How the Blockchain Will Change the World of Hotel Distribution
February 26, 2018 2:00pm
By Harvey Norman
Lowering costs is one of the biggest challenges that face the hospitality industry while considering opportunities for maximizing revenues. Hotel managers need to think of innovative ways to cut down on costs without affecting the quality of their services.
Adopting the blockchain platform as a means of distribution is expected to lower the costs hotels endure directly and indirectly. But switching from the current system and traditional distribution channels is another challenge that lies ahead of hotel managers and their marketing teams.
The Cost of Blockchain:
As hoteliers consider the benefits of switching their distribution systems to a blockchain platform, they also need to think about the cost of establishing an innovative system. This means hiring a new team of technicians, administrators, and experts who are equipped with the needed knowledge to operate the new technology.
The blockchain is a structure of financial data to keep records of financial transactions. Each transaction is safely kept and no one gets to tamper with it. The blockchain has created or contributed to the creation of a new type of the internet. Where information is shared and distributed, rather than copied, digital data is becoming more available thus changing the game for a lot of industries. The information on the blockchain is always updated and reconciled, creating a decentralized network for all data to exist. Since the records kept are easily verified and virtually 100% public, hotel businesses and guests have access to all sorts of data at any given point in time. No single entity has precise control over the blockchain and this means that all parties have the same power to access relevant data. Moreover, it has no point of failure, which contributed to raising its digital value to billions of dollars.
Blockchain as a Payment Method:
As permanent records of data and payments are kept, both buyers and sellers are left with a lot of benefits. There is no room for hackers or unauthorized parties to access any data. This also means that all records are not to be deleted in case of an error. Buyers, or guests in the hotel business, will be able to check on the authenticity of a seller at any point.
The blockchain is one of the trends that we witness as the world goes cashless. Hotel guests prefer such methods of payments as they are safer and more convenient especially when they are travelling away from home. With only 24% of people now preferring to pay in cash, the blockchain among other cashless technologies is on the rise. Hoteliers will have to accept bitcoins and other cryptocurrencies if they want to stay accessible.
How Does the Block Chain Affect Hotel Distribution?
In a highly competitive market, the distribution costs of hotels are always rising creating bigger challenges for hoteliers to face and overcome. This is why the need to look for, adopt and master new distribution technologies is more than just an alternative.
Hotel businesses pay large commissions which increase their distribution costs in order to land more bookings. Such costs and commissions differ from one distribution channel to another but are always depriving hotels of their rightful revenues. With no other options, hotels can do absolutely nothing but agreeing to pay these amounts of money in order to stay in business.
Large chains pay 15% in commission to OTAs, while independent hotels pay as much as 25% due to the lack of bargaining power. Since most bookings are made this way, hoteliers are left defenseless, sacrificing almost 25% of their revenues in order to secure more bookings. Metasearch is another expensive route to go especially for independent hotels that pay as much as 30% in commission for bookings that enable them to make more money. The amounts paid typically decrease for large chains since they naturally have access to more and better distribution channels. In other words, independent hotels who are actually striving to compete with the big players in the industry are actually faced with the biggest challenges. Although in the past, hoteliers depended on traditional travel agencies in order to secure more bookings, the commissions paid now are making this route rather questionable. The high-end large chain hotels pay almost 20% of their revenues while independent hotels pay 25% for travel agent bookings. These costs should turn such distribution channels obsolete. As a result, hoteliers need to think of alternative ways that will help them run their businesses successfully.
Will Hoteliers Accept Blockchain as an Experiment?
Independent hotels are going to represent the biggest pool for blockchain distribution since they typically pay a lot more through traditional distribution channels. However, there will be the cost of installing the new technology that hoteliers need to consider before giving up traditional ways altogether. This will include hiring the right talent, investing in new tools and training the right people to work on the blockchain platform to maximize profit. Since the bitcoin will disturb the medium for OTAs and other big players in the hotel business, hoteliers are expecting to face some resistance. However, most experts agree that it will be a win-win situation for hotels and OTAs. Only time will tell how all parties will utilize and benefit from the blockchain.
Tags: harvey norman,
hospitality tech guru,
With strong knowledge in hospitality IT, customer service & hotel management, I provide unique consultation to automate your Hotel operations & achieve desired optimize revenue, increase occupancy and growth in targeted markets manage expansion cost to a whole new level, through latest PMS technologies which is required for Today’s Hotel Challenges.
I started the hospitalitytechguru – A platform where he now acts as the independent hospitality consultant. Harvey is also a Consulting Partner with hospitality technology company, joining a global hospitality management company with offices in New York, Dubai, London, and India.
Contact me email@example.com
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