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          How will Blockchain disrupt the Hospitality sector?

          Hailed as the biggest digital innovation since the internet, Blockchain is the virtual infrastructure that is changing the way we work.

          Blockchain will disrupt your industry.

          Hospitality companies are starting to look at how the technology could revolutionise their end to end supply chain, loyalty schemes and booking procedures. 

          First the basics: Understand blockchain in 6 minutes by watching our animation

          Skip video to: How Blockchain works > 
          Skip video to: What Blockchain means for business >

          How is Blockchain affecting Hospitality?


          Blockchain allows transactional information to be stored, traced and traded securely and privately between multiple users. Beyond Bitcoin and Cryptocurrencies, there are a number of opportunities for the transport industry.
           

          Loyalty schemes

          Customer engagement is the cornerstone of many companies success and loyalty schemes are often a huge part of this. It is widely accepted that many loyalty schemes aren’t fulfilling their potential - customers often feel it takes too long to accumulate enough points to redeem enough rewards, leading to high attrition.

          Blockchain helps multiple partners come together on a private permissioned or public blockchain, enabling them to offer unique customer experiences - whilst preventing fraud or compromising privacy. Large scale and small independent organisations can use one system and still control how their customers interact with their loyalty scheme.

          Imagine a loyalty scheme where the consumer is able to gain points with an airline and spend them in a coffee chain, rent a car and spend the points in a hotel (see fig. 1). The consumer choice and experience is vastly improved and the blockchain system means there are lower operating costs (meaning the scheme can be operated by smaller merchants too) and a more efficient and secure process.

           

          Supply chain management

          Many large hotel chains are often part of international franchise groups and so have a responsibility to maintain specific levels of quality for the supplies they use. 

          Take the example of coffee (see fig. 2). Blockchain technology can show the journey from the coffee bean (checking it is from an accepted region and grown under acceptable ethical conditions) through the supply chain (checking it meets the necessary checks) and also monitor information about the state of the product (e.g. which temperatures it has been exposed to) - all in real time, in a tamper and forgery proof way.

          All of this can be accessed by the hotelier and franchise owner and even the customer at the end of the chain if required. If something is procured or moved along the supply chain which does not meet the criteria of a smart contract hosted on the blockchain with terms and conditions set out by the franchise brand owner, it can be immediately and automatically rectified.

          This approach will help to grow customer trust and maintain brand reputation. There will also be improvements in supply chain efficiency and a reduction in paperwork and risk. Businesses will have easy access to immutable evidence, allowing the easy resolution of disputes with transporters and manufacturers.

           

          Decentralised travel distribution

          Consumer facing travel and hospitality vendors often source their inventory from other B2B intermediaries – effectively inflating prices as they are marginalized twice. New solutions are looking to disrupt this; Winding Tree which is “a blockchain-powered B2B marketplace for travel inventory (air travel, hotel rooms, car rentals, tours and activities, etc.)” aims to remove the secondary layer of intermediaries.

          The nature of blockchain means the suppliers will be charged to list their posting (such as availability and costing) to cover a mining fee, but everything else (such as reading hotel availability data) will be free – resulting in much reduced cost to the supplier and a lower end cost for consumers. This type of system wouldn’t have a simple user interface, it would act as a data source to be plugged into existing consumer-facing intermediaries systems (or accessed by tech savvy consumers) so costs will be kept very low.

           Have you thought about the legal implications of Blockchain?

          Jurisdiction

          • Which legal framework will apply?
          • What forum should be used to resolve disputes?
          • How do you govern entities that exist purely in cyberspace (known as “decentralised anonymous organisations” or “DAOs”)?

          Liability

          • How is ownership/control determined?
          • Where does the liability lie when something goes wrong?
          • How can businesses limit their exposure?

           

          Smart Contracts

          • How do you create a blockchain based contract (a “Smart Contract”)?
          • When will Smart Contracts be enforceable?
          • Can code determine issues of fairness?
          • How should disputes be resolved?
          • How do you govern decisions made by an AI?

           

          Regulation

          • How will regulatory authorities choose to approach blockchain?
          • How will blockchain interact with existing regimes such as those relating to consumers or finance?
          • How will tax laws apply to transactions a blockchain system?

          Terms and Conditions

          • What terms do you need to include to cover the particularities of blockchain such as payments in cryptocurrency or reward tokens?

          Data Protection

          • Who are the controllers and who are the processors?
          • How can privacy be protected on an open system?
          • How can you obtain all the necessary consents?

           


          How we can help 

          DWF’s market leading hospitality experts have come together to explore how Blockchain is disrupting the industry. We understand this complex technology and its legal ramifications and our hospitality sector experts are here to guide you through what the changes may mean for your business.

          Click here to view what is happening within our Hospitality sector >

          Melanie Williams

          • Partner // Head of Real Estate Sector // Head of Hospitality Group