Blockchain Technology & its Implications for the Hospitality Manufacture

By Tarik Dogru, Makarand Mody, & Christie Leonardi

"A world with little or no intermediaries where there is no need to build trust between people and transactions are completed in seconds. This is the promise of the Blockchain Technology." -Tarik Dogru

Blockchain engineering and its economical, social, and technological implications, mainly in the course of the cryptocurrency Bitcoin, take become hot topics of conversation. Indeed, blockchain technology is primarily associated with Bitcoin because it is built on a blockchain platform. However, blockchain technology goes far beyond the cryptocurrencies such as Bitcoin, Ethereum, Litecoin, Ripple, etc. And so the question becomes: what exactly is blockchain engineering science? In this article, we attempt to reply this question, explicate how blockchain works, and discuss the general and hospitality manufacture-specific implications of the technology.

What is Blockchain?

Blockchain technology is an online platform that chronologically records transactions and tracks avails through distributed ledgers (i.east., shared ledger) in a network (Anderson, 2016; Peters & Panayi, 2016). Transactions in a network may include but are not express to sending and receiving money, payments for products and services, booking a hotel room or a flight, making a reservation, inbound into a contractual agreement, and much more. Furthermore, blockchain technology enables tracking the ownership of assets along with right-to-use in the events of avails being leased to a 3rd political party. Merely put, anything of value can exist recorded, tracked, leased, and exchanged on a blockchain platform and duplicate records of these transactions are simultaneously shared with participating agents in a network. The records are further protected with mathematically configured or cryptographic keys to ensure their security.

Ane business organisation eliminated past the technology is the need to accept trusting individuals on each side of a transaction. A central authority is not required to administer or validate transactions in blockchain platforms (Yli-Huumo et al. 2016). Instead, the engineering is decentralized and transactions are executed and authorized by the members in a blockchain platform via cryptographic signatures and duplicate copies of the transactions are distributed to network members (Crosby et al. 2016). Let's take a more detailed await at how the applied science works.

Blockchain technology: How information technology works

Blockchains are digital databases and require a network of computers to function (Gupta, 2017; Wright & De Filippi, 2015). In a blockchain, transactions are coded into blocks, which are connected to each other in the form of chains, hence the name cake-chain (Crosby et al. 2016; Gupta, 2017; Huckle et al. 2016); Blocks shop records of transactions chronologically with timestamps and a unique reference number (i.e., hash) to previous blocks (Gupta, 2017). While the governing rules of different blockchain networks may vary, all of its members must concord that the transactions are indeed legitimate (Davidson, De Filippi, & Potts, 2016; Pilkington, 2015). Once the blocks are created and chained, the records of transactions cannot be altered or removed from the blockchain, and the sequence of blocks cannot be changed. This provides immutable, tamper-proof information storage and management systems (Gupta, 2017).

While virtually of the known blockchains, which are associated with cryptocurrencies, are open source and accessible by anyone with a computer and cyberspace connection, blockchains practice not have to be public. For instance, the Bitcoin blockchain is public, and transactional records are open up to public while keeping the participants making the transactions anonymous (Crosby et al. 2016). Nonetheless, a concern blockchain tin can be individual and not require any cryptocurrency, as Bitcoin, Ethereum, and Litecoin do, and may require permission to participate in the network and access the distributed ledger (Gupta, 2017). The degree of permission can as well vary amongst participants depending on their role in the network. While the technicality of blockchain technology is complicated, it is important to outline its essential features.

Characteristic 1: Shared Ledger

Records of transactions or ownership status of avails are concurrently available to all the members in a blockchain platform, providing a single source of truth in a blockchain platform. A individual blockchain will require permission (i.e., personal key) to access and obtain the records and details of the transaction. Additionally, the caste to which the participants could access these records tin can be limited (Crosby et al. 2016; Gupta, 2017). Some participants may only be authorized to run into whether a transaction occurred between ii parties, while certain participants tin be given permission to view transactions in full detail.

Characteristic 2: Security

Transactions in a blockchain platform are verified through a consensus that are predetermined by the participating members in the blockchain (Pilkington, 2015). Internally, the records of transactions cannot be changed or manipulated past network members in a blockchain. Externally, a blockcahin platform is extremely hard if not incommunicable to hack because blockchains are stored in many computers and the transactions are encrypted by unique cryptographic signatures (Crosby et al. 2016). The blockchain platform could simply exist hacked if all the computers within the network are accessed at the same fourth dimension.

