Blockchain’s biggest gift to the travel industry: Universal Travel Rewards
There was a time when the travel and hospitality industry was at the cutting edge of building and maintaining customer loyalty programs. Who could forget the buzz around frequent flyer miles and hotel loyalty rewards when they first landed in the early 80’s, and the sense of achievement and status associated with collecting rewards and unlocking new tiers as they took off in the decade or so that followed.
It was a turning point for customer loyalty programs, and the most successful ones quickly became synonymous with a whole culture of perk-powered life.
Many of those programs still exist to this day, and their success has given birth to an entire subcategory of marketing that concerns itself with the careful design of points-based rewards programs, not just for frequent fliers and the corporate elite, but for the masses.
As the sector has developed, and technology has enabled more and more businesses to offer their own programs, we’ve seen online retailers, credit card providers, and even coffee shop chains build customer outreach and retention models upon the newfound science of incentive-based loyalty and rewards programs. Last year, a staggering $300 billion in reward points were distributed around the world, a number that is expected to reach $400 billion by the end of 2018.
But even with this meteoric growth in almost every consumer-facing sector under the sun, there is one market that, despite its size, remains remarkably untouched by this revolution. Remarkable because of its size, and remarkable because of its proximity to the hospitality and travel industry that gave birth to these modern day icons of loyalty by design.
That market is best described as ‘small independent travel businesses’; a catch-all term which includes independent boutique hotels, tour, activity and local experience providers, local transport operators, souvenir shops, restaurants, and any other small business that relies for a large part of its custom on leisure and business travelers.
These independent travel businesses actually make up the lion’s share of the $8 trillion industry they are a part of, but when it comes to benefitting from loyalty programs, almost all of them have been cruelly left behind. This is no fault of their own, but because of the unique makeup of their customer base. One that is by its very nature ‘on the move’, and unlikely to return any time soon.
While large global travel and hospitality companies, such as United Airlines or Marriott, have both the reach and resource to create, and promote, a carefully structured loyalty program of their own, with customers earning points and perks every time they make a purchase, small local travel businesses do not.
As a customer of United Airlines or Marriott for example, you can earn points on a business trip to London, and spend them on a vacation to Thailand, but they can only do this because they have that global reach. Can you imagine collecting loyalty points from Angelo, the hilarious tour guide that took you around Florence’s Uffizi Gallery? Or Admil, the hardworking sherpa that went the extra mile on your hike up to Machu Picchu? Or Ni Luh, the fascinating marine biologist diving instructor that took you swimming with turtles in Bali?
Chances are you won’t be going back there for a while, if that is you ever do, so there’s little for those local providers to gain by investing in a loyalty program for their fly-by-night customer base.
The best they can hope for is to trust that you loved the experience so much that you tell your friends about it when they eventually plan a trip to the same place some two or three years later.
This natural quirk of the market means that loyalty programs in the travel and hospitality industry (unlike in other industries) have remained the reserve of huge multinational companies with a global footprint.
Of course, it would theoretically be possible for a large centralized organization to bring together these few million small independent businesses under one rewards umbrella, allowing customers to earn rewards in one place and spend them at another, but the complexity and cost of centrally and reliably managing such an ecosystem in a way that benefits every player, renders it almost impossible. This however is where blockchain technology comes into its own.
In its current form, blockchain is perfectly suited to life as a currency, as demonstrated by the success of Bitcoin, and the handful of copycat coins that each promise incremental improvements on their more mature cousin. Over in the rewards space, in the same way that blockchain’s publicly distributed ledger allows for a cryptocurrency’s value to be stored and transferred reliably without centralized control, it also facilitates the creation of a global reward token that is immutable, shareable, transferable, and crucially…subject to market forces.
Rewards points are, as it happens, already a type of digital currency. A ledger, kept safe in a spreadsheet somewhere. However, in their current centralized form they simply cannot work for thousands, let alone millions, of different businesses, because such a system relies too heavily on trust.
What’s to stop that umbrella business from effectively ‘printing’ points and spending them at participating outlets? And you can imagine the chaos that would ensue if you opened out that power to ‘print’ points to every business in the ecosystem? In a market that large and diverse, it just wouldn’t work.
The community polices itself, automatically, through the base code and smart contracts that govern the entire monetary policy of the ecosystem. The technology allows for a limitless number of companies to participate in the system, without any one of them having overriding power over the token and its value. The market decides.
In such a system, where the token has real world utility, and people can actually redeem their rewards for products and experiences in the travel space (something we are making possible through our live KeyoPass app, and will in time be available to developers all over the world), we all of a sudden have a meaningful incentive that independent travel businesses can offer to their customers for making purchases, or completing desirable actions, such as leaving their room as they found it or referring a friend once they return home.
In one fell swoop, consumers can now earn rewards (we call them KeyoCoin) for buying that third pair of fishermans pants on the Khao San Road, and use them to tip a gondolier on their honeymoon in Venice.
What’s more, because a decentralized network is so much more efficient to manage and maintain, the financial barriers to entry for even the smallest business are tiny, and their level of involvement is entirely flexible.
It’s in this way that blockchain can, by its very design, unlock a truly universal rewards and incentive platform, one that excludes nobody, and rewards everyone. For KeyoCoin, we’ve begun this journey in the travel industry, precisely because so much of the market is calling out for this kind of innovation.
Of course the large multinational airlines and hotels, those that enjoy a global footprint, will continue to have their own loyalty programs, for the time being. But as Malcolm Gladwell points out, there will come a time, a tipping point, when market forces and consumer demand will force large corporations to adapt to the new way.
This tipping point for the large airline and hotel companies will be powered by blockchain’s second biggest gift to this space, the wide range of pain points it cures for consumers of their restrictive loyalty programs. But that is a topic for another day.
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