How to Prepare for Deployment of Blockchain in the Hospitality Industry

By Josias Dewey Partner, Holland & Knight LLP | December 24, 2017

The blockchain-based application, by Webjet, will be able to provide accurate information about hotel inventory, on a real-time basis, for hotels around the world.  Yet, this application of the technology may not have the biggest impact on the industry.  Hailed as the best use case for blockchain by the Harvard Business Review, loyalty reward systems are the target of significant investment by blockchain companies looking to add functionality to a system of critical importance to the industry. 

Overview of Technology

Perhaps the least understood technology in recent years, blockchain, or as it is sometimes referred to, "distributed ledger technology" ("DLT"), is particularly difficult for many to conceptualize.  Even the terms "blockchain" and "DLT" technically refer to slightly different concepts, where the term blockchain is a subset of DLT.  More specifically, DLT is generally understood to describe a collection of techniques or methods that result in a distributed, peer-to-peer network of computers that, through the operation of a common software protocol, can achieve "consensus" on a single version of truth about some facts or "states," each of which is recorded on a ledger (think database or spreadsheet).  That ledger, in turn, is identically replicated on each computer (or for some data, two or more computers to the exclusion of others) connected to a network.  The result is a network of computers where each user can trust that the records on his or her copy of the ledger are identical to every other copy maintained by the network and that any change to one copy will be made to every other copy-or more simply, a golden source of truth.  

The term "blockchain" refers to a system that implements the above characteristics, and in addition, processes groups of data entries or "transactions," known as "blocks," where each block includes a unique cryptographic marker of the prior block.  This pattern of chaining blocks so that each block is inextricably linked to the prior block gives rise to the term "blockchain".  For certain applications, most of the benefits achieved by blockchain can be realized from DLT without the need for this pattern of storing data in blocks.  As we will see below, this is especially true for ledgers not designed to be accessible by the public, but rather are private or otherwise require permission in the form of credentials to gain access.  This nuance is one of several that can alter the characteristics of a form or type of DLT or blockchain.  An entire book can be written about DLT and blockchain, which requires us to overlook many of these nuances, and instead, focus more on the capabilities of DLT and blockchain in the context of hospitality and less on how it achieves them.  From this point on, we will use the terms blockchain and DLT interchangeably, and treat most technical matters as a "black box".  Just as you don't need to understand TCP/IP protocol to understand the value of the internet, you don't need to know how blockchain protocols achieve "consensus" about their data to understand the value of DLT.

Application to Hospitality

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