Travel first, pay later at this blockchain travel agency
Booking travel through online travel agencies (OTA) like Booking.com and Agoda has become the norm. Traditional travel agencies and independent reservation systems operated by hotels or airlines have been hit severely by these new players. Big name OTAs like Expedia, Hotels.com and Booking.com, however, are all operated by two giant groups: Expedia and Booking Holdings. The two account for over 66 percent of the global market share. As their grip on the market intensified, the commission fees the agencies took increased from 20 to 30 percent to as high as 50 percent. The solution to the problem is to come up with a new platform that can replace the existing players. However, there is no realistic chance of beating the OTAs at their own game. A travel agency partners with a PR firm Tourcom, which offers a travel first, pay later service, has partnered with Hahm Shout, a public relations agency, to cooperate in establishing a travel platform using blockchain and artificial intelligence technology. Tourcom, founded in 2007, earns over 20 billion won ($16.8 million) in annual revenue. It currently has 90 branch offices nationwide and boasts 150,000 subscribers. Its major competitive edge is enabling customers to pay for travel packages after they have been on trips. This way, customers can enjoy travel when a budget package is launched even if they don‘t have the cash to pay for it right away. Hahm Shout, which used to focus on public relations and marketing activities, expanded its services to business acceleration last year. In March the agency launched an event called “2019 Venture Startup Casting Fair” to find companies specializing in blockchain. Among six blockchain companies that participated, Tourcom received the highest appreciation. Hahm Shout decided to offer business consulting to Tourcom on a range of areas including public relations and marketing, upgrading the company’s business model and attracting investment. Why do we need blockchain for travel? A blockchain-based decentralized travel platform can greatly lower commission fees paid to OTAs. Eliminating a service broker could enable consumers to book a 100,000 won hotel room at a price as cheap as 50,000 won. This way, consumers can book travel programs at a more affordable price while suppliers can increase margins. When there simply wasn‘t much travel information to refer to, travel agencies played a big role in curating travel packages. However, travel habits are changing with more and more people choosing independent tours over package tours. The younger generation, in particular, enjoys planning their own trips. These independent tourists usually refer to other travelers’ reviews to find information, but reviews are often unreliable. There have been incidents where OTAs and hotel operators have teamed up to delete negative reviews or even manipulate reviews. On foreign OTA platforms, you can sometimes find reviews written in unnatural Korean, with grammar intentionally bad to stop platforms and hotels using translation tools from recognizing a bad review and deleting it. If you think of a blockchain-based platform, however, reviews can almost never be manipulated. Also, the ownership of any travel information a traveler posts is given to the one who posted the information not the platform operator. The blockchain platform can also motivate travelers to leave quality reviews by compensating them with tokens. Existing platforms have a way of compensating consumers that leave reviews, such as through points systems, but their standards in approving quality are not clear. While about $300 billion worth of points are given out to consumers annually, 58 percent of the members do not know about their points and 38 percent do not know the value of their points. Every year $100 billion of points disappear. Growing attempts to establish a blockchain-based travel platform Tourcom is not the only company trying to apply blockchain technology to travel. In April, Britain‘s largest travel management company Corporate Traveller started receiving payment in bitcoin, a type of cryptocurrency built based on blockchain technology. For the transaction, it partnered with BitPay, a company that enables bitcoin transactions. Commission on bitcoin payments is only about 1 percent, making it a cheaper payment method compared to credit cards. TaiToss is also expanding its presence in Central Asia. The company supports cryptocurrency payment systems at hotels and restaurants operated by Facetime Group in the Middle East and hotels and shopping malls located in Oman’s planned city dubbed Blue City. The key competitive edge of TaiToss is that it offers a one-stop solution so that finding information on hotels, airlines, shopping, tour activities and booking and paying for them through cryptocurrency can be done at once. Recently, TaiToss relocated its headquarters from Estonia to Kazakhstan. Jienem, which offers guesthouse listings to local hotel booking platform Yanolja, is also a start-up preparing for blockchain-based services under a project dubbed “Discover X.” Edmond Ip, co-founder of Banyan Tree Hotels & Resorts, and Soon-hwa Wong, former vice president of Hertz Asia & Japan, are listed as advisors to the project intended at developing a blockchain-based travel platform. Last year, the company also acquired Volo, an app for sharing travel reviews previously operated by SK Planet. But does that mean people will use a blockchain-based platform? Conflict around commission fees between product suppliers and platform operators always takes place for almost all services. Suppliers complain that platform operators take too much commission without doing anything. Of course, for a platform to successfully launch there are heavy development and marketing fees involved. Platform operators also need to build a broad subscriber network. That is why not all online-to-offline platforms are successful. Tourcom‘s project has an upper hand in that it is using a reverse ICO. It already has accumulated data and know-how. With marketing, Hahm Shout can also do its part. The problem will be the platform’s expandability. People won‘t necessarily use a platform just because it exists. There needs to be something in the platform that can differentiate it from well-established competing alternatives.