StubHub is a marketplace for concert and event tickets. Fans who buy tickets to certain events but can’t attend can sell their tickets to someone else who wants to attend the event. Hotels have discovered that NFTs could be the ticket to ensuring they keep their rooms booked in the event of a necessary cancellation.
Currently, if someone books a hotel room and their plans change, they can cancel their reservation and the hotel has a vacant room for the night resulting in a loss of revenue. Even if the hotel charges a cancellation fee, they won’t receive the full room rate. It’s still a loss. Some hotels, however, are experimenting with non-fungible tokens (NFTs) as room reservation tickets to curtail such losses.
How NFT Reservations Could Impact Hotels and Guests
If NFTs can be used as hotel room reservation tickets, instead of cancelling reservations, guests can sell their reservations in a secondary market.
That takes the risk out of the hotel’s hand and puts it in the hands of the consumer. The hotel has already been paid for the reservation. Since the hotel won’t issue refunds anymore, the consumer must then find a buyer for the NFT reservation or suffer a loss. If the NFT doesn’t sell by the reservation date, the hotel room will remain vacant, but the guest is out of pocket on the cost of the room while the hotel profits.
There is also the upside potential that the NFT reservation could sell for more than its original price.
The economics of hotel room reservations have nothing to do with NFTs. The tokens are symbolic, representing the underlying value of the reservation itself. The true value of the reservation is determined by the hotel’s reputation, the season, and other events happening nearby. In other words, supply and demand.
Compare reservations at The Venetian in Las Vegas and Mom & Pop Inn in Bristol, Tennessee. Reservations at The Venetian, a 5-star resort, are certainly worth more than reservations at Mom & Pop Inn. But the value of the hotel room in Bristol would increase on weekends when scheduled NASCAR races at Bristol Motor Speedway has hotel rooms in the city booked. Add a musical tour from a top tier recording artist at a nearby venue and hotel rooms will be scarce.
It is these types of dynamics that could drive a secondary market for hotel room bookings and allow some people to make money from their hotel room reservations.
How NFT Reservations Could Drive Up Hotel Room Costs
As with anything that involves the potential for profit, NFT hotel room reservations would likely lead to enterprising entrepreneurs snapping up large numbers of hotel rooms in advance at lower prices and reselling them for higher prices when there are fewer rooms available. Just as scalpers buy up large numbers of concert tickets for the same reason, NFTs could spark a whole new business category.
Restricting the supply of hotel rooms as demand remains flat would increase the price of rooms on the market. In turn, that could drive demand for more hotel construction.
As more hotels are built to meet rising demand, people with large capital reserves would likely buy up large numbers of those new rooms and sell them on the secondary market, as well. Rapidly increasing supply and demand would naturally lead to increased prices, essentially what’s been happening in the residential real estate market for the past year.
In the end, hotels would profit and would pass the burden of potential losses to their guests while speculative entrepreneurs would risk their capital to sell room reservations at higher prices than the market organically would bear.
This feedback loop would benefit hotels and opportunistic entrepreneurs, but it might not be favorable to the average hotel guest.