By Matt Luczynski, CEO, and Founder of Travala.com
Since the birth of online booking platforms, the online travel industry has grown at an exponential rate, radically transforming the way individuals plan and book their vacations. In 2017 alone, the travel market was valued at $630 billion and is expected to grow further to $1,091 billion by 2022. By creating direct relationships between properties and customers while simultaneously enabling greater choice, online travel agencies (OTAs) have emerged as the driving force behind the growth of the online travel industry.
Over time, however, these benefits have been overshadowed by the growing level of consolidation in service providers, leading to less transparency and heightened competition across participating hotel partners. The online travel industry as we know it today is dominated by two key conglomerates who have come to occupy two-thirds of the global online travel market and 95% of the US market.
Unfortunately, the resulting amalgamation of the online travel industry has come to dictate how consumers interact with service providers, fostering an environment that goes against the very reason for its growth: giving consumers the power to make travel decisions in a transparent manner.
With transparency as a concern, technologies such as blockchain have the ability to redistribute decision-making power while simultaneously providing cheaper transactions that are both verified and recorded on a public ledger.
The hidden pitfalls of consolidation
While OTAs were first created to satisfy demands for increased information from price comparisons, and property availabilities to amenities at a glance, consumers don’t often realize the politics that goes on behind closed doors. Not dismissing the strong relationships that these OTAs have developed with their customers through brand recognition, an OTA is an intermediary all the same and have not always had customers’ or merchants’ best interests at heart.
From the very onset, there exists a power imbalance with the relationship between OTAs and service providers: airlines, hotels, and car rental companies depend on these OTAs to reach their highly active customer bases. By leveraging the strong relationships they’ve come to cultivate over the years, OTAs have the power to dictate how easily service providers can reach customers, make sales, and ultimately succeed.
Searching for less, not more
In 2016, it was revealed that that one OTA used “dimming” to “punish” certain hotels by removing images or information from hotel listings, making them less attractive to a prospective traveler. While this has been since phased out, it clearly demonstrated the extent of their control over its own ranking system and how this power was abused. Additionally, they introduced a system called ‘Accelerator’ that now enables hotels to attain better search rankings through “bidding” for placements.
This new feature was introduced quietly and is already changing the ranking of results for travelers. Evidently, such mechanisms can truly impact the decisions that customers make unaware of the platforms’ influence.
Blockchain can resolve this by decentralizing the search and advertising practices on OTAs and using smart contract technology to allow companies to set pre-determined rules that treat advertisers fairly. Instead of distrusting the travel industry, consumers can rest assured that the booking process will remain neutral and fair as blockchain automatically executes referrals and provides transparency in search results rankings.
Pay for play
Beyond manipulations of search rankings, the search process is further complicated by the abundance of fake reviews. In this day and age, within a supposedly democratized landscape that champions choice and informed decision making, user-generated reviews are integral to informing a traveler’s bookings.
However, how much weight can these reviews carry with recent reports that almost 1 out of 3 TripAdvisor reviews are likely to be fake or purchased by the properties themselves. In fact, after receiving multiple requests from restaurants to review their businesses for compensation, one journalist successfully created a fake restaurant that not only drew unsuspecting diners but became one of the top-ranked eateries in London on TripAdvisor.
While user-generated reviews have long been heralded as a means of gaining an unbiased view of hotels, restaurants, and attractions based on actual experiences, the fiercely competitive landscape encouraged across booking platforms has led businesses to seek tactics that diminish the trust and transparency that these platforms were initially built for. For the average consumer or traveler, it is now more difficult than ever to navigate such a convoluted online travel landscape.
With blockchain, this could change. By recording all bookings made on an immutable, public ledger, reviews could be verified against these transactions, ensuring whether the individual leaving the review had actually stayed at that hotel or eaten at the restaurant they are writing about. This creates an ecosystem where authenticity is both valued and encouraged while fostering a far more trusting environment.
Cashing in on confusion
What was once the cause of the rise in OTAs could ironically soon be their downfall; simple pricing structures and clear deal comparisons have turned complex and deceiving, reducing trust faith among customers. Unlike hotel websites, where consumers can generally view the details of their bookings, OTAs customarily will lump service fees and taxes together into one sum making it difficult for consumers to understand how pricing works for each booking, obstructing their ability to see exactly where their money is going.
A nationwide public opinion poll conducted by Axis found that 57% of consumers have negative views of the practice of packaging and presenting the fees and taxes together, describing this as misleading, hidden, and shady.
By operating through a set of rules rather than looking to an authority, blockchains create an environment where OTAs, service providers and consumers can interact on an even playing field. In this ecosystem, OTAs will be put to the same standards as service providers and consumers, where all transactions and prices can be verified within the network, ensuring a balanced system for all parties involved.
While the online travel industry has quickly grown along with other markets through the introduction of internet-based platforms, OTAs have been slow to evolve with the consumer demands for more transparency. With decentralization and peer-to-peer interactions as an integral part of its networks, blockchain technology has immense potential in changing the way that the online travel industry currently runs. By rebalancing the power dynamic between OTAs, consumers and travel partners, blockchain can help create mutually beneficial relationships between all participants that the online travel industry was originally founded on.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.