Blockchain in boosting hotel loyalty programs
Talk about the blockchain, a virtual, digitized and decentralized public ledger of all cryptocurrency transactions, is never-ending. This trendy register that consists of ‘completed’ blocks to keep track of digital currency transactions is on everybody’s chat menu. But beyond fintech and cybersecurity, what does it have to do with hospitality and how could the industry benefit from it? Oliver Sykes, partner - digital trust at PWC explains Though it is still in its infancy, blockchain technology may be more disruptive and transformative than the internet. It is very encouraging (or alarming, depending on your perspective) that blockchain is already in use within the hospitality sector. There are a number of use case examples, including using blockchain to improve bedroom inventory management, improve processes around traveling identity, and to track and trace baggage.
Finding a relevant use
When considering potential blockchain use cases, a good place to start is to identify current business challenges or areas requiring improvement. It is important to then understand whether blockchain could be used to help solve that use case. There are a number of key characteristics that lend themselves to blockchain solutions.
• Multiple stakeholders: blockchain can provide solutions for value chains or transactions where multiple stakeholders are involved. If the use case you are considering concerns only one stakeholder, you may need to reconsider whether a blockchain is really necessary.
• Exchange of value: currently, exchanges of value, such as online payments, actually involve an exchange of information or instructions to intermediaries, rather than the pure exchange of value. Blockchain provides a solution to transferring value between parties that do not require intermediaries. This value does not just mean monetary; value can be in data, rights or access privileges. Therefore, anywhere there is an exchange of value, the blockchain can potentially provide an improved solution.
• Intermediaries: blockchain solutions provide the facility to replace thirdparty intermediaries with technology as a means of certifying the integrity of transactions. Therefore, if there is a centralized intermediary or someone who plays the role of the trusted agent in facilitating a transaction, blockchain could provide a relevant solution.
• Process characteristics: ongoing, repeatable and predictable processes that can benefit from being automated are more likely to be suitable for blockchain solutions than one-time processes.
• I mmutabi l i t y : o n e o f t h e k e y beneficial characteristics of b l o c k c h a i n i s i mmutabi l i t y. T h e t e c h n o l o g y p r o v i d e s a p e r mane n t , unalterable record of transactions. If your use case could benefit from these features, blockchain could provide a valuable solution. Consideration of these relevant characteristics is one of the first basic steps on the blockchain journey. Once a potential use case has been established, the next step is to plan, set up and run an initial ‘proof of concept’.
Blockchain technology can bring a plethora of solutions to the industry, and mainly address numerous issues related to loyalty programs. The hospitality sector relies on reliable, repeat revenue from customers; therefore, retaining customer loyalty is very important.
• Ecosystem: blockchain can be used to build platforms that involve multiple different participants, including loyalty-program providers, customers, administrators and system managers,
and be used to include other stakeholders within the hospitality industry, such as tourism boards, regulators and governments. These platforms allow participants to interact in one system without intermediaries. This can improve loyalty scheme interactions, especially in terms of points convertibility and exchange, without compromising privacy or competitiveness. It also allows small operators, who do not have a loyalty program, to provide their customers with access to a welldeveloped loyalty points network. At the same time, larger participants can utilize smaller partners to potentially offer their customers more personalized, unique experiences.
• Security: the technology also provides the benefits of advanced transaction security and immutable ledger records. It does not need to hold information about customers, but records the transactions irreversibly. As each transaction is easily traceable and irreversible, this prevents double spending and the risk of fraud. It provides the necessary data for business, while reducing the risk of user data and information misuse.
• User experience: it can allow loyalty-scheme users to access all of their loyalty points and rewards programs from one digital wallet, significantly improving customer’s ease of use, and reducing the risk that users quickly become inactive, which we see with traditional models. The concept of ‘tokenization’ allows users to monetize or exchange their loyalty points. In simple terms, this is the conversion of loyalty points into a type of cryptocurrency and it solves the current challenge of liquidity, which frustrates users. It means users are able to freely trade their rewards, for example, trade points they have earned with an airline for hotel points and vice versa, or even exchange them for fiat or other cryptocurrencies on a cryptocurrency exchange.
• Cost: the most persuasive benefit for businesses is cost efficiency. Loyalty programs cost a fortune to develop and maintain, while blockchain technology provides the potential to offer a better solution at a fraction of the cost.
As is the case with the adoption of any new technology, blockchain presents several challenges that need to be considered. The main challenge is that traditionally, loyalty schemes can be difficult to set up, expensive and resource-intensive to operate. These challenges present barriers for smaller operators within the hospitality sector who wish to operate their own loyalty programs. For those who have established loyalty programs, the lack of unified systems result in the need for complex integrations to be established between multiple different systems and parties, which introduces cost and security risks. There is also the cost associated with the need to use intermediaries, such as banks. From a customer-experience perspective, the schemes are also often restrictive in terms of the flexibility of reward redemption, which leads to low liquidity of loyalty points. Despite these challenges, the Middle East’s hospitality industry is on the brink of a new era and has already started to experiment with it. pwc.com
Blockchain can bring a plethora of solutions to the industry, and mainly address issues related to loyalty programs