Webjet Ethereum Pilot Targets Hotel Industry's 'Dirty Secret'

Publicly traded online travel service Webjet is in the final stages of turning an internal blockchain pilot into a finished product.

Designed to track the inventory of hotel rooms around the world using a private version of the ethereum blockchain, the app was built using Microsoft Azure's blockchain-as-a-service sandbox.

Whereas most applications of distributed ledger technology are being built to cut out unnecessary middlemen or otherwise increase efficiency, Webjet managing director John Guscic said his company has another target in its sights.

In addition to cracking open a new stream of potentially valuable data on travel trends and more, Guscic said Webjet's blockchain application has been designed make it easier for the half-dozen or so intermediaries between a consumer and their hotel to get paid for the roles they play in facilitating a booking.

Speaking at the Microsoft Digital Difference event in New York City, Guscic told CoinDesk:

"That's the industry's dirty little secret. That 4% of volume doesn't get paid for. So ... that's what we're trying to solve."

The opportunity

On average, the Australia-based firm (valued at AUS$1.18bn) books about 750,000 rooms per year in the US, New Zealand, the UK, Canada and Mexico, with millions more searched daily.

Of those, Guscic explained, about one in 10 room bookings experience some sort of manual intervention, and, for one in 25 bookings, service providers including travel agents, travel retailers and travel wholesalers don't get paid for the services they provide.

In addition to making up the lost revenue, Guscic said the pilot, which is currently being used by Webjet employees for internal transactions, also aims to achieve more traditional blockchain promises.

In the existing online travel booking industry, the reconciliation process can take as long as a month, Guscic said, during which time service providers and customers alike can sit in limbo unable to prove whether a service was provided, and at the right price.

Addressing the issue, Webjet created a blockchain dashboard that uses a smart contract built on the ethereum blockchain that is accessible directly by third parties without the need of an API. According to Guscic, the app means the various parties in a travel transaction can know immediately that an obligation was fulfilled.

"It's an opportunity not to compress the supply chain," said Guscic "But to make it more seamless, and by making it more seamless you take costs out of the process to enable each part of the network to work more efficiently."

Business shift

First revealed in February, the upcoming industrial-grade blockchain application is part of a larger push by Webjet into a new source of revenue.

Following on the heels of Webjet's shift to Microsoft’s Azure cloud platform in 2012, the travel booking company expanded from providing hotel rooms directly to guests, to helping partners including the International Air Travel Association (IATA) aggregate their hotel inventory for sale around the world.

In 2013, that new B2B revenue stream resulted in a net loss, but, by the following year, it was generating revenue helping others track and sell hotel rooms. Then, in fiscal year 2016, Webjet generated AUS$155.5m in revenue, $31m of which was from B2B sales.

To help push those margins further, Webjet first spoke with Microsoft in May 2016, and over the course of four 'hack days' at which the tech giant's engineers worked side-by-side with Webjet staff, the application currently being tested internally was created.

The completed blockchain application is expected to launch later this year with three partners on board.

According to Guscic, early versions of the app actually worked too well, and generated more new kinds of data than the employees could analyze. As a result, some of the features were toned down to focus primarily on providing insights on travel trends and demographics.

Guscic said:

"Our initial experimentation with blockchain contributed to the chaos of enormous data, so we continue to refine that process."

Lost luggage image via Shutterstock