The Blockchain and GDS 2.0

The GDS (Global Distribution System) is creaking at the seems, expensive and hard to manage. It's the system you see travel agents use to book a room for you, if you have ever wondered why their system only shows 10% of the hotels available in a certain area it's because a lot of hotels are not on the GDS.

It may be global but it's not comprehensive.

The new offering is the OTA (online travel agent) such as Expedia and Booking.com and they pretty much offer everything. The problem here is that generally they own their own inventory and unless your an affiliate there is no luck for you to plug into their system or build a business.

What is the Blockchain?

I am really going to try and keep this simple for you, because a few days ago I didn't know much about it myself. It's a paradigm shift in how things work and you could call it web 3.0. 

Essentially it lets two people do business with each other who don't trust each other.

Here we go. The Beginning

It all started from bitcoin, the blockchain runs bitcoin. What the blockchain does is unique in that it allows a currency to exist without a central body of control like a bank or government. Basically no one person, government or company can print their own bitcoin, it's de-centralised and nobody owns it.

This is important, the fact that bitcoin is decentralised, independent and open means that nobody can tamper with it and all transaction are immutable (cannot be changed).

It's also open to anyone to download the database and see what has happened within it, if twitter were to use this technology it would mean a tweet is forever and cannot be altered or censored by government or the company itself.

But how does this apply to bookings?

The blockchain is essentially a database, but it's a database that cannot be hacked, denied, changed or modified. It's also open for anyone to take a look at all the transactions that have taken place. Banks are major investors in the blockchain as it allows them to trade contracts with each other and be 100% safe and secure. You might have heard of smart contracts already?

Smart contracts?

This is getting confusing but bear with me here. 

The original blockchain was a major innovation and allowed a currency to exist safely without a central owner. Since 2011 major enhancements have been made in blockchain technology and we now have Ethereum.

What Ethereum is, is essentially is blockchain as a service that is also programmable, so if we apply this to hotel bookings we would get this example:

1. Guest books hotel Indigo in New York
2. Smart contract is made for 1 hotel room for $100 between the hotel and the customer
3. The contract has the cancellation policy hard coded inside, lets say its 24 hour free cancellation by the guest only.
4. When the contract is outside the cancellation policy period, the contract executes code that sends payment over to the hotel to pay for the room.
5. The hotel room is paid for and the guest may turn up and check-in

What is so special about that, you may ask?

Well guys that would be the first ever guaranteed room booking without any form of central authority in the middle, essential its a peer to peer transaction. 100% safe for both parties.

The hotel cannot take payment early and the guest cannot cancel or withhold funds after the free cancellation period is up. The hotel is happy as the booking is 100% guaranteed and the guest is happy that his room is booked and there are no credit card details to be stolen or misused.

The important part is that there is no middle man to skim profits from the transaction, at least no large profits such as a 15% commission or 2.4% credit card fees. a hotel may lose 20%+ of the booking value to these kinds of fees.

What would a GDS 2.0 look like?

Imagine this: 

A decentralised database holding all the inventory of hotel rooms worldwide, that guests can book directly with the hotel with the help of smart contracts and the blockchain to enforce the contract. 

A system without a central owner that decides to charge a 15% commission or connection fees.

A system that allows anyone to connect to it and build their business on top of it, example a Online Travel Agent.

A system that makes channel managers and GDS systems obsolete as there will be one open source database of all room inventory and the ability to book rooms securely without the need to pass over credit card numbers.

(Credit cards may still be used to buy the credits for the transaction)

When can we expect all this?

To all you early adopter types out there, this kind of thing is years away. There are huge monopolies that would delay and block any kind of innovation in this field as it would drastically alter their business model.

"Sometimes it's better to shoot yourself in the foot today rather than someone shoot you in the head tomorrow"

The best people to create the GDS 2.0 of the future would be the companies that operate GDS 1.0

Im hoping that someone out there is building this today, it will be an exciting time for all involved and with many new possibilities for innovation.