub) for building decentralized social networking applications. It promotes decentralization, allowing users to interact across different platforms and servers without reliance on a central service. Key features include:
- Decentralization: Users can communicate across various platforms without centralization.
- Federation: Multiple servers (instances) can share data while remaining autonomous.
- Interoperability: Promotes compatibility among different social platforms and content types.
- Activity Streams: Defines a data format representing social activities (e.g., posts, comments, likes).
- Privacy and Control: Offers user data control and migration between servers.
- Community and Adoption: Used by popular platforms like Mastodon and PeerTube.
- Open Source: Many ActivityPub implementations are open source, fostering development.
Picture this: you worked your *ss out, and one day, you find yourself unexpectedly kicked out from TripAdvisor. You’re now unable to transfer your hard-earned reputation to another medium and are effectively held hostage by the platform.
This can all sound futuristic, but as Mark Twain used to say, “History doesn’t repeat itself, but it often rhymes.” The way most media talk about Web3 today is similar to the way we talked about the web in the 90s and, well… We all know how that turned out… And what I discussed in this article is just the tip of the iceberg. There are few possible usages of Web3 in the travel industry, but there are so many others: room-mapping using blockchain, post-API integrations, DAOs for the management of tourist destinations, “unlockable destinations” through NFTs (something that my friend Aljoša Ota is working on with the Slovenian Tourist Board), attribute-based selling via NFTs, decentralized marketing, etc.
We are, once again, on the verge of a monumental change. As a music fan, I always use the analogy that gives this article its title: “Web3 is to Web2 what punk rock is to disco music.” And quite frankly, it’s just up to us to decide if we want to be the Bee Gees or The Sex Pistols.
“Web3 is to Web2 what punk rock is to disco music.” And quite frankly, it’s just up to us to decide if we want to be the Bee Gees or The Sex Pistols.