Crypto-volatility dims blockchain travel distribution dreams
3 Aug 2018 - by Jason Simpson
No discussion around technology in travel would be complete without mentioning cryptocurrencies and the emergence of blockchain technology as a driver of possible innovation within the industry.
Initially the emergence of cryptocurrencies and blockchain technology was seen as an opportunity to disrupt the travel industry, providing a new form of direct, secure, almost immediate payments.
Sabre Labs, travel technology company Sabre’s innovation arm, released its Emerging Technology in Travel Report 2018, of which almost a third focused specifically on blockchain. But the report makes the case that the applications for any given cryptocurrency (BitCoin, Ethereum etc) are limited due in part to their extreme volatility.
“A US$3 000 (R40 000) purchase of Bitcoin at the beginning of 2017 peaked at a value of US$50 000 (R665 000) toward the end of the year,” the report says. “The same US$3 000 purchase in Ripple cryptocurrency was worth more than US$1m (R13m) at the end of 2017.” A few weeks later the report claims Ripple’s value had decreased from its highest point by as much as 75%.
This high level of volatility makes it difficult for industry players who wish to transact in cryptocurrencies to plan and budget ahead. Further, with uncertainty surrounding exactly where, and how, cryptocurrency transactions will be regulated around the world, companies may be more cautious about investing in cryptocurrency payment solutions. Expedia has recently dropped Bitcoin as a payment method, after introducing the option on its website in 2014.
Maksim Izmaylov, Winding Tree ceo, told Travel & Meetings Buyer that ‘crypto-volatility’ is definitely an issue. “Stabilising an asset is not an easy task, it’s very expensive, but there are a few projects out there working on that issue. Tether and MakerDAO, for example. I'm sure there are a few more. These cryptocurrencies could already be used for sending transactions without the fear of volatility.” According to Izmaylov, crypto-volatility would decline as the ecosystem of cryptocurrencies matures, and as the public gain more knowledge about what they are, and how they work.
Winding Tree is a non-profit organisation claiming to have one goal, to foster innovation in the travel industry. The company’s White Paper identifies the concentrated structure of the travel industry as a problem for innovation. It says that the two largest OTAs (Priceline and Expedia) control about 95% of the US market, while the top three GDSs (Amadeus, Sabre, and Travelport) have a 99% combined market share over non-direct airline inventory. “These dominant players lack the economic incentive to innovate because there are only two major intermediaries in the hotel sector, and three in the airline sector,” it says. “Some of these companies still use dated mainframe computers and software written decades ago.”
Currently in the development phase, Winding Tree hopes to bring innovation to the industry by creating an open-source blockchain based marketplace for the travel industry. Suppliers will be able to put availability into a database, which sellers will be able to buy instantly using Winding Tree’s cryptocurrency, Lif. Winding Tree has designed its solution to function automatically, without human interactions. Software engineers will then be able to create user-facing interfaces on the Winding Tree platform. “What we're hoping to achieve is decreased cost of transactions, faster settlement, but most importantly, we want to see more innovation in the travel industry,” said Izmaylov.
While Winding Tree was initially vocal in its mission to take on today’s travel technology giants – the OTAs and GDSs – it seems to have softened its approach somewhat. When asked, Izmaylov said: “We initially had this notion of disintermediating the market, but after some time we'd realised that all we want is more innovation, we want progress. If some slowly moving companies die or change because of it, it is none of our concern. I'm sure there are ways for those companies to adapt to the changing technological landscape, if they want to.”