GOeureka are boldly stepping into the highly saturated online travel booking space, but with a blockchain marketing play to differentiate their approach.
Here are 5 things you should know:
- It’s an OTA (Online Travel Agent), but one that does not charge hotels any commissions.
- Blockchain based, they have their own cryptotoken called GO Token (an ERC20 token); currently in ICO stage, they have created 1bn tokens, aiming to sell 600m tokens at 10c each – a raise of $60m.
- They will allow customers who are members of hotel loyalty programs to convert their points into GO Credits; these can then be used to spend on anything within GOeureka’s platform.
- Customers can pay on GOeureka with credit cards, a range of cryptocurrencies, or Go Token (as well as Go Credits). However, credit cards and all cryptocurrencies besides Go Token will incur a 5% transaction fee, which will likely be the majority of the transactional activity.
- GOeureka will also have a tiered loyalty program of its own, based on spend volume across designated time periods; as people move up in tiers, they will secure a higher discount off their bookings. This is only available to customers who pay with Go Token and it’s going to take time to accumulate a reasonable holding.
GOeureka are claiming to unlock 400,000 hotel rooms upon full launch, establishing their merchant network far ahead of all other blockchain loyalty start-ups.
There are, however, several challenges GOeureka must overcome on their path to success:
Challenge 1: Consumer perception
GOeureka’s revenue model is based on that 5% transaction fee. Effectively, this means that customers are funding the cost of the GO Token given back to the customer instead of the hotel, which is certainly a refreshing change from a hotel point of view. The question is, will customers see it that way?
A 5% credit card transaction fee is quite high and in markets like Australia it’s actually illegal to charge it, because the ACCC (Australian Competition and Consumer Commission) recently mandated that companies are only allowed to pass on credit card merchant fees they themselves incur, and these typically sit at no more than 3% in the worst-case scenario of AMEX. To get around this they’ll need to label it a booking fee or similar which is likely to make them more expensive than other OTA’s, a competitive issue.
Challenge 2: Offsetting capital raised with ongoing token demand
Will GOeureka be able to generate enough demand to stimulate a price rise on its GO Token, considering they are aiming to raise $60m? The ideal scenario here is that there is minimum $60m worth of token demand across their ecosystem within the first 12 months of operation, so let’s hope the 400,000 rooms help them achieve this.
If their demand ends up being significantly smaller than the supply, the likely result will be a price drop in the value of the Go Token. By our calculations, if a member was returned 5% of their spend, GOeureka will need to generate $1.2bn of bookings to generate $60m of token demand.
Challenge 3: Currency conversion
GOeureka claim that if hotels are allowed to convert their loyalty program currency into GO Credits, it’s a win for the balance sheet. This isn’t actually true for most hotel loyalty programs, who do everything they can to dissuade members from transferring their points out of the program, as it’s a cost to their business (they will be required to pay GOeureka for the value of the points). The main way the hotels will de-incentivise members from doing this is by making the conversion rate quite poor. This works against GOeureka’s ambitions.
Overall this is an interesting proposition, but it will require scale. In a highly-competitive market with companies such as Expedia, Booking.com, Wotif, Agoda and Trivago competing for market share, this will be an enormous challenge, even with a $60m war chest.
Max Savransky is Loyalty Director of Loyalty & Reward Co, a leading loyalty consulting firm based in Sydney. He has 10 years’ experience within the loyalty industry including roles at Mastercard Loyalty (Pinpoint), Silverneedle (Next & Sage Hotels) and Pureprofile. As Loyalty & CRM Manager at HOYTS, he launched the highly successful partnership with Qantas Frequent Flyer, including a world-first Qantas Points in-store redemption proposition. He is an active cryptocurrency trader.