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Newsletter

Estimating the Impact of Airbnb on the Hotel Industry: Newsletter #8

Estimating the Impact of Airbnb on the Hotel Industry: Newsletter #8

Estimating the Impact of Airbnb on the Hotel Industry: Newsletter #8

Newsletter

Impact of Airbnb on Hotel Industry

Newsletter #8: The impact of Airbnb on the hotel industry; Go mobile behind the scenes for efficiency; Bon voyage, Amazon Destinations.

Estimating the Impact of Airbnb on the Hotel Industry
Boston University | The Rise of the Sharing Economy: Estimating the Impact of Airbnb on the Hotel Industry
Hotel Speak | Airbnb Is On The Rise: Hotel Should Be Prepared

Why it matters: We continue to follow the Sharing Economy (mostly Airbnb) with intense curiosity as the debate intensifies over its broader impact on the hotel industry. It seems every quarter more industry folk swing towards the viewpoint that it will greatly impact hotels. Only last week Barry Sternlicht (Starwood Hotels Founder) took to Bloomberg to make this point, that “it’s undeniable that these industries (the sharing economy) are changing the landscape.”

The rhetoric from the larger groups has often been that the shared economy is simply growing the whole pie, increasing total demand. However, this research paper is one of the first that provides evidence this is not the case: “the sharing economy is significantly changing consumption patterns.”

Some of the early signals are that the lower-priced hotels that do not cater to business are most affected and are losing market share and revenue (8%-10% in Austin where Airbnb supply is highest). One of the biggest concerns is that Airbnb has a near zero marginal cost - in Lehman’s terms, anyone can add a room at no cost to the company whereas hotels obviously don’t have the same luxury. So in times of high demand (conferences, sports events visits from the Pope) hotels have less of a grip on the market supply than they had before and thus less opportunity for those golden weeks. In fact that’s exactly how Airbnb was born, when the founders rented airbeds in their apartment at a time of constricted hotel supply.

So how do we respond? We’ve seen three types. 1) Invest: Some like Hyatt joined the bandwagon, investing in the industry. 2) Join: some lower end hotels are placing their rooms on these sites like an OTA. 3) Regulate: petition for regulation. We think a fourth and more foundational approach is underway: adapt. As Barry, and even as our spotlight on hotel investment from last week suggests, hotels need to become less of a commodity and focus more on the product. A loved product will always hold up against pricing power and this change in consumer behavior.

 

Bon Voyage, Amazon Destinations
TechCrunch | Amazon Shuts Down Its Booking Site, Amazon Destinations
 

Why it matters: With competition for bookings getting more heated by the week, this story took us by surprise. Last week, Amazon shut down its Amazon Destinations travel site, less than six months after launching the service. The e-commerce and cloud computing giant first launched its hotel booking product in April with a focus around local getaways and reviews, going to head to head with TripAdvisor and Google. While not much has been confirmed (or denied) by Amazon, one has to suspect this turnabout is simply a result of poor traction in the space, despite expansion to 35 US cities. As this is not the first foray into the travel space from Amazon, we cannot be sure this is the last. For now, at least, the competition's holding steady in bookings.

Roger that.
Hotel News Now | Go Mobile Behind the Scenes for Efficiency
 

Why it matters: Recall your last taxi trip in Europe. You’re sitting inside, enjoying the sights and sounds of the city, when the radio noise starts. It’s a never-ending cackle of messages, none of which are actually for your driver. Now, contrast that with getting in an Uber. The same logistics dance is happening in the background, yet smart devices and cloud technology facilitate silent, directed and efficient point-to-point request management.

This Hotel News Now story talks of a similar transformation by technology, yet the setting here is your hotel. Don’t get us wrong, radios are very useful (as is pen and paper for that matter), but with the capabilities of cloud software and connected devices today, there is a better way. Of course, arming your staff with smart devices to manage their work is not about reducing the sound the radio makes along your corridors (although guests - and staff - will surely be thankful for this!), it is about improving the workings of your hotel.

Radios aren’t just open channels that everyone has to listen to in case the message is for them (thus acting as a distraction as well as an inefficient method of communication), but radio communication can’t be easily monitored and recorded and doesn’t provide any data for operational improvement. To really crystallize this point, imagine a guest walks past the front desk and asks for their room to be cleaned on their way out. With technology today, your front desk can enter that request into the hotel’s back-end system, which in turn will dispatch it to a device (often an iPod Touch) in the responsible housekeeper’s hands. Now, the front desk can immediately return to their own work, knowing the request is dealt with, while the housekeeper can start the job and indicate completion on the iPod. Management, meanwhile, is all the wiser, knowing not only that the request was placed, but also how long it took to complete.

We find hotels have a really great understanding of their guests before they arrive, as indicated by the latter’s booking and pre-arrival preferences, as well as a great understanding of their guests stays after the fact, once guests have paid their bills and left reviews. However, hotels have much less insight to the actual behavior of the guest during the stay itself. This story shows this doesn’t have to be the case. With the right back-of-house technology there is a better, more efficient and more accountable way of working; where each request can be tracked from its origin to its completion, regardless of how the request is made.

Bon Voyage, Amazon Destinations
TechCrunch | Amazon Shuts Down Its Booking Site, Amazon Destinations

Why it matters: With competition for bookings getting more heated by the week, this story took us by surprise. Last week, Amazon shut down its Amazon Destinations travel site, less than six months after launching the service. The e-commerce and cloud computing giant first launched its hotel booking product in April with a focus around local getaways and reviews, going to head to head with TripAdvisor and Google. While not much has been confirmed (or denied) by Amazon, one has to suspect this turnabout is simply a result of poor traction in the space, despite expansion to 35 US cities. As this is not the first foray into the travel space from Amazon, we cannot be sure this is the last. For now, at least, the competition's holding steady in bookings.