Airbnb: How Hotels Can Adapt to the New Sharing Economy?


Airbnb has grown at an astounding rate since its launch less than ten years ago (2008). For the most part, the hotel industry has overlooked this growth in competition. But how can it be ignored when the price a hotel can command during compression periods has been proven to drop due to the sometimes thousands of Airbnb "price is right" becoming available during peak times.

Airbnb recently released figures stating that on July 5th, 2014 over 20,000 guests stayed at their member properties in Paris, the world’s number one tourist destination. With figures like that the hotel industry can no longer afford to ignore this growing segment. Airbnb currently represents as much as 17.2% of hotel room supply in New York, 11.9% in Paris, and 10.4% in London, according to Barclays’ estimates, and those percentages are projected to increase this year.

There's got to be more than price

So, what are these former hotel/hostel guests looking for, other than a great price?  Well, it begins with something different, engaging, and real. On the Airbnb site, guests are encouraged to “have the time of your life! Enjoy your host's home and city, as if it were a friend's, and remember to be considerate of your neighbors. If any issues arise during your trip, be sure to get in touch with your host. In most cases, they'll be the person best equipped to help you. If your host can't solve the problem, please contact us”. So what they’re really selling is the warm contact of the host, who can also, for example, arrange a pick-up at the airport and plan a full agenda of activities in the community – really, anything the guest may want to do. Staying with a local can help you get that elusive “in the know” feeling.

Getting back to that fateful July day in Paris, just imagine the lost room revenue for the hotels. Some would say “just desserts” to an over-priced commodity; others might be less sanguine and express a sigh of loss – the lodging industry simply did not keep apace of the consumer. The industry, just like Airbnb and similar services, is under fire around the world as it comes to grips with the sharing economy and changing zeitgeist.  

What about the business traveler?

No doubt, Airbnb has carved out a significant slice of typical lodging patrons, namely the casual traveler and vacationer. But what about the business traveler? Surely hotels can still serve the executive and business minions, high-end clientele and the meetings and convention folks. Those guests want services at hand and immediately. Right? Wrong. Within 24 hours of launching the new global travel management suite on July 20 of this year, Airbnb announced that it had signed up 500 new companies to its Airbnb for Business program. There are now more than one thousand businesses from over 35 countries around the world who are formally making Airbnb part of their corporate travel programs. Among this roster are Fortune 1000 companies, including Google, who are allowing employees to benefit from Airbnb’s wide range of accommodations available in more than 190 countries. The business trip is being redefined and Airbnb’s popularity demonstrates how customers are looking for a mix of business and leisure, often adding on a weekend to explore a new destination. See more here. 

More than $$

Airbnb has several advantages, beyond price. They offer a different experience with all sorts and types of accommodations and locations. Hotels have the four walls, enhanced with amenities - admittedly, an experience for some along with a sense of security (no surprises). Can that be enough, though?

A further advantage for Airbnb really goes back to the history of lodgings, where the innkeeper actually greeted and personally cared for his or her guests.  Current Bed and Breakfast proprietors and smaller boutique properties have this advantage. If you’re a hotel manager, when was the last time you or a member of your senior staff escorted a guest to the assigned room, explained the room features, suggested property services and restaurants,  and, upon departure, thanked them personally for their business. Writing this from the perspective of a guest I genuinely can’t remember the last time this happened to me. Usually, all you get is a “turn left when you exit the lift”.
(To go deeper: Hotel language, 7 phrases to avoid to be successful)

The concierge service is a prime, but underused, feature within hotels (and outside, too).  Airbnb hosts serve this function, as well, with a very personalized touch, offering perks that you would not find at a hotel. Perhaps, our hotel concierge should have an expanded role.  Providing that there is sufficient guest history, a full “guest stay plan” could be implemented for those who do want some adventure to tantalize the senses and make memories. And I don’t mean flogging restaurants and tours that they can find themselves.

There will still be a good amount of push and pull in the lodging sector.  Companies like Airbnb still need to come to terms with local laws, taxes and zoning and building restrictions in almost every worldwide community they serve.  But, the marketplace and consumer expectations have significantly changed. Plus, world citizens are making some extra money on that spare bedroom.  

So, what do you do to counter the threat of the sharing economy? Here are four key lessons:

  • You don't have to change your business model to become ‘more sharing economy’, instead focus on the points of difference that are areas of weakness for sharing economy brands.
  • Understand the marketing strategies that are being used by sharing economy brands and then respond in a considered way – taking into consideration the psychology at work.
  • Tap into the underlying trends that propelled the sharing economy into the mainstream – communities, trust, and shared values. Then see how this could work with your property.
  • Explore the opportunity to be part of grassroots peer-to-peer communities whose aim of supporting communities – show how it can be done.

The sharing economy is an interesting and attractive business model – but it is not the only one in town. Smaller and boutique properties need to promote the virtues of their own business model and really think through in a creative way how to challenge the growing threats of sharing economy brands.

If you have any comments on how your property has adapted to the new sharing economy please share below.