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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Guest Service: A Culture of YES

In a recent global consumers report, 97% of the participants said that customer service is a major factor in their loyalty to a brand, and 76% said they view customer service as the true test of how much a company values them. And since there is no industry more reliant on customer satisfaction than the hotel industry, managers must be unrelenting in their determination to hire, train and empower the very best people, and to create a culture of exceptional customer service within their organization. Of course, this begins with hiring the right people. There are people who are naturally service-oriented; people who are warm, empathetic, enthusiastic, pleasant, thoughtful and optimistic; people who take pride in their ability to solve problems for the hotel guests they are serving. Then, those same employees must be empowered to solve problems using their own judgment, without having to track down a manager to do it. This is how seamless problem solving and conflict resolution are achieved in guest service. This willingness to empower employees is part of creating a Culture of Yes within an organization.  The goal is to create an environment in which everyone is striving to say “Yes”, rather than figuring out ways to say, “No”. It is essential that this attitude be instilled in all frontline, customer-facing, employees. Finally, in order to ensure that the hotel can generate a consistent level of performance across a wide variety of situations, management must also put in place well-defined systems and standards, and then educate their employees about them. Every employee must be aware of and responsible for every standard that applies in their department. The April issue of the Hotel Business Review will document what some leading hotels are doing to cultivate and manage guest satisfaction in their operations.