What do sites such as AirBnB, Relayrides, Cookening or Vayable have in common? They are all, in their own way and in their own niche, web platforms presently shaking the travel & hospitality industry inside out, with a groundswell that few are considering seriously: the collaborative economy.
Also known as the peer-to-peer (P2P) movement, the collaborative economy basically stems from technological developments enabling consumers to bypass corporations and big brands to transact directly with each other. According to the Altimeter Group, it can be defined as follows:
The Collaborative Economy is an economic model where ownership and access are shared between corporations, start-ups and people. This results in market efficiencies that bear new products, services and business growth.
While social networks, massive mobile device adoption and easy-to-use websites, blogs and other platforms explain in great part how this new economy is taking shape, there are are also two key market forces driving this movement. As Jeremiah Owyang explains in this June 2013 report, there are both societal and economical drivers explaining this new economy, as explained in the figure below:
The P2P movement has been making waves for years now, making notorious in-roads within the music industry when Napster and other public file-sharing sites shook up the traditional models in place some 12-14 years ago. What happened next is now part of history: music labels fought hard against what was to be a losing battle. Napster ended up folding, but iTunes came around selling individual songs for $0.99, with a new model taking shape where copyrights were respected, illegal downloads reduced and there are now numerous new models, with monthly payments, freemiums or individual payments, i.e. Spotify, Grooveshark, Songza, etc.
For many, AirBnB represents the posterchild of collaborative platforms shaking up the traditional hospitality model. Just like Napster ruffled some feathers back in the days, AirBnB is presently the dominant player under public scrutiny in the travel sphere, with some legal woes in the State of New York among other places. And as can be expected, hospitality leaders are responding much the same as major music labels did back in 2001: some deny the phenomenon or are oblivious to its impact while others now want to wage a full-on war on to what is considered “illegal” housing. The thing is, how do you wage a war on a phenomenon that’s becoming anchored in our everyday life, part of a new, evolving social fabric?
And while there is a lot of talk about AirBnB, Couchsurfing, HomeAway and other vacation rentals sites, the truth is that the P2P movement spreads much deeper and wider than strictly accommodations. In fact, the collaborative economy is now rooted in each of the five key elements of the travel ecosystem:
Notice that most, if not all, of the above experiences and services providers would traditionally be paying members of destination marketing organizations (DMO) or conventions & visitors bureau (CVB). Thus, this major shift under way is one of the key disruptors explaining Why the DMO model is broken and how it will need to adapt to this new reality.
But just how much money does this new economy represent and how is it impacting the traditional players? A recent analysis by EuroMonitor International contends the impact of AirBnB on the hotel industry is minimal. Considering AirBnB has sold 10 million room nights since its inception in 2007 pales by comparison to the one billion room nights sold in the US alone, only in 2012! Perhaps, but I still believe there is a major shift going on here that WILL impact traditional hotel players. Here are a few reasons why:
And just like the Hygrade sausage principle, the more people will talk about this different way to travel and book accommodations, the more it will add to its credibility and popularity, turning it into an even greater threat than it is now.
Acknowledging the present situation and shift in consumer behavior would have to be the very first step, yet few hotels publicly call it out or seem to revamp their customer experience accordingly. A study by InterContinental Hotels Group (IHG), The New Kinship Economy, published earlier this year, spoke of new travel relationships, the evolving digital landscape and different styles of travelers, from multi-generational to new family groups. Well I wonder… do these new types of travelers find what they need in hotels that have not changed their offering in the past decade, if not more? Some of the irritants from traditional hotel business include:
All things we’d take for granted a few years ago, but does it still fly in 2013? Independent hoteliers or hotel chains nimble enough to adapt are those who will maintain their market share and grow. A great example is how Kimpton Hotels, in the US, focus on customer service with various surprise & delight initiatives that keep customers coming back. Or Hilton’s Garden Inn brand, offering suites and full-kitchen amenities catering to families or customers staying longer. And there are many more, of course.
The collaborative economy is here to stay and will impact many aspects of our everyday life, including how we travel and discover the world. Hurdles still remain to ensure proper standards are delivered across all experiences and to avoid illegal encounters. But denying this phenomenon won’t help, nor battling it with hopes that it shall go away. It’s time to embrace the potential and see how it can become beneficial to all in the travel industry, starting with the consumer. Because after all, hoteliers who always had and still have the customer as their number one focus need not fear for the future…