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NFTs For The Hospitality Industry – Hotels
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NFTs For The Hospitality Industry – Hotels

August 14, 2021

Have you ever dreamed of opening your own hotel? Did you ever harbor aspirations to transform an old and dilapidated building into an alluring art-deco establishment where literary types gather to sip tea and compare notes about their latest masterpiece? Maybe you have, at some point in your life, imagined an opulent opening day, when Grand Crypto Hotel welcomes its first set of guests through its revolving doors.

All valid thoughts and dreams, of course, but there’s a major impediment to grandiose dreaming, isn’t there. You need funding to pay for your dreams. And the grander the dreams, the larger funding that they require, usually, so unless you’ve got a few million to spare, the Grand Crypto Hotel won’t become a reality just yet.

But what if I told you that you don’t have to be a millionaire, or a real estate tycoon to partake in hotel ownership? What if I explained that there is a way that you can own a part of that hotel? Is your interest piqued yet? Sit down there beside the fire and listen while I tell you about tokenization. It won’t take long, I promise.

A brief history of tokenization

In today’s technology-savvy world, we understand tokenization as the process of turning sensitive data into non-sensitive data tokens that can be shared or traded without compromising the underlying information. Banks use tokens to transmit banking details to a payment processor, for example, to prevent data breaches.

But tokenization itself is a concept as old as mankind itself. Clay tokens used to count, store, and communicate financial data are known to have been used circa 4,000 BC in regions today known as the Middle East. Early tokens were individual pieces made in different sizes to represent quantity. Later, the tokens would be etched with lines or dots to denote the quality of whatever they represented.

These early tokens were used for administrative purposes, in local economies, and much later, they led to the advent of writing. So from the very beginning, tokenization has been used to convey information. Data.

This trend of representing data continues today, albeit in a more sophisticated fashion, more in accordance with modern technology.

Tokenizing the hospitality industry

If you ask any hotelier what their main business goal is, you’re likely to hear that their focus is to increase occupancy rates, and maximize revenue per room, commonly known as RevPAR.

These two metrics are difficult enough to maintain in normal years. During the pandemic, they have fallen off a cliff as there has been virtually zero travel (either for leisure or business) over the past 18 months, and rolling lockdowns have kept people indoors at their homes. Millions of hotel rooms worldwide lie unoccupied, i.e., they’re not producing revenue. Leisure travel is starting to return this year, albeit at a reduced capacity. Normality will return someday, but we’re still a long, long way away from the good old days before COVID-19.

So in light of this economic quandary, hotel managers have been forced to reinvent the business and find alternative ways to make their establishments profitable again. Tokenizing their hotels is one of these new ventures.

But how does tokenizing a hotel actually work, and what benefits does it bring?

Tokenization opens up two interesting avenues: Fast access to monetary resources (capital, in other words), and tokenization-as-as-service

Releasing capital, fast

Hotels range from small, family-run establishments, to larger, franchise-owned mega buildings. The plot of land where they stand might be worth millions, and when considering the furnishings, equipment, ornaments, furniture, etc., the value of a hotel site might run into the billions. Problem is, if the hotel has no guests, all that value is locked unto itself. In fact, it costs a lot of money just to have the place open, in terms of staff, energy consumption, water, etc.

In the time of COVID-19, where millions of hotel rooms have been dormant for the best part of two years, releasing some of that locked capital has taken center stage. In this situation, the hotel owner could just sell the property, but this would mean finding a buyer, which is easier said than done, particularly in these turbulent times. And if the property is sold, the hotel would obviously be in the hands of somebody else, which might not be in the seller’s best interest.

Tokenization would enable the hotel owner to sell part of the hotel, by digitizing the hotel’s assets through blockchain technology. Once the digital version of the hotel is uploaded to the chain in the form of tokens, the owner can begin selling these assets to different buyers, and people would effectively own part of a hotel. The blockchain would keep all the information transparent and secure, so the hotelier can track which tokens are sold, and to whom, and at what price.

In this scenario, tokenization enables the fragmentation of the sale (rather than selling the entire hotel to one person), so every investor retains what is called fractional ownership. In other words, you no longer need to be an eccentric billionaire to own a hotel. Or part of it, anyway.

Tokenization-as-a-service

Tokenizing a hotel opens up brand new possibilities for turning a profit via blockchain, including tokenization-as-a-service.

The digitization process creates a perfect replica of the hotel on the blockchain, a ‘digital twin’, if you will. Using smart contracts, several specialized platforms now enable this virtual representation of your establishment to manage daily tasks, including maintenance, supplies, etc. through third-party contractors, for example. This has an immediate and obvious benefit: cost reduction, by a great margin. The hotel manager (the human one) can delegate all these tasks to the digital twin, and focus on more pressing matters. Tokenization-as-a-service saves a whole lot of money and frees up a great deal of time.

Conclusion

We’re slipping into the last quarter of 2021, and COVID-19 shows no sign of exiting the world stage any time soon. Hotels remain half, or completely empty, and the situation is unlikely to improve for quite some time. Tokenizing hotels, or hotel rooms, creates real investment opportunities for small to medium investors with limited financial resources, and from the hotelier’s perspective, it’s a win-win situation.


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