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People today expect to be connected always and everywhere; sometimes it’s hard to believe that there was a world before smartphones and Wi-Fi. In the time since Wi-Fi became ubiquitous in hotels, apartments, and public spaces, it has fueled the evolution of connectivity in a lot of ways. Just like Maslow’s hierarchy of needs, the most basic needs start at the bottom, and you can’t get to the next level without a strong foundation. 

By now, everyone is aware that hotel giant Marriott International announced on Friday a massive data breach that goes back more than four years and may have affected up to 500 million customers worldwide. 

After two years of preparation, the FlyZoo Hotel — a futuristic property that uses interactive technologies to do everything from greet guests to deliver room service — is ready for business. 

Mobile technology is fast becoming central to the entire travel experience. Consumers are increasingly using their smartphones to research trips, book accommodation, check in at the airport, and access their hotel room. But one of the next big roles mobile has to play in the travel process is mobile payment. The idea of an entirely cashless society might still seem some way off, but mobile payment is gaining popularity. As it becomes more widely used, its fast and frictionless nature will bring benefits before, during and after a trip. 

Digital marketing, also known as internet marketing, plays a significant role to boost hotel website traffic and online bookings. Recently, many big announcements were made in the digital industry, for example when Facebook introduced a new video format for marketers, or when Google announced a board core algorithm. If you are a new hotelier and want to stay ahead in the industry, then you should know what’s going on in the hotel digital marketing industry. 
 



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Airbnb: What is Next?

03/03/2016

Only recently the understanding has emerged that Airbnb – and similar businesses – would be something big. There is now a consensus that, maybe unlike other initiatives coined as the “sharing economy”, the large scale use of residential housing for traveler accommodation will change the way we do business in the hotel industry. And if things were not clear enough, the company last summer raised 1.5 billion U.S.D. private funding for its further plans.

It is urgent to analyze and to interpret what is happening, not only for hotel companies facing a disruptive competitor, but also for cities, whose initial concern – loss of tourist tax revenues – now seems to be the least of their worries. Two European city destinations illustrate the different interpretations of the phenomenon. While Barcelona cracks down on unregistered tourist apartments with draconic fines, Amsterdam has embraced the “sharing economy” and has reached an agreement with Airbnb, in which the payment of tourist taxes is exchanged for a more permissive attitude.

About the “Sharing Economy”

Let us first get our definitions straight. Technological developments have led, in the last decades, to economic innovations and a profound socio-cultural impact. The free flow of information enabled people to create decentralized networks to share ideas, movies, music, services or even physical goods they no longer needed. Rachel Botsman, advocate of the “sharing economy”, used the example of a power drill – that in its lifetime will be used for no more than 12 minutes by an individual owner – networking allows us to save money and resources.

But that is not the goal nor the effect of every network. They also offer a platform for commercial activities. The following graph distinguishes centrally controlled versus “open” networks, and networks geared towards social benefits versus for-profit networks:

[See chart above]
 
In other words, some networks, like Airbnb, are about economic transactions rather than sharing. If we think back to the power drill example, the differences are obvious. Apartments are not usually idle: therefore we do not see efficient use of an underutilized asset, but substitute use. Whereas having a power drill available will not have anyone drill more holes, the demand for tourist accommodation is far more elastic. Finally, the temporary offer of accommodation enters in direct competition with an existing market: hotels.

Do Not Turn Your Back on Innovation

Of course, the innovation popularized by Airbnb is not just the network model, but also experiential aspects of its offer: diverse types of accommodation, contact with locals, and “off-the-beaten-track” tourism. Its appeal reflects a consumer trend which hotels should not disregard. Kodak or the music industry constitute wise lessons about the risks of neglecting or just trying to outlaw innovations. Precisely the experiential aspects that attract Airbnb fans have also been picked up by innovative hotel brands as citizenM, Room Mate, Yays or Zoku.

