How the Sharing Economy Impacts the Hotel Industry
by Berny Huber*
The Sharing Economy has been a rapidly growing business model in the last decade. Even Elon Musk from Tesla has announced that he will stop selling cars in the future, but rather have them shared and driving autonomously from guest to guest. As he says: "In cities where demand exceeds the supply of customer-owned cars, Tesla will operate its own fleet, ensuring you can always hail a ride from us no matter where you are."
The sharing economy peer-to-peer exchange of goods and services has significantly impacted other business institutions, causing them to lose money and demand. In the era of fast internet availability, cheap services, and better access to disposable income, more and more people are gaining entrance to services and goods that weren't available to them before.
This is true, especially in the tourism and hospitality business. With new airlines offering cheap fares and extremely affordable tickets, people from lower economic classes can travel all around the world, increasing the demand for inexpensive accommodation and services while abroad. As a result, the sharing-economy business model has found fertile soil to grow on, taking advantage of such increased and modern demand to offer innovative and inexpensive services and solutions.
This negatively impacts the hotel industry, which sees a decrease in demand from customers. Hotels all over the world are struggling to resist and adapt to the sharing economy model and the global changes in demand caused by broad access to the World Wide Web.
In this article, you will read about the sharing economy model and its impact on the hotel business. Also, we will introduce the advantages hotels still have over alternative accommodation services and how they can adapt to these rapid changes in demand. Lastly, we will be discussing the shared economy opportunities for hotels and how they can take advantage of this business model to increase demand and generate profit.
What is Sharing Economy?
Sharing economy is based on the temporary sharing of resources between individuals. These resources can be goods or services, from a room to a car, a skill, or even a luxury bag. It usually connects the supplier (person willing to share a good or service) to the demand (someone who wants to “borrow” it in exchange for money) through an online platform facilitated by fast and widespread internet access.
Famous examples of sharing economy companies are Airbnb, which offers room or house rentals for travelers, and Uber and Zipcar, offering transportation services. This economic model has been rapidly growing in many industries, linking individuals who act as supply and demand. Today, you can find platforms that allow you to rent designer clothes, bags, sporting goods, and cars for a certain period of time. Services like pet sitting, freelance writing, and errand running are widely available.
Sharing Economy Impact on Hotels
Regarding the hotel and hospitality business, the sharing economy has had an enormous impact on the accommodation, transportation, and tourism services demand. Because it relies on global access to the internet and its primary channels, sharing economy supply can reach intercontinental levels, becoming available to tourists from hundreds of different countries, as well as locals.
This new global strategy of economic exchange weakens traditional systems used by many hotel companies. Studies on hospitality market share show that Airbnb alone annually “steals” around $450 million in direct revenues from hotels. As rental listings on Airbnb increase each year, covering a wide range of prices, accommodation size, and quality, so will their share of the hospitality market.
Although sharing economy models are trendy among younger generations, hotels and the traditional hospitality business still hold advantages over platforms like Airbnb. The central benefit hotels have is the consistent quality of their services, which almost always attend to customer expectations. Because sharing economy connects the client to another individual as their supplier, the services provided are difficult to reach the standards of institutions like hotels.
Another advantage hotels have over sharing economy models is their rewards programs, which helps to fidelize customers, especially those on constant business traveling that can eventually use reward points for leisure. However, Airbnb is working on implementing systems that attend to the business segment of travelers, so this advantage might cease to exist.
How Can Hotels Adapt
There’s a myriad of ways hotels can adapt to the current demand changes, guaranteeing they don’t lose their market share in the hospitality industry to sharing economy models of accommodation.
Hotels need to increase their online presence. With widespread access to the internet, potential customers are exposed to hundreds of different hotels and accommodation options, constantly adapting their demand to new market trends. Having a well-designed website with easy navigation, fast upload times, one-click shopping (such as Amazon), good pictures, and relevant information about the hotel location, amenities, and services is crucial for retaining people's attention. Sound SEO strategies for ranking higher on search engines and distribution channels are also necessary. Hotels can also help Airbnb home-owners do the same, improving the visibility of their rental listings in exchange for money or commission over revenue.
