Skift Take
Our channel checks and industry data point to a relevant future for blockchain technology in travel distribution. However, proponents will need to move fast in creating compelling applications that perform better than what's already out there.
Yesterday we launched our latest Research Report, The Future of Blockchain in Travel Distribution for our Skift Research subscribers. Numerous reports and articles have now summarized the disruptive potential of blockchain in travel. However, these are typically broad and barely touch on all or many of the various areas where blockchain could permeate travel. We believe that the discussion now needs to get more granular.
In this report, we dive deeper into the online travel distribution value chain, particularly for hotels, to get a better read on the implications of this technology that promises so much. We offer data on distribution mix by distribution channel, cost of acquisition by channel, current and forward-looking adoption rates of blockchain by the travel industry, hotel advertising spend by distribution channel, how this will likely change over time, and more.
Blockchain technology is compelling because it offers a prescribed solution to some of the more burning issues now playing out in online travel distribution. Assuming that blockchain can deliver on superior speed, cost, and user experience for both the supplier and customer, then hoteliers and airlines could gradually adopt it. This conclusion is based on current sentiment in the market about existing channels and general attitudes and frustrations with existing third-party relationships.
We also stress that blockchain technology is still new, and that it will take time for these platforms to develop the necessary standards needed to make a meaningful impact on the market. We also note that online travel distribution is a moving target. Existing players recognize the various friction points and are proactively working to build sustainable businesses. Travel is also a highly competitive market. Big technology companies including Google and various China-based players are steadily grabbing share of the total addressable global consumer market.
High commissions and access to customer data are the two core objections that hoteliers express when it comes to their relationships with OTAs. Hoteliers want to build more direct relationships with the customer, in order to market bookings more effectively but also add-ons and up-sells. OTAs typically obscure key customer data including emails from their hotel partners. Understandably, OTAs want to own the customer relationship as do the hotels. OTAs incur enormous marketing costs to acquire those customers. Advertising spend on platforms like Google account for the majority of costs for these platforms. Hotels justifiably feel entitled to more customer data, given the commissions that they pay to the OTAs.
Figure 10
Source: Skift Research State of Hotel Direct Booking Survey 2017
Decentralized platforms promise total transparency when it comes to customer data. Here, we note that a small majority of hotels are dissatisfied with the amount of data that they collect from their OTA partners. Interestingly, independent properties tend to be more satisfied than branded properties. Here, we can only assume that OTAs are more willing to share their data with independents. Intuitively, this makes good business sense for OTAs since loyalty programs are less relevant to independent properties. Once obtained, hotel chains can market their brand and properties across their entire network of hotel inventory.
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Tags: blockchain, distribution, online travel, skift research