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How the Sharing Economy Influences Hospitality

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Posted by Alex Gaggioli
October 9, 2018

The sharing economy is the tech world’s latest favorite buzzword. Although I personally hear the word all the time, I never fully understood the ins and outs of what it meant. As I began my research, I found that the internet tends to disagree on what it actually means.

The sharing economy has greatly influenced the hospitality industry over the past few years, so understanding the basics is important.

Definition:

I found a broad description:

The Sharing Economy is a socio-economic ecosystem built around the sharing of human and physical resources. It includes the shared creation, production, distribution, trade and consumption of goods and services by different people and organizations. Source: The People Who Share.

But, I also found a much more narrow description:

Consumers or firms granting each other temporary access to their under-utilized physical assets (‘idle capacity”), possibly for money. Source: Inc

Another popular way to describe the sharing economy is through collaborative consumption. People, also known as consumers or peers, share their own unused goods with one another for both long and short periods of time. Consumers with available assets, such as an unused car or empty rooms, can create revenue by offering them to their peers through non-traditional channels.

Enter: intermediary channels and tech companies

When mobile app car services such as Uber and Lyft entered the market, suddenly a rigid taxi industry was upturned. People with cars and extra time could now hop on Uber or Lyft and offer rides to other consumers. Thus, creating a peer-to-peer system with a technology medium.

But, many people believe Uber is no longer really a part of the sharing economy. According to inc, for a someone or a firm to partake in the sharing economy, the supplier must be offering an asset that would otherwise go unused. For example, UberPool in San Francisco is indeed a part of the sharing economy because it lets users share taxis in the city to save money. But, UberX and UberBlack are not a part of the sharing economy because the services performed are at the request of the user, rather than people sharing unused seats. The distinction is small but important to the argument.

What this means for travel

But, how does this directly affect the travel industry and more specifically hoteliers?

Obviously, Airbnb has become a major player in hospitality over the past few years. Reportedly worth almost $20 billion, Airbnb has a market cap higher than many traditional hotel businesses such as Starwood, Wyndham, Accor, and InterContinental to name a few. Those numbers have many hotel professionals worried, and for a good reason.

At its core, Airbnb strives to be the essence of the sharing economy. But, like Uber, Airbnb listings do not always contribute to the new system.

Listings that contribute to the sharing economy:

  • Hosts who list unused rooms in their homes (the host may or may not be present) 
  • Hosts who list their permanent home while they are away

Listings that do not contribute to the sharing economy:

  • A property owner who lists a property or multiple properties that they do not live in (i.e. vacation rentals) 

But, regardless of how someone wants to classify an Airbnb listing, the entire business has posed a significant threat to traditional hospitality.

Hoteliers came together at the Alternate accommodations: The demand benefits to discuss trends and emerging threats. Hotel News Now reported Kurien Jacob, chief revenue officer of Highgate Hotels, saying “We definitely see Airbnb as a big threat. We come across that in every single meeting we have.”

The BDRC market research shared by Hotel News Now offers interesting data into new trends:

  • 19% of US travelers used some shared accommodation site in 2014
  • 44% of consumers would consider using one in the future
  • 66% of millennials and 62% of Gen Xers will use shared accommodations for than once, with 51% of baby boomers becoming repeat users

As consumers become more familiar with new platforms like Airbnb, hotels will continue to lose business if they do not properly respond.

A cheaper sticker price isn’t the only thing driving guests to use Airbnb. Cultural experiences and location are also a major contributing factor to consumer behavior. Airbnb customers feel more in tune with the local culture during their stay than in traditional hotels, often due to zoning. If guests are choosing Airbnb because traditional hotels don’t offer the same cultural experience, how can hotels adapt to level the playing field?

Some believe boutique hotels will be hit the hardest because they offer the same culturally focused type of experience as an Airbnb. But, boutique hotels offer guests more than Airbnb does according to Chadi Farhat. He says that these hotels focus on design, entertainment access and nightlife that are simply unavailable through most Airbnbs.  

Let’s be clear, Airbnb isn’t the only sharing economy company on the market. Couchsurfing.com lets users host and stay in locals homes around the world for little to no cost. Wimdu also offers a platform for people with extra rooms to rent them out to tourists, very similar to Airbnb. Viable is a platform for locals to offer tourists on unique experiences through their cities. All of these companies contribute to the sharing economy and pose a threat to hotels.

The future for hospitality

The hoteliers quoted in the Hotel News Now article say that they are watching the sharing economy very closely. Hotels could start offering shared rooms for travelers who seek a different type of travel experience, whether it be price or culturally driven. Beyond sharing rooms, how can a hotel join the shared economy?

NetTrans says that the sharing economy will push traditional travel industry business to offer workspaces, hotel rooms and rental cars at hourly rates. The sharing economy will create new markets and processes for the entire industry. Imagine if hotel rooms go virtually unoccupied due to hourly rentals. 

Companies such as Airbnb and Uber are certainly innovative and challenge traditional business. They will push business to be more flexible and transparent while doing more for the consumer.

I, for one, am excited to see how the hospitality industry responds to new technologies and adapts to the shared economy.