Tech
How Hoteliers Can Dip Their Toe Into the NFT Waters |
Hotels are well positioned to take advantage of the NFT explosion because we are already in the business of creating unique experiences for our guests. By Larry and Adam Mogelonsky – 01/19/2022
With all the hype surrounding 2021 about blockchain, cryptocurrency, non-fungible tokens (NFTs), and the dawn of the metaverse, now is the time for hotels to consider how these rapidly growing trends will impact our industry. How can they improve the guest experience? When is the right time to act? And most importantly, will they help increase revenue or asset value?
What are non-fungible tokens?
As the title suggests, this short article is about NFTs, which are unique (non-fungible) digital identifiers (tokens) that grant their owners specific access to pieces of property, rights (including commercial use), or services. This uniqueness is verified and backed up using blockchains with transactions for NFTs completed in cryptocurrencies; both of these terms are out of scope here, although we strongly recommend you spend some time understanding how they work.
Right now, in early 2022, NFTs are in an early adopter, honeymoon phase, with the crypto community trading digital artworks at exorbitant prices while the outside world looks on in amazement at what are simply harmless iterative jpegs of bored-looking monkeys. Our gut tells us that there is indeed a bubble, but it is not a repeated tulip mania because the technology behind NFTs has deep and diverse applications. The key word in the definition above is “access,” which can be pretty much anything.
Why are NFTs valuable?
A closer look at Bored Ape Yacht Club (BAYC) provides a prime example of where the technology is headed and where the potential value for hotels lies. In case you didn’t know, the total traded value of all BAYC collectibles just surpassed $1 billion. According to its website, BAYC is a “limited NFT collection where the token itself doubles as a membership to a swamp club for monkeys.”
So, you pay for one of 10,000 limited-edition NFTs with the distinct profile picture of a funny primate as visual proof of ownership. But that’s the surface, the Trojan horse, if you will.
This token also gives you dedicated access to a members-only community, which for BAYC includes access to a private Discord server (a rapidly growing social media site that currently has over 350 million users) where you can communicate directly with a host of celebrities (BAYC NFT owners). Currently, this list includes the likes of Jimmy Fallon, Mark Cuban, and Eminem; if you win a BAYC NFT auction tomorrow, you’ll also get privileged access to chat with these bigwigs.
Furthermore, because the primary identifier is unique, the jpeg is entirely yours alone to use across other digital media, most significantly in future virtual reality metaverses, augmented reality platforms, or mixed reality experiences. As Gary Vaynerchuk, another NFT evangelist, says, this is similar to buying a custom character skin or other cosmetic mod for a freemium game, only with blockchain tracking across all games and platforms for as long as the internet exists.
Three NFT Use Cases for Hotels
We’ve already covered a lot of how this works, but based on the above, our hope is that your wheels are in motion. Hotels are well positioned to take advantage of the NFT explosion because we’re already in the business of creating unique experiences for our guests. Not every stay would qualify, but simply thinking in terms of digitized, unique access should generate some use cases.
- Increase unique experiences. Let’s say you run a 200-room property across multiple categories, with no individual keys that have unlimited amenities and sky-high prices. Technically, that’s 73,000 (200 times 365) unique stays per year—not exactly “limited edition.” Instead, let’s say you actually have an indisputably exclusive product, like a presidential suite or villa, where you can designate that any guest who stays there for at least a week (length can vary) receives an NFT to mark the occasion that, importantly, also gives said guest special access to a variety of other perks. What those perks are, exactly, depends on the brand, but some basic ideas include entry to a members-only online community like BAYC, access to private lounges in the real world, free room upgrades, free airport shuttles for all future stays at any location, or early access to future product launches. And since each NFT is unique, the perks can also be delineated by year, edition, and so on.
- Loyalty Program Markets. From the previous use case and the basic ideas listed, the smart question is to consider why you need blockchain or NFTs to unlock all those perks when your current guest profile and loyalty program tracking software will suffice. The answer is markets. NFTs give their owners the ability to sell their token-subscribed privileged access to the highest bidder. This in turn creates residual value for the hotel stay long after the onsite experience has been rendered complete. In a world where brand relationships are eroding, NFTs can strengthen a loyalty program because an owner can then sell their access to future perks, strengthening the incentive to purchase in the present. And those loyalty-based NFTs don’t have to be earned just through one-time experience purchases, but can also be achievable much like our current points-based tiered programs. Again, it depends on the brand.
- Digital twinning. VR tourism is already here and it doesn’t necessarily require unique tokens because its primary purpose is to whet the traveler’s appetite for something else. The act of producing a “digital twin” is to create an identical replica online, which has already found solid applications in predictive maintenance modeling for complex machines like mining equipment or passenger aircraft. As the metaverse inevitably morphs into all sorts of wild and bizarre virtual reality or augmented layering of our corporeal earth, one of the first steps for hotels will likely be photorealistic mirroring of physical locations within a blockchain-based online world. Within these nascent ecosystems, cryptocurrencies will be the medium of exchange, while digital property rights and, for the good of our industry, unique hotel stays, meeting spaces, or access to other exclusive virtual activities may be regulated by NFTs, if the experience warrants. And you never know, having a digital twin could give you insights into how to improve operations on the physical property, just as other industries are currently using digital twinning.
- Capital increase. Think back to the AAirpass program launched by American Airlines in the 1980s, where for $250,000 pass holders received unlimited first class tickets on all the airline’s flights worldwide. Pandemic cancellations aside, if you identify as a frequent flyer and plan to be one for decades to come, that price is actually pretty cheap. Using NFTs, you can create such lavish programs aimed at high net worth individuals—think $1 million for a lifetime of stays in any room or suite at any branded property with all food and beverages included—but also establish within the underlying smart contract that each resale of the pass results in a new incremental floor price and a percentage of the sale owed to the hotel. The end result is that you get a large influx of cash that you can use for current needs like renovations or debt service payments with the promise of future stays and meals, as well as strong incentives for a second-hand market and some form of residual returned to you with each resale.
Going back to the initial questions, it may be a little early to act because the virtual economy of cryptocurrencies, NFTs and the metaverse is very much like the Wild West that has yet to coalesce around a few select universal protocols. However, this should not stop you from putting together the first outlines of a plan that educates your team on what these new technologies are and the opening strategy to take advantage of them. This will be a very lucrative space in the near future, so prepare accordingly.
Larry and Adam Mogelonsky are one of the most published hospitality writing teams in the world, with over a decade of online content. As partners in Limited Hotel Consultinga Toronto-based consulting firm, Larry focuses on asset management, sales and operations, while Adam specializes in hotel technology and marketing. Their experience includes properties around the world, both branded and independent, and ranges from luxury and boutique to select service. Their work includes six books “Are You an Ostrich or a Llama?” (2012), “Llamas Rule” (2013), “Hotel Llama” (2015), “The Llama is Inn” (2017), “The Hotel Mogel” (2018) and “More Hotel Mogel” (2020). You can contact Larry at [email protected] or Adam to [email protected] to discuss hospitality industry challenges or to book speaking engagements.
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