Can blockchain help a tiny, travel-dependent island reinvent its economy?

On the tiny Dutch Caribbean island of Aruba - population just over 100,000 - tourism is the foundation of the economy, contributing about 88% of its gross domestic product and accounting for 90% of its total employment.

About two million people visit the island every year, many of them booking their hotels, flights and experiences through the dominant online platforms controlled by companies such as Expedia Group and Booking Holdings.

ATECH Foundation, a nonprofit working to develop the startup and technology ecosystem in Aruba and the Caribbean, believes blockchain could be the answer to reducing the role of those intermediaries and therefore keeping more tourism revenue on the island.

“We have locally owned hotels or boutique properties, and currently, to compete, they have to list on these international platforms, so a big chunk of their commission is being paid to the middlemen,” says Varelie Croes, co-founder of ATECH Foundation and, since January, also the chief innovation officer for the government of Aruba.

“If you have a platform that lets you as a local entrepreneur keep a bigger chunk of your profits, then one, your local companies are making more money, and two, a bigger chunk of that profit will be taxed in Aruba so that’s income for the country.” 

Pilot program

ATECH has been convening local entrepreneurs and stakeholders to explore blockchain for the past few years, and in late 2017, the foundation signed an agreement with Winding Tree to pilot a blockchain platform for travel on the island.

Winding Tree is a B2B blockchain-based travel distribution platform that is in development. When it becomes available - founder Pedro Anderson says it hopes to have a minimum viable product by mid-June 2018 - inventory data from suppliers such as hotels, tour operators and airlines would be openly accessible without fees, with a goal of stimulating innovation from existing companies and entrepreneurs to sell that supply and to create new solutions for the industry.

“Because before anybody who wanted to compete in that way would have to get their inventory from the intermediaries who were charging those high fees so there’s double marginalization, your prices would always be higher than everybody else’s, and you would just be at a disadvantage. It wouldn’t be scalable,” Anderson says.

Since its token sale in February, Winding Tree has been developing a proof of concept for hotels and working to scale the platform. Anderson says while independent hotels are ideal partners for Winding Tree, there are also challenges.

“Locally owned hotels - not just in Aruba but everywhere - the fees that they pay are much higher to intermediaries. I’ve heard of leakage as high as 45%. So for them the incentive is huge. The challenge is how to connect with all those small independent hotels considering they may not have their own tech teams; they use different property management systems.”

Local support

In Aruba, Croes and the ATECH Foundation are facilitating these connections by meeting with local stakeholders to spur interest in a pilot they hope to launch by the end of this year.

Working in their favor is the fact that the Aruban government is onboard with the idea of exploring blockchain, so investments in new technology and the development of policies can happen simultaneously. 

“An innovation mindset is core to our tourism policy,” says Dangui Oduber, Aruba’s minister of tourism.

“We work closely with our stakeholders and local entrepreneurs to explore innovative solutions to ensure a more resilient future for the island's tourism economy. Blockchain is changing the game when it comes to tourism and Aruba is at the forefront of these developments in the region.”

And along with boosting the amount of tourism revenue that stays on the island, Croes says her long-term goal is to gradually “transform Aruba’s tourism economy into a knowledge economy” by making the island a testing ground and authority on breakthrough technologies.

“I think Aruba is going to become the model case for future economic resilience for small-island economies,” Croes says.

“There’s a lot of change coming through the pipeline, and most countries are not ready for it, let alone these smaller economies. We are looking to build that model of future economic resilience using breakthrough technology. And because Aruba is already a leader in tourism and hospitality, that is the logical route to start there.”