Leveraging Blockchain to Improve Customer Loyalty in the Travel Industry

Traditional loyalty programs fail to meet customer expectations, causing frustration and disengagement.

Integrating blockchain technology into loyalty programs can revolutionize customer engagement, providing flexibility, autonomy and interoperability.

As the travel industry struggles to retain customers in an increasingly digital world, Can Taner, CPO at Bitpace, suggests blockchain technology could provide a solution. Traditional loyalty programs fail to meet the expectations of today’s tech-savvy customers, leading to high levels of dissatisfaction and disengagement. According to the Bond Brand Loyalty Report 2024, half of all travelers find the lack of flexibility in these programs frustrating, and nearly a third have abandoned them altogether.

Traditional loyalty programs operate in closed-loop systems, limiting customers to a single brand and offering limited redemption options. As customers interact with various brands and accumulate points, the inherent limitations of these systems diminish the perceived value of those points, leading to high churn rates. As a result, brands face the risk of stagnation in a world that increasingly values ​​digitized and seamless travel experiences.

Today’s travelers expect more than just airline miles or hotel discounts. They demand flexibility, choice and control over how they interact with brands and redeem their rewards. For them, loyalty programs should function as a currency, not just a one-way ticket to rewards tied to a single brand. In response, the travel industry is exploring innovative technology solutions to revamp its approach to customer loyalty.

With its decentralized methods and tokenized assets, blockchain technology offers a creative solution to this problem. Loyalty programs can become more dynamic and customer-focused by adopting these new technologies. However, integrating blockchain into the travel supply chain is not without challenges, as evidenced by projects like Winding Tree, which cited lack of preparation and the need for greater trust in blockchains within the travel industry as reasons to abandon their tokenized loyalty program.

Nonetheless, Taner suggests that if companies adopt a collaborative attitude and allow customers to switch between brands, beneficial mechanisms can evolve, leading to potentially remarkable long-term payoffs. Tokenized loyalty systems powered by blockchain technology are a radical departure from existing models. By converting travel points into digital assets on the blockchain, these systems create intrinsic value and transform how points are earned, exchanged and valued across different ecosystems.

Blockchain technology also enables real-time cross-border transactions, eliminating the delays and complexities associated with traditional loyalty systems. It simplifies conversions and eliminates geographic restrictions, providing convenience to businesses and consumers. For businesses, this approach allows deeper penetration into the international customer base, while consumers benefit from greater freedom and choice in using their rewards.

However, implementing such decentralized programs requires extensive preparation on the part of travel agencies. This includes choosing a permissioned blockchain to operate on, designing interchangeable loyalty tokens within the travel ecosystem, deploying programs on a secure decentralized ledger, and ensuring compliance with evolving regulations.

Taner says traditional loyalty programs are insufficient for today’s travelers. As customer expectations evolve, businesses must adapt their engagement strategies accordingly. Blockchain technology offers a new customer-centric approach by enabling flexible, interoperable and decentralized loyalty systems. By adopting these new models, the travel industry can reinvigorate its loyalty programs, increase customer satisfaction and drive growth in the digital age.