Feature three: Efficiency

In a blockchain platform, individuals do not need intermediaries to found trust because transactions are candy and verified within the blockchain network (Anderson, 2016; Gupta, 2017; Wright & De Filippi, 2015). In fact, the Economist defines blockchain as the "trust machine" suggesting that it eliminates the need for trust between people (Economist, 2015). In other words, the interest of tertiary-party arbitrators, such as banks and governments, to verify or authorize transactions is not needed in a blockchain platform. The elimination of intermediaries from the procedure streamlines the process and significantly reduces transaction time and costs.

Feature 4: Smart Contracts

A "smart" contract is a contract that can self-execute and self-enforce a set of rules or provisions in a contract (Davidson, De Filippi, & Potts, 2016). All the provisions that crave action can exist executed autonomously, either immediately or at a specific fourth dimension. Smart contracts may include a few or many contractual clauses and may or may not require human involvement, significant they can be partially or fully self-executing (Gupta, 2017). The transactions will be broadcasted to all parties involved and these records are immutable. Charter contracts, for example, tin can be prepared on a blockchain platform as smart lease contracts that include all the provisions that ordinary lease contracts include, such every bit a leasing period, lease corporeality, payment date, lessor's and lessee's information, and other governing rules. Enforcing the governing rules and payments for the leased belongings (i.east., firm, car, bike, etc.) tin can be an excruciating process in an ordinary contract, since the lessor has limited data and ability to enforce the contract and thus requires tertiary party involvement. In a blockchain platform, the lessee's depository financial institution account tin be linked to the lease agreement and payments tin be completed automatically on the payment date. Similarly, an agreement betwixt a travel booking site and hotels or airlines can be executed apart and immediately once the event occurs. In summary, smart contracts eliminate the costs and delays associated with ordinary contracts (Crosby et al. 2016; Peters & Panayi, 2016).

What are the implications of blockchain applied science?

Blockchain technology has the potential to revolutionize many aspects of technology, business, and governance. The trust-free, tamper-axiomatic, and cryptographic security structure of blockchain applied science enables digitizing fiat currencies, creating smart contracts, developing decentralized autonomous organizations, and many more applications. Governments, corporations, and other organizations have already started to develop blockchain platforms to test and potentially integrate the technology into mainstream use.

One of the prominent implications of blockchain technology is observed in banking and finance, equally it has the potential to brand financial transactions much more secure, cost-effective, and time-efficient (Peters & Panayi, 2016). Governments could pursue the possibility of digitalizing fiat currencies to facilitate faster and secure transactions with picayune or no need for intermediaries, which potentially eliminates or reduces transaction costs. In fact, the French government has launched a working grouping to research the implications, benefits, and applications of blockchain for the public sector (Sundararajan, 2017). Furthermore, the French government announced that it will permit banks and fintech companies to establish blockchain platforms for unlisted securities trading, citing that it will "develop new means of trading securities that are faster, cheaper, more transparent and safer" (Sundararajan, 2017).

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Some other important implication of the blockchain technology volition exist observed in accounting. The current accounting system depends on the double-entry bookkeeping to provide internal control and heavily relies on both internal and external audits to build trust between stakeholders (i.e., suppliers, financial institutions, and governments). Blockchain applied science has the potential to advance the bookkeeping organization to the next level. In a blockchain platform, transactions are automatically executed, verified, and recorded in real time on a cryptographically-secure distributed ledger, which is attainable to all members in the blockchain network. That is, the digitalization of the accounting system via blockchain engineering science will eliminate the demand to continue split records of transactions across transacting businesses and cross-checking that often requires the use of external auditors (Anderson, 2016). In addition to toll-savings and increased efficiency, blockchain technology prevents frauds and manipulations in recordkeeping due to its tamper-evident infrastructure. While blockchain applied science could modernize the current bookkeeping system, information technology could not completely replace the part of bookkeeping departments and eliminate the need for auditing. Professional accountants are still necessary for auditing, internal command mechanisms, and accounting arrangement improvements.

