The travel industry has been in a constant state of flux in the last two decades. Travelers used to rely on their home phones to call hotels to book a room, or go through a travel agent to smooth out all of the wrinkles, but now it can be done fully online without the need to speak to another person at all.
With the rise of the internet, booking websites put information about hotel prices and availability at consumers’ fingertips. But this convenience comes at a price. Whether they realize it or now, consumers pick up the tab for commission and processing fees, and are obliged to bear partiy price agreements between online booking services.
Now, with the advent of blockchain, savvy travel companies are finding ways to leverage the young technology to potentially revolutionize the space.
LockTrip is one of those companies.
“By building on blockchain technology, we can give unique competitive advantages and possibilities that weren’t available just 12 years ago,” according to the LockTrip team. “No one was talking about decentralization back then or a distributed database or smart contracts between two parties.”
But those are exactly the things that LockTrip is now talking about — and implementing — through its platform.
From the consumer’s perspective, online travel agencies simply appear to aggregate prices, provide an array of booking options, and help facilitate the booking process. But LockTrip offers a different point of view from within the industry.
“Imagine a very chaotic and extremely inefficient industry with an annual turnover of more than $700 billion and growth rates of above 10% per year,” according to the LockTrip whitepaper. “Add monopolistic structures and the abuse of power to that equation and you get a very accurate description of today’s travel industry.”
OTAs do provide a convenient way to compare hotel prices and check availability. But to facilitate booking rooms for travelers, these OTAs charge hotels around 20% in commission fees to provide its service, according to LockTrip, a cost that is often passed along to the consumer.
So why not simply book directly with the hotel and skip the OTA?
Because, over the years, online travel agencies began to figure out ways they could protect themselves from being undercut by better prices from competitors and from the hotels themselves. One of the most effective tactics they found was rate parity.
Rate parity is when the same rate is applied to a hotel room no matter which website or company is used to book the room. In the current system, many hotels are bound by rate parity agreements with OTAs.
Because of the popularity of booking websites, hotels are theoretically able to reach a broader audience and book more rooms through the OTAs. The drawback is that — in addition to the 20% commission fee — hotels are not able to price rooms cheaper for customers who book directly through them.
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