TUI’s Blockchain initiative blips IBM’s radar


Fritz Joussen, CEO of European travel giant TUI, is convinced that Blockchain technology will dominate B2B within five to ten years, while the consumer-facing implications are further down the line but could potentially “change the internet”.

His previous comments about Blockchain heralding the end of the road for Booking.com and Expedia grabbed the headline writers attention earlier this summer , and he went into more details at a briefing in London this week.

Monopoly money

His argument is, give or take, that companies such as booking.com and Expedia create value – to the investment community – by building scale through “monopolistic structures” and then monetize that scale via significant consumer marketing spend, funded to an extent by the margins they can charge suppliers because of the monopoly they have created.

Blockchain, he argues, “prevents monopolies by offering non-discriminatory access to everything”.

Clearly, access to everything would necessitate a public Blockchain and TUI is currently using a private version, designed in-house, to optimize its internal processes and distribution of its owned inventory. Joussen admitted that it was undecided in terms of its long-term thinking on opening up its Blockchain to third parties, but he seemed excited at the possibilities, while caveating his comments by saying that his ideas are just that, ideas.

“Booking as a service” is a leftfield idea around Blockchain. Joussen raised the possibility that the TUI Blockchain could, repeat could, become an exchange for hoteliers to distribute inventory without the “monopolistic margins” currently charged by the existing intermediaries.

IBM interest

For the boss of a business with a market cap of nearly £8 billion ($10 billion) at the time of writing, Joussen was surprisingly forthcoming. In particular, he admitted that he had talked with Ginni Rometty, CEO of tech giant IBM. Joussen said that Rometty “happened to be in Europe” at the time one of this early interviews about Blockchain was published. He said that Rometty was interested in his ideas that the currently private TUI Blockchain could become public and whether TUI was interested or would be in “spinning it off” at some stage.

With its Blockchain initiative still developing internally, there isn’t anything for TUI to spin off, but the interest from IBM, however informal, is surely a sign that TUI is on to something. Joussen thinks that not only is its approach to Blockchain unique in travel but also stands up against what is happening in other verticals.

The spin-off to IBM of a Blockchain which will take Expedia and booking.com out of the game is not only a theoretical conflation of various moving parts but also very much future gazing. But in the here and now TUI is already using Blockchain internally and is seeing the benefits. Joussen said that there are 30 people within the group working on Blockchain and that within five years “savings of €100 million a year are managable” through its adoption of Blockchain.

BedSwap

Many game-changing tech initiatives focus on either cost savings and generating revenues – TUI believes that Blockchain can do both, although the initial focus is on the former. But it does have a Blockchain-enabled project in place which is central to its global plans outlined in its TUI 2022 strategy.

The project is known as BedSwap. Blockchain enables TUI to shift its owned hotel inventory between different points of sale according to the demand it is seeing and can flex its selling margins accordingly. This is made possible by “integrating” TUI’s yield systems with the Blockchain.

The next phase of this initiative is, potentially, connecting its property management system to the Blockchain-connected yield systems. What this could, repeat could, allow TUI to do is to yield every single room across its entire portfolio differently.

And following on from this, data held about guests in the PMS could also be fed into the Blockchain platform. By connecting to a marketing engine TUI would then be in a position to build a propensity engine and create a one-to-one marketing relationship with guests.

Five years

Joussen is clearly enthused by the possibilities that Blockchain offers the business, which reflects his pre-TUI background as a software engineer and specialist. He was candid enough to admit that his brief when taking the TUI hot seat in 2012 was to stop the business in its existing format “from dying”. His decision to sell off Hotelbeds Group and the mixed bag of long-tail specialists known as Travelopia were all based around his desire to create a vertical structure for the business in which “content” – namely its owned assets such as hotels and cruise ships – were the main profit centres for the business.

Having said that, the sale of Hotelbeds to Cinven for €1.2 billion ($1.4 billion) last April was based around his belief that the emergence of Blockchain was a threat to the bedbank business model (and indeed all intermediaries).

When specialists and generalists alike talk about digital transformation, TUI is as good an example as any of a business which developed during the analogue age and has thrived in the digital age. Its initial adoption of Blockchain shows confidence in the specific technology but also its proactive approach to a tech-driven evolution of its business model.

Here’s a video from TUI Group’s web site in which it outlines its approach to Blockchain.

 

 



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