The demand for short-term vacation rentals is massive. Worldwide, the market is worth $44.3B USD, and it’s expected to exceed $59B USD by 2022, growing by 7.4% annually.
Despite the size of the market, there are many problems with the current system. Commissions can be as much as 20% of the total rental cost, and payments, especially international transfers, can be complicated and expensive. Many platforms are plagued by problems with fraudulent reviews and inaccurate feedback, and there is a perception that critical reviews can simply be removed. Overall, there is a lack of transparency about properties, and there is little recourse for travellers if a property doesn’t match the photos posted online. Similarly, property owners may have concerns about the identity of their guests, as it is presently very difficult to confirm identity online.
Recently several blockchain platforms have emerged which promise to deal with these issues. Here’s an overview of the ways that blockchain will transform the market:
Although individual platforms vary, a common feature of short-term rental platforms on the blockchain is that they promise to reduce transaction fees by 2 to 4 times compared to existing platforms. With peer-to-payments flowing directly from the traveller to the property owner, there is no middleman, fewer delays, and lower costs.
Blockchain streamlines international payments, and smart contracts, which can contain built-in dispute resolution processes, make the payment process easier for both parties. Once a smart contract is established, rental fees can be held on the blockchain until the rental is completed. At the conclusion of the stay, successful completion of a review process would trigger the release of the rental fees to the property owner. Payments can easily be reversed if the reservation is cancelled for any reason. Payments on the blockchain also have a much lower risk of fraud, including chargebacks and misrepresentation. Finally, processing payments using blockchain technology makes it much easier to link short-term rentals to a loyalty program, which will further improve rental rates and renter satisfaction.
With the growing frequency of data breaches and privacy concerns, consumers are increasingly skeptical about the security measures that traditional e-commerce platforms offer. The distributed ledger system that underpins blockchain technology is both transparent and secure: once recorded, information cannot be altered, and only the participants in a transaction can view the details of that transaction. Blockchain also offers individual users a great deal of control over who can access their personal data, and under what circumstances that access can occur.
Blockchain provides an easy and efficient way for individuals to verify their identities. Typically, a platform will require a user to upload a copy of their government-issued identification document. This information is then stored securely on the blockchain. As part of the rental contract, both the traveller and the property owner would be able to view each other’s information.
More accurate information
Storing property records and photographs on the blockchain means that renters can access accurate and trustworthy information about properties and their rental histories. Renters can also be assured that they have access to the complete history of previous renters’ reviews, without fear that negative reviews have been removed.
At present, approximately half of all active Airbnb listings have no rating. One blockchain platform, Emphy, will offer incentives for incentives for both guests and hosts to generate information for ratings. These incentives will be provided in exchange for actions such as providing a detailed description of the property, adding photos, and writing reviews. Incentivizing the ratings system will allow property owners to maximize their occupancy rates and thus earn more money. In turn, guests who provide feedback will be rewarded with more favourable rates, as well as platform-specific tokens that can be applied towards future rentals. Because the size of the reward for each party is determined by the rating left by the other, reliable and realistic rewards are encouraged. And because only the parties to a transaction can leave a rating, the opportunities to create fraudulent reviews are limited.
Another platform that features a rating system is Zangll, which will periodically assess the ratings of the properties on its platform and will delete those with the lowest ratings. Zangll will also make use of decentralized control of smart technology such as electric locks that will sync with smart phones and smart watches, removing the pain points associated with accessing the property using traditional keys or codes.
With international travel growing steadily, and with consumers increasingly demanding a more authentic travel experience, the demand for short-term vacation rentals will only increase. As blockchain technology develops, and as more use cases are developed, we will see additional platforms that offer personalized, reliable and secure vacation rental options.