TUI Group CEO used its annual results to discuss how it was using blockchain technologies to “serve our customers better and yield our product better”.
The company was the latest to adopt the technology, which allows for secure data sharing, following similar moves in the airline industry.
TUI’s in-house blockchain works alongside its Cyrus yield system, controlling the group’s inventory. The company said it was also working on a common purchasing system across its operations and pointed to a future in which it saw a digitised and automated supply chain.
Chairman & CEO Friedrich Joussen told analysts: “If you want to address 20 million customers individually, you need the most modern IT technology. In the blockchain, you avoid hierarchical structure, the world is flat, it’s open, everybody can know everything. So, the blockchain is not in the internet, the blockchain is the next internet. It’s the disintermediating technology for internet platforms.”
He added: “It’s interesting to see what your customers do, equally is interesting when you cannot offer what the customer has asked for. And in the long tail, you see exactly that, you see demand building somewhere.”
Joussen described how TUI’s system currently worked: “Assume you have a hotel that customers book from the UK and from Germany. Let’s assume the hotel has 100 rooms and you allocate 50 homes to the UK and 50 homes to Germany and they are, as an inventory, carried and administrated in the booking system.
“What we have done, we have flexed the inventory out of the booking system and have put onto the blockchain. Now what happens is … Cyrus communicates to the blockchain inventory and suggests that for example, in the UK, the bookings into that hotel are running very well so the prices are very healthy, and we are running in front of the traditional booking curve, and may be in Germany, exactly the opposite. Maybe the prices are low.
“Cyrus starts to suggest that maybe we should reallocate some of the risk inventory from Germany to UK because we could make more money. This is the bed swap feature, and that’s exactly what the system is doing today.”
Joussen said that the system was not currently automated, with traders still in control, but said that the group used the proposals made by the system to educate staff, with a view to eventual automation.
Looking ahead, Joussen said: “You could open it up – we could open it up for our Chinese markets. Like a hotel bed bank, without intermediary fees because it’s all flat, we don’t want manual, this is just available inventory.
“Digital is not, I sell my products on the website. Digitising a business is digitising the full supply-chain in the business and that’s what we are doing.”
The CEO told analysts that TUI had “two mega initiatives; one to customers, mass individualisation of 20 million; one to the content, risk inventory management and inventory solutions. Two mega initiatives, which I’m absolutely 100% convinced, will be the major profit drivers over time.”
TUI denied that the company would open up the blockchain solution to third parties “yet” because it was proprietary and still changing, but suppliers to the sector have also noted the potential. The latest to launch a solution was OwlTing, with a hotel management product which it said would “allow flexible inventory management and efficient booking transactions, with enhanced customer privacy and transaction security, thanks to blockchain”.
The company said: “With the rise of various online travel agencies, hotels must be able to strike a balance between pricing for visibility on major OTA channels and pricing for profitability on their own websites. Hotels also need to better understand their returning customers and adjust marketing strategy more proactively, which incumbent technology solutions cannot fulfil.”
While blockchain technology is so far focused on booking and inventory, it is also thought that it could be used in loyalty programmes, allowing operators to finally create a single profile for each guest and creating the personalisation which will drive true loyalty. With TUI the current flag bearer for blockchain, eyes are on the former high-street travel shop turned innovator.
HA Perspective [by Katherine Doggrell]: The hotel sector has been looking for a silver bullet to cut out the intermediaries and the hope is that blockchain will slay the dragon. This may not be the case unless the sector is more proactive.
Charlie Osmond, chief tease, Triptease, told us: “The travel industry has a problem with centralised inventory. GDSs are old and expensive, making it unnecessarily difficult for the industry to innovate and improve the online travel experience for the consumer. Blockchain technology can be easy to access, low-cost, and is fundamentally based on de-centralising things – making it a potentially attractive alternative to traditional systems.
However, the technology doesn’t mean much unless people are building interesting things with it. It’s great to see that the tech is becoming available to a wider audience, but we’re yet to see a really killer application that’s likely to hook hoteliers in.
Blockchain tech does have real potential for the industry. Hoteliers are getting increasingly fed up with siloed data and sluggish intermediaries. There’s no question that the guest is losing out under the current way of doing things. Double margins are passed on to the end user, while innovation in user experience is held back by non-communicative systems. Blockchain can certainly help to address these problems – widespread buy-in, though, seems a fairly distant possibility (for now).”
Additional comment [by Andrew Sangster]: OK, hands up, who really understands blockchain? I’m willing to confess my knowledge is at best sketchy. But even a newbie like me can see it looks like a technology that will catalyse yet more disruption.
As a general rule of thumb, new technologies usually take more than twice as long for their impact to be felt than the boosters suggest. But, where it is a fundamental shift in how business is conducted, that impact is often more than twice as profound as initially expected. Yet more change is coming.