The benefits of blockchain in the travel industry

Advocates of blockchain technology say it is poised to disrupt a range of industries, from finance to supply chain tracking and real estate. Blockchain promises to drastically transform the way data is stored and used, improving the transparency and security of transactions.

For these reasons, several industries have begun to experiment with the technology, and one of the most exciting segments is the travel industry, where it can potentially be transformative in many areas.

First a quick explanation. Although blockchain seems complicated, it is a fairly simple concept. It’s really just a ledger hosted across multiple public nodes that is used to store records of transactions. Each of these transactions is stored in a “block” secured with cryptography.

Because blockchain records are stored on many computers, the data is considered decentralized. Each block contains both transaction information and a timestamp, and they are stored on all the nodes that make up the network. In this way, blockchain records cannot be changed without agreement across the network, a design that makes it nearly impossible for anyone to make changes without being noticed.

Because blockchain originated with Bitcoin, the world’s first cryptocurrency, in 2009, many assume that the technology only has practical applications within finance and related industries. But the truth is that distributed databases can provide benefits in many different types of industries.

Some examples include advertising, which can be used to prevent fraud by providing transparency around ad impressions. Other use cases include elections, which can lay the foundation for a transparent, open, electronic voting system.

Also, the traceability benefits of blockchain can be used to verify the authenticity of things like educational certificates, qualifications and licenses, which can be recorded in a distributed ledger and made immutable. Because of this, blockchain could eliminate the need for educational institutions to authorize credentials entirely.

How Blockchain Benefits the Travel Sector

There are many reasons why the travel industry may consider adopting blockchain. The industry is particularly dependent on the cooperation of several players in the business, such as travel agencies, airlines and hotels, who all share information with each other. For example, travel agencies must pass on customers’ information to hotels and airlines.

Meanwhile, the personal assets of these customers may also be transferred from one organization to another. Blockchain could potentially make it easier to access and store this information, and the data would be more reliable due to its immutable properties.

Financial transactions also play a major role in the travel industry, and blockchain’s ability to simplify and secure payments is well known. After all, payments were the first major use of blockchain (think Bitcoin). It is especially useful when it comes to foreign payments, since cryptocurrency knows no borders.

Such benefits become all the more compelling when considering the size of the tourism industry. According to Statista, the combined travel industry contributed more than $9 trillion to the global economy in 2019. Although the COVID-19 pandemic greatly affected travel in 2020 and 2021, the sector still generated $4.7 trillion and $5.8 trillion respectively in these years.

The travel industry consists of several sectors as well, including transportation (airlines, car rentals, and public transportation), accommodation (hotels, Airbnb, hostels, cruises, and so on), food and beverage (including restaurants, bars, and cafes,) and entertainment (such as theaters, shopping, nightlife, etc.). Each of these segments is a multi-billion dollar industry in its own right, and there are many opportunities to apply blockchain technology to all of them.

While the travel industry was hit hard by the global coronavirus pandemic, the sector has rebounded strongly since the world began to reopen. According to the UN World Travel Organisation, the number of international tourist arrivals globally in January 2022 increased by 130% compared to a year earlier, with the 18 million additional visitors recorded that month equaling the total increase throughout 2021.

After being trapped indoors for the better part of two years, it’s clear that people are desperate to get out and explore, and 2022 consequently looks set to be one of the best years ever for international travel.

With that in mind, it’s worth exploring some of the more exciting ways blockchain can potentially be used to improve efficiency and transparency in one of the world’s fastest-growing industries.

New possibilities with blockchain interoperability

One of the most relevant blockchains for the travel industry is the Flare Network, which has created a unique protocol known as the State Connector that makes it possible to connect to all kinds of networks, including other blockchains and also public APIs.

Flare’s State Connector was built to solve problems around blockchain interoperability. Those who are familiar with how the technology works understand that there are several blockchains in the world – such as Bitcoin, Ethereum, Avalanche, Binance, Solana and so on – all of which operate independently and are unable to communicate with each other due to technological incompatibility.

Additionally, blockchains also have no way to communicate with non-blockchain systems, such as traditional databases and APIs.

The State Connector changes this, providing a reliable way for a blockchain to read the state of transactions on any other chain or system. So not only does it make it possible to transfer information from one blockchain to another, but it also allows blockchains to tap into other, real-world data sources in a decentralized way.

In a nutshell, the State Connector is a smart contract that allows decentralized, blockchain-based applications to search for information from outside the network they run on. This is achieved via a network of independent attestation providers, who are incentivized to collect the requested information and verify it before providing it to the Flare Network. The State Connector ensures that enough of these independent attestors agree that the information is correct, and if so, it publishes it to the network.

In this way, the State Connector can, for example, check whether a deposit has been made on another blockchain. So if someone pays for their plane ticket with Bitcoin, it can inform an application on Flare or another network the moment the payment is confirmed.

The State Connector may also power other types of dApps that respond to real-world events, such as traditional bank transfers, the outcome of sporting events, home purchases, educational achievements, insurance claims, or anything else that may be accessible via an API.

For the travel industry, this has many potential transformational implications. A hotel or an Airbnb can start managing their bookings through the blockchain. Currently, when a traveler books a hotel through an aggregator site such as Booking.com or Expedia.com, a significant portion (between 10% and 25%) of the price goes to commissions and other fixed costs. With blockchain, it becomes possible for hoteliers to cut out the middleman, which means no commissions and cheaper prices for travelers (or more profit for the hotel).

Flares State Connector can be used to enable dynamic pricing to maximize efficiency. Most hotels usually change their prices based on demand and availability, using complex APIs and third parties. Hotels can simplify this by using the State Connector to connect to the website’s API to retrieve relevant pricing data at a lower cost.

It is a similar story for the airline industry, where flight bookings are often made through third parties such as Skyscanner. Once again, airline prices are usually dynamic, with tickets costing more during peak travel times and less when fewer travel. With Flare’s State Connector, airlines can sell airline tickets through dApps that are connected to real-world pricing systems via APIs.

There are even greater opportunities when we combine blockchain with related technologies such as non-fungible tokens. NFTs, as they are called, can be used to represent each passenger on a cruise ship for example. They can install an app on their smartphone when boarding a ship that contains a wallet plus an NFT.

The cruise operator can then create various games and activities related to the real world via this app where passengers can earn points throughout the trip. Points will be distributed via an API powered by the State Connector. Those who earn a certain number of points can receive prizes and benefits, such as a free dinner at a restaurant or a massage. These items will be linked to the passenger’s NFT for verification purposes.

A winning combination

Blockchain technology and the travel industry promise to be a winning combination. It has the potential to put forward-thinking travel service providers at the forefront of innovation, while building greater customer trust through reduced costs and more efficient systems.

One of the significant challenges in the way of blockchain adoption is the lack of standardization. Using multiple blockchain networks can cause major headaches for an industry that relies heavily on data exchange. This is where innovations like Flare’s State Connector can pave the way forward, providing a simple way for blockchains and other systems to communicate with high trust and transparency.

Blockchain will have so many positive implications that its implementation in the travel industry is undoubtedly only a matter of time. Industry participants will benefit from lower costs and more efficient systems, but the real winners will be travelers, as blockchain enables a safer and more reliable way to travel.

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