The implications of blockchain technology goes beyond accounting and finance services. One-third of 3,000 executives surveyed by IBM reported that they are either considering integrating or have already incorporated the blockchain engineering science into their businesses (Wesley, 2017). The potential to significantly improve supply chain management is also present (Gupta, 2017; Tian, 2016). The electric current supply chain management systems are fragmented, and tracking products' origins and shipments is crushing. On a blockchain platform, every motility of the product from the initial departure point to the final destination can be tracked meantime by everyone involved in the supply concatenation. This could eliminate fraud and errors, increase efficiency and security, reduce costs associated with paperwork, and build sustainable inventory management and control systems. In other industries, especially those in which multiple companies are involved in the production cycle, and where the final product consists of many parts, such as the automobile and aircraft industries, tracking and monitoring components of the products and even the nugget ownership and the right-to-use of the products could provide better functioning, responsible, and sustainable systems. Airbus, for instance, is in the process of integrating blockchain engineering to track and monitor the parts of aircrafts used in the production procedure (Hackett, 2017).

Current and Futurity Uses in the Hospitality Industry

While the technology is still in its infancy, hotels, restaurants, airlines, travel agencies, and other hospitality businesses could amend their service quality, guest satisfaction, and profitability by integrating blockchain engineering. As more hospitality businesses adopt blockchain technology, stakeholders in the hospitality industry will collectively benefit from its use. In the following section, we present some of the possible means in which blockchain technology can be used in the hospitality industry.

Tracking guests

Hotels can exist instantly updated right from the time that a guest leaves her dwelling house for the airdrome to when she checks in for her flight and even upon arrival at the hotel. This tracking tin increase efficiency by reducing expect time during the check in process and thus increase guest satisfaction. While tracking guests' movements might exist considered an invasion of privacy, accessing the information will require the invitee's authorization and individuals volition exist able to determine the degree of information that is shared with hotels or other members in the network. Therefore, blockchain technology has the potential to provide seamlessly integrated guest services without intruding guests' privacy.

Tracking food

Tracking and monitoring foods is applicative to the restaurant industry. Indeed, nutrient consumed in restaurants is role of the supply chain offset at the farm. Thus, extending blockchain based supply chain direction systems to restaurants could provide meliorate quality control and nutrient safety in restaurants. That is, restaurants could collaborate with their nutrient suppliers to be involved in the blockchain platform that tracks and monitors the food. Furthermore, restaurants can allow their guests to check the origins of and routes taken past the food used to prepare their meals, via blockchain technology. Just put, blockchain engineering science can facilitate trust in restaurants in regards to the quality of the ingredients used to prepare meals.

Airline and hotel points

Loyalty programs often create more problems than they solve. Hotels and airlines tin can build loyalty programs on a blockchain platform and issue loyalty tokens as rewards to their guests (Kowalewski, McLaughlin, & Hill, 2017; Kowalewski & Simon, 2016). The loyalty tokens are similar to loyalty points; however, blockchain technology enables customers to freely buy, sell, or substitution their loyalty tokens with others. Allowing customers to commutation loyalty points in an open exchange can also increase the competitiveness of loyalty programs and increase overall service quality. For example, the market value of company B's tokens might exist higher than company A's tokens due to the quality of products and/or services those tokens can purchase. So a company that is worth more than than the other is likely to exist the preferred in the market, incentivizing other firms and thus the organization every bit a whole to increase the quality of their offerings to attract more than customers. Furthermore, loyalty tokens could likewise be used beyond industries; consumers would exist able to use their hotel loyalty tokens in restaurants, airlines, coffee shops and other businesses through blockchain platform. In collaboration with IBM, startup technology company Loyyall is developing a blockchain platform where consumers can redeem, buy, sell, or exchange their loyalty points (Hill, 2017).

Digital ID

Blockchain engineering could provide a solution to identity theft. In airports, hotels, and restaurants, costumers must frequently nowadays their IDs as proof in gild to pass security and check in to their flights, hotel rooms, or consume alcoholic beverages. This makes consumers vulnerable to identity theft; non only past the person who is checking IDs but besides other people around who might obtain important personal information. As a solution to this exposure, IDs, including birth certificates, driver'south licenses, social security numbers, and passports, among others, can exist stored in a blockchain platform and people can be given permissions to bank check and validate IDs (Davidson , De Filippi, & Potts, 2016). Like to QR codes, IDs can be in a course of cryptographically-secured codes that let verification of ane'southward identity without seeing essential personal data. In addition to eliminating the likelihood of loss or theft of physical IDs or personal information, digital IDs that are stored on a blockchain could also eliminate forgery (Gupta, 2017).

Smart Contracts

Smart contracts can exist adopted to facilitate both minor and major transactions in the hospitality industry. Hotels and travel agencies, for example, could streamline their business relationships with smart contracts on blockchain platforms. Like to a legal contract, a smart contract between hotels and travel agencies would have the contractual provisions that are predetermined past the transacting parties (Crosby et al. 2016; Gupta, 2017; Peters & Panayi, 2016). Anytime a transaction occurs, it is recorded and shared on the blockchain. Once transactions are recorded, the payments tin can exist candy immediately based on contractual terms. Non only would this facilitate payment, but would besides farther optimize room sales through improve collaboration between hotels and travel agencies.