Companies like Airbnb have kickstarted the importance of location when looking for accommodation in a city. Because of that, hotels should focus on their location and its proximity to relevant attractions, not only on the quality of their rooms. Tourists today are always searching for unique and exclusive experiences, so local and regional attractions should be highlighted in the hotel marketing strategies.
Sharing Economy Opportunities for Hotels
Just like hotels can adapt and overcome the challenges of the sharing economy, they can also find growth opportunities and retain their market share of the hospitality industry in this new business model.
Pairing up with homeowners who list their extra rooms or vacation houses on platforms like Airbnb is an excellent way to profit from the new sharing economy. Hotels can add such accommodations to their booking platforms or simply offer recommendation options in exchange for a commission. This way, the hotel profits from such earnings and expands their offer to clients who would rather stay in Airbnb-like accommodations. The service provider on the platform (the person listing their room) also benefits from this exchange as they gain more visibility and credibility among the hundreds of similar room listings. The key in this kind of exchange will be the quality assurance.
Hotels can also offer revenue management services and financial/maintenance software use to homeowners in exchange for money, as well as cleaning and maintenance services and concierge assistance for tourists. They can work on deals with close-by homeowners to offer hotel services and amenities to their guests, resulting in an extremely low cost of acquisition, cash flow, and an opportunity to market their services to potential clients. They can also offer similar services to Uber drivers or any other people working on shared economy platforms.
Applying sharing economy to some of the services provided at the hotel is also a great way to adapt to this business model, incorporating it to the benefits the hotel offers to clients and improving its portfolio. Making Zipcars available to customers or working with local restaurants on providing discounts on specific dishes ordered through food delivery services are examples of that. Hotels can also rent workspaces like conference rooms for digital nomads and even work with hourly rental of rooms that were not booked through regular channels.
Selina Hostels is a company that excels on that! Their CoLive program allows digital nomads to travel to any hostel / hotel unit on a given continent in exchange for a fixed rental price. With the program, these individuals have access to wellness classes, discounts at the facility’s restaurant and bar, and a private space for working. Bike and surfboard rentals are also part of the package. On top of that, they market the idea of adventure, easily selling their shared economy services.
Adapting to the Sharing Economy Era
As sharing economy business models grow, hotels need to find a way to adapt to new trends and overcome challenges imposed by rapidly changing tendencies on demand. Although companies like Airbnb can inflict challenges for hotels, they can also be an opportunity to increase profit and expand the hotel’s marketing reach. Working with homeowners who list rooms on such platforms, creating a symbiotic agreement that exchanges money for additional services, is a great adaptation strategy. Including sharing economy businesses to the services, hotels provide to their guests also helps to adjust.
Hotels need to grow their online presence and SEO strategy to compete on a global market, moved by widespread internet availability and customer access to information. By doing so, they will survive the changing market environment and thrive among competitors in the industry.
Companies like Uber and Airbnb, as mentioned before, have been created to attend to this new demand style. Others like Tesla are developing new approaches to their offer that can also fit the current exchange model. You can see entire industries changing to adapt — the clothing industry with companies like ThreadUP or even the general content creation industry with freelance jobs and its numerous platforms. The hospitality industry needs to follow suit if it wants to survive and thrive in this new environment.
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* Berny Huber - World travelled Swiss / Canadian business manager and consultant with over 30 years of experience. Trilingual (E, F, G). Certified Swiss Chef, Diploma from the Swiss Hotel Management school of Lucerne (SHL), Master of Business Administration (EMBA) from the university of applied science of Chur (HTW Chur), Switzerland.Senior Director Global Business Development of ICRME (International Center of Revenue Management Education), Lecturer in Revenue Management, Ecology, Investment Psychology and Quality Assurance at the Swiss Hotel Management school of Lucerne(SHL Schweizerische Hotelfachschule Luzern). Various certificates from Cornell University: Digital Marketing, Hotel Revenue Management, Advanced Hospitality Revenue Management (Pricing and Demand Strategies). Currently working on the Revenue Management 360 certificate