The boss of the world’s largest travel and tourism company has said that blockchain is set to disrupt the very companies that have been disrupting it, leaving the company with one, rather old-fashioned big advantage.
These days the big disruptors often don’t own anything physical. Google owns an algorithm, Facebook has a network of users, Uber, Airbnb, etcetera just own an engine for putting people and products together.
If you want to get big in the taxi business, you don’t start buying cars, instead you create a mechanism for putting drivers and customers together. Actually, owning stuff is rather old-fashioned.
By that definition TUI is rather old fashioned, it owns several tour operators including First Choice and Thomson Holidays, but it also owns 130 aircraft and 300 hotels and holiday resorts. It has vertical integration – and a lot of it.
Airbnb and Expedia are the very opposite of vertical integration, they operate at one very small layer of the chain – the booking engine combined with search. But booking engines are often natural monopolies, the more people with property to hire out, who use Airbnb the better it is – users don’t really want the hassle of comparing lots of Airbnb type services, they want the one engine.
The more choice you have with Expedia, the better.
You could say ditto for Uber, when you whip out your smart phone to see where the nearest taxi is, you lose something ifthe app only tells you about some of the taxis.
Words sung by Abba explain Uber, Airbnb and Expedia; they are all part of a ‘winner takes it all’ economy.
But now the boss of TUI, Fritz Joussen, has said that he believes blockchain can remove the booking engines from the chain altogether.
Blockchain uses a distributed ledger for holding a record of assets owned and transferred in a chain. The entire ledger is stored on every computer that is used to make a booking, making it impossible to hack into and change, because to do so you would need to hack into every computer, and removes control of the information stored from any one company.
Bitcoin is an example of blockchain, but a lot of interest has recently focused on Ethereum, an open platform for developing blockchain apps.
Speaking at a recent conference in Berlin, Mr Joussen said that blockchain “takes away the monopoly of knowledge from a few platforms.” Interviewed by Skift at the conference, he said “It will be very difficult for intermediaries to have sustainable business cases… These platforms build reach by spending billions on advertising, and then they create monopolistic margins on top of what they have as sales and marketing. They do offer great sales and marketing. Booking.com is a great brand, but they create superior margins because they have monopolistic structures. Blockchain destroys this.”
He added: “I think vertical integration is coming into style. The only thing that creates value long-term and is sustainable is vertical integration.”
There is historical precedent for crowd sourced platforms disrupting disrupters, and creating an opportunity for old fashioned companies that had previously been a victim of the disruptor. Take as an example, Encyclopaedia Britannica, Encarta and Wikipedia. Encarta, the CD based encyclopaedia from Microsoft, disrupted Encyclopaedia Britannica, pushing it into Chapter 11. But Wikipedia, in turn, made Encarta an irrelevance, but Encyclopaedia Britannica has found a way back into the market, appealing to education establishments, seen as a more trusted source than Wikipedia.
Mr Joussen was referring to the likes of Expedia and Airbnb because they operate in his market place. But the logic of his argument would apply to Uber. Lyft and others, too.