How Hotels Can Compete With The Sharing Economy
by Robbie Bhathal, Co-Founder & CEO of Suiteness
The sharing economy is growing and thriving. More and more people are getting used to a sharing way of life and it is now commonplace to define startups as ‘Uber of this’ or ‘Airbnb of that’. But whether the sharing economy poses a threat to traditionally run companies or not, specifically, Airbnb being a threat to traditional hotels is something that’s still debated over. Some hoteliers and companies do not think Airbnb poses a threat to them — that the vacation rental company operates in a different niche and serves a different customer. But does it really?
Airbnb launched in 2008 and has since grown at a staggering pace, now valued at $25 billion. Consider what was once, AirBed and Breakfast, with the promise of reducing accommodation costs by sleeping on someone’s air mattress, is now Airbnb, with an inventory that is 62% entire homes or apartments. In no way can the company be ignored as a passing fad anymore. Airbnb is just one of many companies that are disrupting the traditional hospitality industry. HomeAway, VRBO, OneFineStay, Oasis Collections, LuxRetreats, Inspirato, FlipKey are just a few of the other market entrants. Airbnb grew 113% last year with only at about 17% occupancy. All this was made possible thanks to technology that removed barriers and created efficiency in supply dynamic.
And how about its target market? The company started as a service that catered to the price conscious budget traveler. Today, you can book mansions and palaces and celebrity homes on Airbnb — even Beyoncé famously stayed at an Airbnb! The vacation rental company even has a portal for business travelers — a small percentage now, but a growing number. So does it really operate in a different niche? No, not so much.
But should hotels fear the sharing economy? Our take is, no. The sharing economy has introduced a new set of competitors for the hotel industry and even a new supply of consumers looking for the right experience. But hotels shouldn’t fear the sharing economy. They should, in fact, embrace it!
Vacations are harder than ever. People work longer hours, and are typically at least one plane ride away from family and friends. Moments of togetherness is a rare luxury these days. So when people choose to invest in moments that celebrate being together, they want the best experience — typically luxury experiences. A report by the Boston Consulting Group indicated that luxury consumers preferred experiences to things, spending $980 billion on ‘experiential’ luxury. And the largest category was found to be luxury travel — larger than cars!
So we now have a situation where people are valuing experiences over possessions on one side, and on the other, we have a growing sharing economy which is great news for the consumer. Families are not relegated to sharing two queen beds for a family of four. After all, which parent would want to spend their vacation sharing 400 sq. ft. with two teenagers, or risk the alternative, have two teenagers stay in their own room three floors down? Instead, enter your friendly neighborhood Airbnb and they can rent a whole house for a few days.
However, not everything is as rosy as it seems with Airbnb and similar vacation rental companies. Growth rates don’t reflect the current problems in vacation rental business. In Airbnb’s hometown of San Francisco, illegal listings account for almost 22% of their revenue. At the same time only 54% hosts are verified with valid IDs. These are risks inherent to the vacation rental industry and will take time to be corrected. And this is the opportunity that hotels can seize, to use the same technology as vacation rentals to offer safer, more transparent, flexible access to their highest quality properties and provide a higher return on vacation investment to their customer.
The main concern for many in the hospitality industry is the idea of price. It shouldn’t be. Group travelers who rent homes will quickly realize the difference between ‘starting rates’ and ‘actual rates’. Various costs like security deposits, maintenance and cleaning fees, all add up on sites like Airbnb and HomeAway making the final bill significantly higher than what was promised. People do not realize that ultimately they end up spending time, effort and money on a lot of things that they could’ve avoided had they just stayed at a good hotel — airport shuttles, complimentary housekeeping, breakfast on the house, even towels and toiletries that don’t need to be packed and carried around! Hotels need to remind customers that for a few dollars more, they are being offered a greater return on someone’s vacation experience investment.
Take suites for example. When we started Suiteness our vision was to build a simple and easy way for people to access amazing suites, and have truly memorable, relaxing trips. However, a suite is so much more than just a place to rest your head — it is a place to stay together. With a good suite, people don’t have to worry about security deposits, cleaning up after themselves, safety concerns, or, as in the case of our CEO, worry about a stinking house thanks to a sewage issue that took 24 hours to be fixed, totally ruining his first vacation in over two years.
Hotels should accept Airbnb and such vacation rentals as legit threats and what they should do to tackle it, is to:
Lay it all out there: Invest in content and highlight their best assets. Suites, for example are an especially great option for family and group travelers. WiFi is another essential that most people cannot function without.
Price transparency: Get rid of hidden fees, transaction costs, customer fees, etc. Let people know what they are going to pay early in the process.
Embrace technology: Open API’s are a good thing and technology can truly create a frictionless user experience.
Accentuate ALL the differentiators:
· Location — Hotels have a built-in advantage of being located right in the center of action. That is where people want to be. No one wants to save on accommodation and then spend it all on transportation, in addition to losing precious vacation time getting from one place to another.
· Amenities — Base level amenities are always included at every hotel and people don’t have to carry them along wherever they go. And if we are talking luxury suites and penthouses, they have amenities that most people dream of!
· Service — 98% of vacation rental hosts spend less than 20 hours a week committed to their own property. Service is one of the hotel industry’s biggest strengths that they can use to their advantage. Cleanliness, privacy, no-nasty surprises, clean sheets, not having to put up with noisy neighbors — all things that I’d rather not have while on vacation, said no traveler ever.
Consumers want choice, they want options, they want space, they want to easily create their vacation experience, and they want it all now. Hotels need to give consumers what they want and all they have to do is open their doors to the best experience they can offer.
Suiteness brings you technology that will change the way you travel by opening up a world of luxury that is dedicated to exclusive hotel suites and penthouses, previously unavailable to the public. We have an exclusive inventory and our system allows you to book highly sought after suites at the best prices. In fact, most of these suites are typically not bookable online.
