Competing with the Sharing Economy: A case of hotels getting social

Assignment Task

Case Study

Introduction

Chelsea was concerned. As the new General Manager of a branded mid-sized hotel, she was charged with driving up occupancy levels and increasing room rates, a task that shouldn’t be too difficult to accomplish given that tourism was finally booming in her city after the great recession. However, in the last few years, Airbnb had taken more and more market share from her, and she was finding it difficult to compete. She wasn’t surprised – she herself used Airbnb on her travels when she couldn’t get a discount with her own hotel chain. Most of time it was cheaper, and often it was just more fun. Pondering this last thought for a minute, she had a thought: “I know I can’t compete on price with Airbnb – my owners wouldn’t allow me to discount that much. But I wonder if I can compete on ‘fun’?” With that thought in mind, she decided she needed to gather more information -firstly on the sharing economy and exactly what customers liked about it; and secondly on what other hotels around the world were doing to compete with this new phenomenon.

The sharing economy

Chelsea soon found out that she wasn’t alone; the sharing economy was having a disruptive influence on the travel industry as a whole (Guttentag, 2015). Entire communities and cities around the world were using network technologies to do more with less, by renting, lending, swapping, bartering, gifting and sharing products on a scale never before possible (McAlpine, 2014). Travel-oriented peer-topeer (P2P) websites were rapidly expanding, allowing travelers to rent lodging, cars, sports equipment and more from other individuals. Since August 2008, over 25 million guests had chosen to sleep in one of the 800,000 Airbnb listed properties (Traum, 2016). The ridesharing app Uber was signing up over 1100 new ridesharing partners every month in Australia (Allen, 2015). PWC (2014) suggested that sectors in the sharing economy had progressed along an ‘S-curve’ pattern where initial low and volatile volumes make way for a breakthrough company to accelerate growth before the market saturates. At this point, old sectors mature and decline – to be replaced by the next overlapping innovation (see Figure 1). They projected revenues for ten sectors, split between a sharing economy group (peer-to-peer finance, online staffing, peerto-peer accommodation, car sharing and music and video streaming) and a traditional sector group (equipment rental, B&B and hostels, car rental, book rental and DVD rental).

How hotels are competing with the sharing economy

What Chelsea discovered was that hotels were competing with the sharing economy at different levels. Firstly, competing could be as simple as staff hosting a social hour for guests on arrival in order to encourage interaction with and between guests. The Sutton Place Hotel at the base of the ski hill in Revelstoke, Canada, for example, hosts a welcome reception every day for new guests to enjoy a glass of wine and a selection of locally-sourced cheeses (see Figure 4). The key motivation behind the event, hosted every evening from 4-7pm, is to encourage guests to socialize, said concierge Marco Mahringer. “We also use it as an opportunity to provide guests with further information about the hotel and what they can do during their stay.” Mahringer says that about 80% of guests come down for a drink on their first evening. “Often they are a little stressed and tired after a long journey, so it is a great way for them to relax and speak to fellow skiers or snowboarders”

Decision time for Chelsea

After all of this research, it was time for Chelsea to make a decision about what to do. One option was to do nothing, and hope that the sharing economy was a fad that would eventually lose its appeal. After all, one of the studies she had read said hotel industry growth in 2016 was faster than that of Airbnb. In addition, the literature showed that consumers were significantly more likely to trust a leading hotel brand than Airbnb, so perhaps she was safe from further encroachment from the sharing economy. However, she did like the way some forward-thinking hotels were shaking things up in order to compete with the sharing economy, and she sensed that she needed to make some changes in her hotel. Making a deeper social connection with her guests seemed to be critical for survival, and she really liked Deloitte’s idea of the future hotel manager being an ‘integrator’. She just wasn’t sure which of the five roles she should play in order to offer her guests a more memorable hotel experience. Should she be a Curator, a Matchmaker, a Neighbor, an Architect, a Choreographer, or all five? And which of the best practices she had observed from all these hotels competing with Airbnb should she adopt? What she was clear about, was that it was time for action.

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