In a similar vein, the execution of franchise agreements and management contracts could be carried out with smart contracts between franchisor, franchisee, management companies, and asset management firm according predetermined governance rules to eliminate conflict of interest and increment efficiency.

The applications of smart contracts can be extended to the guests, completely eliminating the check-in process. Through blockchain technology where digital IDs are stored along with an authorized account for payments, hotel rooms can be assigned to guests and a digital primal tin can be recorded into the blockchain technology once the payment is received. The most important advocacy in this smart contract is the fact that both IDs and payment information are encrypted via secure codes and are thus not exposed to theft (Gupta, 2017). The application of this smart contract can be extended to other industries, such equally car rentals, role rentals, leased apartments, and and then on. Airbnb properties can also utilise such a smart contract to resolve some existing security concerns. Slock.it, a German startup is working on what is essentially a blockchain-based lock that self-executes based on the lock owners' predetermined rental terms. These blockchain based locks are installed in properties—cars, houses, offices, etc. and the bachelor dates, along with rental amounts are posted on the smart contract where renters can book these rental properties; once the payment is received, the smart contract authorizes admission to renters for the rental period.

Furthermore, smart contracts can facilitate travel insurance in the event that a flying is delayed or canceled. The contractual terms can be role of the blockchain network via a smart contract and tin be executed if a delay or cancellation occurs.

Many companies in the hospitality and travel space are betting big on blockchain'due south bandwagon effect to facilitate cheaper, better, and faster experiences. TUI Group is already using blockchain technology to manage the distribution of its inventories and assets and handle internal processes (Watkins, 2017). But time will tell whether the prophecy fulfills itself. However, i thing remains true: during a fourth dimension when the economic system is strong, and the hospitality and travel industry is optimistic about its future, the benefits of blockchain technology are likely to concenter the involvement and investment dollars of companies beyond the spectrum (Bujarski, 2018).

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Dogru Headshot

Tarik Dogru earned his Ph.D. in Hospitality Direction from University of South Carolina, and holds Master'south degree in Business organisation Administration from Zonguldak Karaelmas University in Turkey.Prior to joining the Boston University School of Hospitality Administration faculty, he was an adjunct faculty at University of South Carolina (2013-2016) and research banana at Ahi Evran University (2009-2012) in Turkey. He has taught a multifariousness of courses, including Economics, Finance, Accounting, Hospitality, and Tourism in business and hospitality schools. He is a Certified Hospitality Educator (CHE) and holds Certification in Hotel Manufacture Analytics (CHIA) from American Hotel & Lodging Educational Constitute. Tarik's research interests span a broad range of topics in hospitality finance, corporate finance, behavioral finance, existent estate investment trusts (REITs), hotel investments, tourism economic science, and climatic change.
Mody
Makarand Mody, Ph.D. has a varied manufacture groundwork. He has worked with Hyatt Hotels Corporation in Mumbai as a Trainer and equally a Quality Analyst with Bharat's sometime premier airline, Kingfisher Airlines. His most recent experience has been in the market research industry, where he worked every bit a qualitative inquiry specialist with India's leading provider of marketplace research and insights, IMRB International. Makarand'south research is based on dissimilar aspects of marketing and consumer beliefs within the hospitality and tourism industries. He is published in leading journals in the field, including the International Periodical of Contemporary Hospitality Management, Tourism Management Perspectives, Tourism Analysis and the International Journal of Tourism Anthropology. His work involves the extensive use of inter and cross-disciplinary perspectives to empathize hospitality and tourism phenomena. Makarand as well serves as reviewer for several leading journals in the field. In fall 2015, he joined the faculty at the Boston University Schoolhouse of Hospitality Assistants (SHA). He received his Ph.D. in Hospitality Management from Purdue University, and also holds a Master's degree from the University of Strathclyde in Scotland.
ChristieChristie Leonardi is a senior at Boston Academy School of Hospitality Administration. She was a Management Trainee in Mandarin Orchard Singapore and a Pubic Relations Intern in AccorHotels' corporate office in New York. She currently holds a position in the Museum of Fine Arts in Boston as a Corporate Relations Intern. Her interests include traveling, food, contemporary art and real estate.

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