Travelport and IBM test blockchain to improve distribution and settlement for tours and activities

Another travel brand is looking to gain a foothold in the booming in-destination experiences sector.

Following a successful proof of concept study done in partnership with IBM, Travelport is developing a private blockchain to simplify, expedite and validate the distribution and settlement of tours and activities.

Within the next six months, Travelport chief architect Mike Croucher says it will launch a minimum viable product, possibly with a focus on tours and activities provided in cruise ports or through large hotels in a tourist destination.

Croucher says as travelers’ interest in unique experiences has grown in recent years, it has become clear that traditional distribution channels do not suit this sector, which has a high percentage of small, independent suppliers.

“For all the large platforms, including ourselves, the cost of entry is actually quite high,” Croucher says.

“The cost for us to put content onto our system takes quite a lot of work - the expense of surfacing it and then the expense of settlement, managing contracts. What we saw with the opportunity of blockchain is, could this actually solve this long-tail content in a different way?”

And on the other side of the equation, he says, is the need to help travelers discover and trust experiences from small, local suppliers.

“The way you are doing this today is you are seeing a walking tour [for example], and you are going on TripAdvisor and you are seeing hundreds of reviews on there. But there are lots of false reviews out there, there are lots of issues and it takes a lot of search,” Croucher says.

Beginning last spring, Travelport began working with IBM to explore how the distributed ledger model of a private blockchain could solve these issues, adding transparency and automation to serve operators, resellers and consumers.

The idea

The solution has several components.

To ensure that the experiences available through this blockchain are trustworthy – that they actually exist and are of suitable quality – Travelport will require every piece of content, every walking tour or fishing expedition for example, be endorsed by a person or entity in the local market.

So after adding their inventory to the blockchain, suppliers will be responsible for contacting an “endorser” from a list supplied by Travelport and developed through their worldwide industry network.

“Whether that be a local travel agent, a tourist board or something like that that endorses the content, and therefore it means that content has some seal of approval around it on the chain,” Croucher says.

“From a Travelport perspective, this saves us from having a very large sales team around the world, trying to source content and endorse content.”

Once the content is endorsed, it becomes visible on the blockchain to resellers, such as a hotel or cruise line, and the endorser would receive a commission on the sale of their endorsed products.

And this is where another characteristic of blockchain kicks in.

Smart contracts are self-executing agreements that delineate the rules of transactions on a blockchain.

It’s an instant settlement of commission, whereas today the settlement of commission on any sale is a six to eight-week process - or sometimes a never process.

Mike Croucher - Travelport

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In this case, the tour or activity operator would complete a contract template provided by Travelport that specifies the commissions to be paid on each transaction.

“For example, maybe the retailer, whoever sells it, gets a 5% commission, the endorser of the content gets a one-off fee of $100 and maybe Travelport takes a .5% fee on every transaction,” Croucher says.

When a sale takes place, the smart contract executes automatic payment to each participating party.

"It’s an instant settlement of commission, whereas today the settlement of commission on any sale is a six to eight-week process - or sometimes a never process,” Croucher says.

“And that transparency of contract exists within the blockchain to cement that that transaction has taken place.”

Settlement in this system is done in fiat currency based on the location of the recipient.

The potential

Based on feedback they received after sharing the proof of concept at a variety of Travelport customer events during the summer, Croucher says they are focusing on a few specific use cases. One would be large hotels in tourist destinations.

“If you take Las Vegas, the big casinos there, we are beginning to get traction with them to say this might be a way for us to offer something very different than the concierge desk we have today,” he says.

“Currently for many of the localized tours you want to do at a hotel, you need to go down to the concierge desk, ask for it, they need to phone up, they need to sort it all out, they keep a record and then they get their commissions. Automating that is difficult for them. So they see how they could build this into their in-destination resort-type websites.”

Croucher says this platform could also benefit cruise lines, by connecting them with many new, uncommon activities to offer to their guests while in a port, each one affirmed by a local tourist board or travel agency.

“It’s very hard for them in each port of call to coordinate those types of unique experiences like a cooking class or a Segway tour or something, because actually booking it in advance and getting assessment and fulfillment of that is difficult,” he says.

Travelport is working to identify launch markets as it builds out the minimum viable product.