What We Know About Airbnb

In our study we found that the information used to discuss Airbnb had often been published by the company itself. In its main destinations the company hires renowned consultants to conduct fairly standardized, survey-based research: the conclusion is in all cases that Airbnb had a positive economic impact, contributes to the spreading of tourism spend to peripheral neighborhoods, has beneficial environmental effects and supports the livelihood of non-traditionally employed people as free-lancers and starting entrepreneurs.

Now, there is one problem: we get the results but not the data. This means cities cannot measure or manage their visitor streams; nor can they verify the amount of taxes owed, even if there is an agreement. In fact, the Airbnb studies should at least partially be considered as a marketing instrument. The success of companies as Airbnb and Uber apparently benefits from their willingness to invest in this type of marketing and lobbying. In any case, their data control is a source of competitive advantage.

In the absence of data, reliable assessments of Airbnb’s impact are rare. The debate revolves around the issue whether Airbnb visits are incremental of whether they affect the market share of traditional hotels. In a well-known study, Boston University researchers demonstrated an important impact on the revenues of hotels in Texas, particularly Austin, already two years ago.1 Merril Lynch analysts consider that a considerable part (43 to 67 percent) of Airbnb listings compete directly with the traditional hotel offer as they are not shared spaces.2  A report commissioned by the Spanish hotel industry contradicted every single aspect of the Airbnb studies: their offer is more concentrated in city centres than hotels, their guest profile coincides with that of hotels, while their spending and economic impact are considerably lower.3

These findings question the conventional wisdom that “Airbnb is bad for hotels but good for tourism”. But is it good for neighborhoods? If we create an additional – tourist – demand for residential housing, it can hardly be surprising that prices go up, as has been claimed for cities as San Francisco, New York and Barcelona. Especially if those who benefit are not just hipsters with a spare room, but commercial investors with “multilistings." According to the New York State Attorney, its share in New York is 36 percent; in Barcelona, this amounts to 60 percent with 2.5 percent of hosts controlling 30 percent of the apartments.4
 
Future Scenarios

The further development of this phenomenon will depend on two variables: in the first place, the evolution of tourism, and in the second, on how it will be regulated. Airbnb constitutes an incentive to innovate but leads to pressure in booming markets. In the darkest of all scenarios, we see a commercialization of residential neighborhoods, which in popular areas could start resembling timeshares.

In conclusion, hotels should consider incorporating some of the innovations brought by Airbnb, rather than trying to ban them. The phenomenon needs regulation, which should especially focus on two major problems: information ownership and commercial “multilistings”.

The full scenarios are available in the Journal of Tourism Futures.
 
This is an ongoing research project with more reporting to come.
 
 

1 Zervas, G., Proserpio, D., & Byers, J. (2014). The rise of the sharing economy: Estimating the impact of Airbnb on the hotel industry. Boston: Boston U. School of Management Research Paper.

2 Huston, C. (2015, August 13). As Airbnb grows, hotel prices expected to drop MarketWatch. Retrieved September 2, 2015, from Marketwatch: http://www.marketwatch.com/story/as-airbnb-grows-hotel-prices-expected-to-drop-2015-08-13

3 EY España. (2015). Impactos derivados del exponencial crecimiento de los alojamientos turísticos en viviendas de alquiler en España, impulsado por los modelos y plataformas ce comercialización P2P. Madrid: Exceltur.

4 New York State Attorney General. (2014). Airbnb in the City. New York: Office of the New York State Attorney General Eric T. Schneiderman, and Arias Sans, A. (2015, July 1). Desmuntant Airbnb. Apunts crítics sobre el cas de Barcelona. Retrieved October 31, 2015, from La trama urbana: http://latramaurbana.net/2015/07/01/desmuntant-airbnb-apunts-critics-sobre-el-cas-de-barcelona/#more-1245

About The Author
Albert Boswijk & Jeroen Oskam




Albert Boswijk is director of the European Centre for the Experience Economy.
 
Jeroen Oskam is director of the Research Centre at Hotelschool The Hague.

 
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