Microsoft and publicly traded travel company Webjet are creating the first travel industry blockchain for hotel bookings

Australian Stock Exchange-listed online travel company Webjet has begun using blockchain technology to book hotels, in what the company claims is an industry first.

Webjet has completed a six-month project behind closed doors with tech giant Microsoft to create a proof of concept that it says has the potential to transform existing travel industry processes and manage payments for online hotel bookings.

Webjet’s move comes as the banking and finance industry looks to harness blockchain technology to speed up payment processing, enhance security and reduce costs.

Wells Fargo, Australia and New Zealand Banking Group and Commonwealth Bank of Australia are working together to study blockchain technology; the Australian Stock Exchange is also studying whether it can move its settlement and clearing systems to the blockchain.

Blockchain first came to the fore as the underlying technology for Bitcoin, but its potential uses are much wider than that. Blockchain can share lists of transactions, digitally verified between a large number of computers rather than on a central server, and this secure transaction ledger can be updated on the system in near real time.

Webjet CEO John Guscic (left) and CIO Graham Anderson (right)

Reduce human error

Webjet executive director John Guscic told the Australian Financial Review that the blockchain technology they developed was focused on the B2B wholesale sector, providing hotels and travel agents with the ability to reduce costly errors at all stages of the travel booking supply chain.

Guscic said:

"The dirty secret of the global hotel industry is that one in 25 transactions globally is ultimately unbroken because someone provided a service but was not paid for it... When you look at it as a whole, that's a huge number."

“This is happening because there are a lot of intermediaries in this space that are exchanging information with each other. We think blockchain will create a seamless, more inaccessible and more robust supply chain, and ultimately a fairer outcome because people will be paid accordingly for the services they provide.”

Initially, Webjet will only use blockchain within its own division, but chief information officer (CIO) Graham Anderson said it was likely to expand to the 250,000 hotels it works with, as well as many of its third-party suppliers.

He explained that Webjet has created a smart contract for hotel bookings, which creates a permanent record that is not subject to dispute and ensures that any subsequent changes to the booking are clearly recorded.

Anderson said:

“We’ve developed a way to match bookings on a blockchain, which is essentially a decentralized trust platform.”

Building Capabilities

Guscic said Webjet had worked with technology provider Microsoft to create its own blockchain, which is hosted on Microsoft’s Azure cloud platform and built on Microsoft’s Bletchley blockchain template.

He said Microsoft was providing a lot of resources and was also looking to build its own blockchain capabilities, telling Webjet that they were the first travel industry blockchain being developed globally.

Microsoft Azure Chief Technology Officer (CTO) Mark Russinovich said there was huge value to be gained by working with companies that wanted to be early adopters of blockchain, and that Webjet had a great opportunity to expand on the initial work they had done.

He said:

“We will be able to learn a lot as Webjet uses this blockchain technology first within its subsidiaries and then expands to their supply chain.”

“We intend to feed back our work with Webjet to others in this space who are looking for solutions. We are focusing on creating a kind of sandbox for developers, developing and testing combined technologies with customers and partners, and ultimately helping the customer base choose the right tool to solve specific business problems.”

Room for development

Guscic said Webjet investors should be able to see the company’s early moves toward blockchain. In 2012, Webjet created a B2B division that operates in the Middle East, North Africa and Europe, and is looking to launch in North America.

The B2B unit has annual sales of $350 million, but as a relatively late entrant into the market, it has plenty of room to grow, he said.

"The questions I've been asked repeatedly by investors are how fast this new unit can grow, what it will cost, and what return on investment we expect."

"We want to be a global player in the hotel industry, and to be a global player you need to have a certain scale, and to have a certain scale you need to be a low-cost supplier. This has led us to set our strategic goal of becoming a low-cost supplier in the hotel wholesale sector."