Amid travel industry
chatter about how blockchain will transform travel distribution, Winding Tree
is among the few startups applying the technology directly to the travel space.
It is developing a "new economy" for hotel, airline, rental car and
other travel suppliers—from distribution through payment. With its first launch
only a few months away, CEO Maksim Izmaylov spoke with BTN's Michael B. Baker.
For the newly initiated, what is blockchain, exactly?
Blockchain is a groundbreaking new technology that is
definitely going to change the world. It's not very easy to understand. People
hear blockchain and they immediately think about some sort of virtual currency,
but it goes much deeper. The underlying technology behind bitcoin, blockchain
allows us to build networks without third parties that would sit in the middle
of all the transactions and control the network. The blockchain technology
allows us to transact on a network without intermediaries. Bitcoin is a financial
system where we don't need a bank in order for me to send you a certain amount
of money. Similar logic can be applied to all kinds of different areas in our
lives. In the case of Winding Tree, we are seeking to disintermediate an
industry that is dominated by a few large corporations.
What solutions does the technology offer to travel,
specifically?
In the travel industry, one of the hardest problems is
access to data. The implications of that fact are tremendous. Without open
data, we cannot have innovation. As someone who has been in the travel
industry, working with startups, for at least three years, I see that problem
very clearly. What we're doing by removing intermediaries is allowing suppliers
in travel to connect easily and quickly without a long sign-up process and
without paying exorbitant transaction fees. By doing that, we're bringing a lot
of value to the table. The blockchain technology, because of its implications,
allows for many, many other things to be built on top of the platform. That's
the core of our platform. It's bundling. It should be easy to combine different
travel segments, such as air, rail, hotels and B&Bs.
Blockchain fundamentally as a technology allows [there to
be] no downtime. [In traditional transactions], there is a central party out
there whose servers go down every once in a while. The bitcoin blockchain, as
an example, is up all the time. In a few years, we're going to see a lot less
fraud because of the blockchain technology. Third parties bring a lot of
security problems to the table. Look at Equifax. If you store a lot of user
information, payment information and information that should not be disclosed
to the public in one place, of course you are going to be hacked; it's a
gigantic target for hackers. Blockchain as a distributive technology removes
that problem on a very fundamental level.
How will your product work?
For suppliers and sellers to travelers, they'll just plug
their systems into our network and out of the box, they can sell inventory very
easily, receive a payment in cryptocurrency and at the same time immediately
transfer that cryptocurrency and convert it into a fiat currency, such as U.S.
dollars or euros, and send it to their bank account. Cryptocurrency is just an
enabler. For suppliers, it will be easy to sort inventory from all kinds of
different suppliers—airlines, hotels, car rentals, tour and activity
providers—and combine them in interesting ways and sell them with no exorbitant
transaction fees. We've designed a whole new economy around blockchain
technology. Our goal is not just to make money as a company but to bring
innovation back into the travel industry. Our goal is not just to remove the
bad guys. It's to make travel cheaper for travelers [and] more profitable for
suppliers and sellers, and that technology fundamentally gives us the ability
to do so.
What level of interest have you attracted from suppliers?
We have a lot of natural interest. We have big players like
[German travel and tourism company] TUI. We're talking to big and small
airlines, a few hotel chains and a few smaller providers. Our goal would be to
work with companies that can move very fast in terms of technology integration.
We wouldn't sit and wait for the big airlines [that need] two years [to
integrate. We want] to be able to experiment very fast and start from there. We
do have conversations with very big corporations out there that are willing to
move fast.
What about current travel distribution suppliers?
We have talked to the big GDSs and OTAs several times. Our
message to them is that fundamentally, blockchain technology does remove
intermediaries but those companies do not have to go away. Those players that
sit in the middle of all the transactions are able to charge those fees not
because they deliver a lot of value but because they can; there is no
marketplace that would determine the right margin, the right price point for
the value that they deliver.
What is your time line for launch?
In the software world, nothing is ever done and
fully operational. The minimum viable version of the product we are hoping to
launch this fall, around … November. We are going to start with testing the
smart contracts for hotels and vacation rentals. It's something that we have
developed over the past few months, and so far, it's up and running. We're
testing it with a few of our suppliers. Airline smart contracts will be much,
much harder. The search will be much harder, so we will try to deliver by the
end of next year. We need a lot of feedback and to learn about how those big
companies operate. All of those airlines have different systems, so it's going
to be a lot of work.