It was only in 2008 that pseudonymous Bitcoin founder Satoshi Nakamoto devised the first blockchain database, authored his white paper and kickstarted the entire cryptocurrency revolution. Only 14 years later, crypto is on an ever-evolving rollercoaster ride,both heralded as the future of the economy and condemned as a volatile, unregulated “bubble” soon to burst.
So, what exactly is cryptocurrency, why is it so controversial and how can it be used within the hospitality industry?
What is blockchain?
For those new to the terminology, to understand crypto, you must first understand blockchain. Blockchain is, as the name suggests, a chain of blocks – it’s a safe way of storing digital data. Once data has been recorded inside a blockchain, it becomes very difficult to change it.
Each block contains some data, the hash of the block (likened to a fingerprint – a unique code that identifies the individual block) and the hash of the previous block. The fact it also contains the hash of the previous block creates the chain, as all the blocks are linked together. This is one reason why blockchain is so secure. To change one block, you must change all the following blocks.
What’s more, there is no one central entity where blockchains are stored; blockchains use peer-to-peer networks. When someone joins the network, they get a copy of the blockchain. Each time a new block is added, there must be consensus from the whole network that the block has not been tampered with.
Bitcoin and other cryptocurrencies work using this blockchain technology and the data of a transaction is stored in a block. However, there are other ways to use this technology, such as storing medical records, notarizing documents and even collecting taxes.
Blockchain technology and hospitality
In terms of hospitality, blockchain technology is already being used to streamline processes and make them more secure. The most obvious is crypto payments, which are rising in popularity, especially in the past few years, with some even saying that cryptocurrencies will eventually erase fiat currency (government regulated money, such as GBP or USD) altogether.
Presently, credit card and bank transfers make up the largest proportion of payment transactions, but they can be delayed by up to five days. Crypto transactions take place on one secure network, remove complexity and delays, and negate issues such as overdraft or foreign transaction fees
Furthermore, cryptocurrencies are increasing in value at an exponential rate. If a hotel had taken a 1 Bitcoin booking in January 2017 (valued around USD900), that Bitcoin would be worth over USD47,000 today.
Hotel brands embracing crypto payments
Hotel brands are taking note, with many setting up crypto payment methods in the last year. The Pavilions Hotels & Resorts are partnered with London-based global crypto-payment gateway Coindirect and have been accepting 42 virtual currencies as payments at all of their properties since July 2021.
As of October 2021, The Maldives’ S Hotels & Resorts has been collaborating with trading platform FTX to allow guests to pay for stays using virtual currencies – making their two Maldivian properties the first in the archipelago to do so.
Here in Thailand, Sri Panwa Phuket and its sister properties Baba Beach Club Hua Hin and Baba Beach Club Natai have been accepting Bitcoin, Ethereum, USDT and USDC as payment since 15th September 2021.
Other uses for blockchain technology within hospitality
There are other benefits of blockchain beyond payment. Cryptocurrencies can identify guests with only a fingerprint, while smart contracts between distributors and hotels can track dynamic changes in pricing in an automatic, transparent and secure way.
Some businesses are even using cryptocurrencies to solve staffing problems. In the UK, where there is a severe shortage of staff in the hospitality industry thanks to Covid-19 and Brexit, pub owner Peter Gilbert of The Potters Arms in Amersham has been paying staff a monthly bonus in Koda. Similar to how big corporations provide employees with stocks and shares options, crypto allows small businesses to offer comparable initiatives.
“[Staff] are seeing that money increase every month, and it is giving them an education in crypto to help them in the future,” says Gilbert, who credits crypto bonuses with increased staff retention, attendance and keeping staff engaged.
There are also specially-designed cryptocurrencies already in operation within the travel industry. LockTrip is a cryptocurrency that offers a zero-commission marketplace for direct hotel bookings, eliminating the need for OTAs. There are other blockchain-based currencies created for loyalty programs, which can be used by multiple merchants to offer points and rewards.
Taking things to a whole other level, the founder of UNYCU Hotels, Johannes Fritz Groebler, launched The Crypto Hotel in spring 2021. The hotel is 100% powered by the Ethereum Blockchain, and holds the title of the world’s first NFT (non-fungible tokens, a type of certificate of ownership) hotel. Digital areas of the hotel can be bought and sold by hotel “guests.” While everyone can see The Crypto Hotel, only the buyer has official ownership rights to the objects – a concept that is described as collecting digital artwork.
Drawbacks of cryptocurrencies
However, it’s important to note that blockchain has its disadvantages. Cryptocurrencies are volatile and can change value very quickly. Just as they are rising at an incredible pace, they could just as easily lose that value.
Like anything digital, cryptocurrency can be vulnerable to cyber attacks and scammers, who often use social media to lure people into unsafe investments. Cryptocurrencies are unregulated, so there are no rules in place to protect your wallet and if you lose money, there’s no company you can use to claim.
This has led to tightened restrictions on cryptocurrency this past year in countries like the United States, including outright bans in China, with more global cryptocurrency crackdowns expected in 2022.
Is crypto the future of hospitality?
Although crypto is controversial and has its drawbacks, there are many advantages that blockchain has for hospitality. In an era of uncertainty, industries must be flexible to new ideas and embrace concepts as they grow in popularity, in order to reach the most amount of people.
How the hospitality landscape looked pre-pandemic is not how it will emerge in the endemic period to follow. The most important thing businesses can do is to focus on education when it comes to blockchain and technology in general – be open to new ideas, prioritize safety and stay ahead of the curve.