The main applications of the technology that currently have some use case is i.) tokenization of hotel bookings, ii.) fractionalization and iii.) administrative optimization. The other hyped use cases of loyalty programs, security, hyper personalization and sustainability are probably just hype for now.
Tokenization
In my opinion hotel room tokenization, if implemented carefully does present an innovative and win-win situation for both hoteliers and end user in a myriad of ways. From the hotelier, tokenization of hotel rooms is an option, but an option that can be utilized:
to ensure no over bookings
increase occupancy rates by allowing redundant rooms in low season to be offloaded and traded into the marketplace
as a possible means to by-pass the advertising and agency platforms to decrease costs and improve margins by utilizing blockchain hotel booking platforms instead that don’t charge commissions
as an additional source of revenue as the hotel can opt a % of trading commissions for each trade on the market
as a “proof of Stay” since a verifiable online transaction record that can identify each guest, their stay, and their reviews could eliminate fraudulent reviews, as each review could be automatically verified based on the presence of a token.
For the end user, there are also some benefits and solves real world issues, if they are willing to embrace the technology:
No more non-refundable bookings (customers can just sell their stay on the secondary market)
Huge flexibility in terms of booking, cancellation, last minute changes, as 14 day trips with sudden changes to plan can be changed into 9 day trips and the last 5 days resold (as an example)
Possible cost savings comparatively versus booking on other online booking platforms since theoretically, blockchain backed booking platforms enable hotel to end user direct transaction without the need for middle men and thus eliminate commissions and transactional costs.
Fractionalization
This applies cross industry to real estate assets, art, or anything of monetary value. Applying blockchain technology to this process allows for secure, transparent, verifiable direct ownership (given the regulatory and legal framework) of assets whilst simultaneously allowing the asset’s ownership to be divided up into smaller pieces (fractionalization), so that those without the means to access certain asset classes could also gain exposure via blockchain technology. As an example in the hotel industry would be April 2023, CoFund, in partnership with Tokeny which tokenized a $10 million hotel in Bali, allowing investors to gain exposure to the Bali Hotel asset with just a minimum investment of USD $1,000.
Administrative (Supply chain verification, Inventory Management etc)
The blockchain provides an immutable record of vendor selection which is becoming an increasingly administrative process with the enhanced due diligence requirements. This permanent record provides a clear audit trail and thus a higher standard of assurance over the reliability of company records. An example of this would be TUI Group. Being a huge conglomerate with 1,200 travel agencies, 5 airlines, 400 hotels and 16 cruise liners, it has embraced blockchain technologies back in 2017-2018 and houses its in-house blockchain-enabled systems to maintain real-time records of hotel bed inventories. TUI also houses all of its contracts with suppliers and customers on a private blockchain.
Downsides
With the major application of this currently in the tokenization of hotel bookings, mainly as NFTs, there are risks at play and therefore why we see such a slow process in migration and not much activity from the big players within the industry.
Too much transparency. Firstly, tokenization ensures data on the public blockchain, and with fierce competition to grow occupancy rates and deliver revpar increases, there is not enough incentive for competing hoteliers to have all inventory data available on the whim.
Price volatility and branding. Upper tier and luxury tier hotels are all about providing quality experiences for its customers, thus there is risk in that a hotel room NFT's price fluctuates with high volatility in the secondary market.
Extra Layer of Administrative Work. Next, there is the process of verification. Installing systems in place and in replacement of legacy verification systems take time and cost. Verifying token ownership may introduce an additional layer to the current check-in process that consumes both staff and customer extra time.
Negative Perception of Crypto. There’s also the downfall of Luna, FTX which formed negative perception and reputation for cryptocurrency and blockchain community as a whole. A hotel's reputation could be interpreted as negative if they started to adopt new technologies with blockchain publicly.
Slow User Adoption. From the user adoption curve angle, the current technology is also extremely non user friendly. Customers need to be heavily into cryptocurrency to adopt this new process for hotel bookings and currently, there has not been sufficient user adoption.
Fraud. Hacking and scams, or the perception of its likelihood are also a deterrent for hotel chains to adopt this technology. If a customer accidentally purchases an NFT from an unverified collection and proceeds to the hotel room only to find out that they were scammed, this would be disastrous for both the customer and hotel image.
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