When CEO Junho Lee of Lodging solutions company Jienem says he feels the pain of hoteliers groaning under the weight of extortionate commissions charged by online travel agencies, it’s because he really does. Founded as a co-living startup four years ago, Lee’s company now oversees an extensive guesthouse network, offers consultation services to hoteliers and even operates two offline hotel franchises itself.
It’s not nearly as lucrative a business as you might think, however.
“From our experience in franchise operations, we know commissions are tough” says Lee. “Our first expenditure is commission, believe it or not. It’s a lot of money. We make revenue, and 20%, 25%, up to 30 or 40% goes to commissions.”
And that’s why Lee and his team came up with DiscoverX, Jienem’s effort to build a new travel ecosystem powered by blockchain.
At first glance, the DApp – currently in the early stages of development – may seem like just another travel app, sharing reviews and allowing users to find and book hotels on the go. Look under the hood, however, and you’ll find a decentralized blockchain engine that not only liberates hoteliers and others in the travel industry from high commissions, but also incentives users to share quality information and reviews, an absolute necessity at a time when independent travelers are becoming ever more important in the travel industry.
Breaking the monopoly
Lee see DiscoverX as a much needed alternative in an online travel industry virtually monopolized by a couple of large hotel booking companies that charge commissions as high as 40%. The burden can crush smaller hotels. Indeed, the American Hotel & Lodging Association has been waging a PR campaign against two of the largest online travel booking providers, and in Australia, a national completion watchdog is encouraging consumers to directly call up hotels rather than use online booking sites.
Lee says, “When there’s a monopoly, there’s no competition, so you can charge as high a commission as you want.”
DiscoverX will lower commissions by cutting inefficiencies using smart contracts. Traditional online travel agencies have plenty of distribution channels – first vendors, second vendors, third vendors and so on. The online booking industry’s big dogs also spend a lot on marketing, a cost that gets passed on to hotels and consumers. “We want to get rid of all the middlemen to lower the costs,” says Lee. “We’re going to minimize the things that the traditional industry used to do.”
He adds, though, that the big players have little to fear from his DApp. All he is doing is giving hotels and travelers another option. “If you look at the beef industry, from the cow to the table, there are many distribution systems,” he says. “What we’re trying to do here using smart contracts is build a p2p market.”
The same user experience. But better.
When it’s completed, DiscoverX will offer a user experience that differs little from the traditional online travel experience. You’ll be able to download a DApp from Google Play or App Store and use it to book hotels using fiat or crypto. You’ll be able to get reviews, read travelogues and view photos, too.
Where the DApp differs, however, is how it incentives users.
On traditional travel sites, reviews – even when they’re not outfight fake – often lack balance. Lee says, “You write reviews only when you’re really pissed or really happy.”
The centralized nature of traditional online travel sites make it nearly impossible to manage the thousands of reviews posted a day, too.
DiscoverX’s content reputation protocol, on the other hand, encourages users to write accurate reviews and accounts, and write them consistently. Reviewers earn tokens for writing quality reviews on a regular basis. Readers earn tokens for reporting fake reviews. Early adopters earn more tokens for being brand evangelists. Thusly, Lee’s team is building a token economy that incentives the community to produce quality content and police itself sans centralized database managers and gatekeepers.
Lee says, “We believe the strongest motivation is incentive.”
Providing quality information and reviews is a critical mission at a time when the travel paradigm is shifting. Millennials prefer free independent travel, or FIT, over group tours. Rather than relying on tour agents, young people are planning their trips themselves. “In FIT, content is very important,” says Lee. “You need to have terrific reviews to have a good travel experience.”
Sounds great. But when can we see it?
As readers could probably guess from this writer’s frequent use of the future tense, DiscoverX is a work in progress. Hopefully, says Lee, the DApp will come out next year. He cautions, however, “We really haven’t finalized our roadmap yet, so it’s hard to tell for certain.”
Still, he’d prefer to see it launched sooner than later.
“We want to make it ASAP because startups are all about speed. It’s better to release a product early and get a lot of criticism and develop it by reviewing that criticism and feedback.”
The innovative nature of what Lee and his team are trying to do has proven a challenge. Lee concedes that a decentralized, blockchain-based travel agency was mostly theoretical, at least up till now. Lee’s developers not only require time to get used to blockchain, a relatively new technology, but also use said technology to create a completely new product.
Lee has been recruiting many good researchers and developers, particularly from tech giant Kakao. His company also recently acquired the travel information website VOLO from SK Planet, providing a rich supply of reviews, travelogues and photo material to work with.
He stresses, however, that technology is only part of the game, especially in the travel industry, an industry in which he and his company have much experience and can draw upon an extensive network of contacts. “Technology is very important, but you need to have a lot of experience in the travel industry,” he says. “You need to know how to acquire users, you need to know how to work with hotels. You need to have a lot of networks. What we’re really good at is business, and this is a business at the end.”
In fact, the DirectX team has been meeting with hotel industry officials and attending hotel-related conventions such as Hotel Show 2018 to promote their product and blockchain technology. “We’re trying to work very closely with the hotel industry, to work closely with the travel industry,” says Lee. “There are still many people who do not know about our project, so that’s why we’re working on that first. We’re really focusing on the business side right now as we build the product.”