Blockchain in boost­ing ho­tel loy­alty pro­grams

Hospitality News Middle East - - CONTENTS -

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 so­lu­tions

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.

Blockchain can bring a plethora of so­lu­tions to the in­dus­try, and mainly ad­dress is­sues re­lated to loy­alty pro­grams


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