On the EyeforTravel conference trail last year Tom Bacon was surprised to learn that hoteliers and airlines alike are exploring innovative and alternative partnerships
The continued growth of Airbnb and other short-term vacation rental suppliers continues to be a hot topic for hotels. Among the questions that hoteliers are asking are: How should a hotel compete with the Airbnb property located nearby? How do we fight Airbnb? Can we stop this industry disruptor?
Interestingly though, the debate now seems to be taking a different direction, along the lines of that ‘if you can’t beat ‘em, then why not join forces’. Indeed, numerous executives seem to be coming round to the idea that working together may be the way forward, in the way that William Beckler, founder of Alltherooms.com, suggested they should in an EyeforTravel interview late last year. Beckler told EyeforTravel that: “The sooner hoteliers recognise that one customer can buy into more than one concept, the more successful they will be”.
The main point here is that very often short-term rental companies and the hotel industry offer different products. In other words, they are not always perfect substitutes for each other; just because you’re an Airbnb aficionada, doesn’t mean you’ll never stay in a hotel. Airbnb may be great for families who need more space and cooking facilities, but the adults in that same family may also be business travellers who prefer the consistency, predictability and facilities of a hotel for their work-travel needs.
Competing with each other is a stretch at best, and for hotels, to truly compete in the quirky, multi-room, space, is almost unthinkable.
Hello 21st century lodging
Nobody is disputing that demand for hotels, especially in certain locations, has been impacted dramatically by new short-term rental alternatives. Nevertheless, there is a growing recognition of the need to objectively review the strengths and weaknesses of each business model to determine if there are opportunities for collaboration. That has to be a good thing.
So, rather than fighting this new business model, some hotels are starting to think about ways to ride the tide. Some of the possibilities being debated include:
Hotels do offer some services that short-term rental owners would value. Potentially, hotels could offer services to nearby rental locations and share in their growth and success. Sometimes, for example, check-in is a challenge for an absentee property owner. Hotels, on the other hand, often have 24/7 check-in capability; they could provide a key collection or drop off service. And when it comes to cleaning, hotels, of course, have large well-trained teams that could potentially service nearby properties as well.
Harnessing hotel RM
Innovative travel start-up ‘Beyond Pricing’ offers revenue management services to short-term rental properties – and projects a 40% increase in revenue for property owners. Indeed, the application of hotel RM algorithms to rental properties can add tremendous value to the owners. But one argument is that nearby hotels could add even more value than a centralised RM provider. After all, hotels likely understand the local market better and potentially local hotel RM departments could even offer RM services to nearby properties.
Participating on Airbnb
Distribution is one of the key strengths of some short-term rental providers like Airbnb, which customers increasingly rely on to identify available properties all over the world. So, why not hotels too especially in places like New York City, for example, where Airbnb is facing intense pressure from regulators? Indeed, hotels could participate in this channel with their own product, particularly if they offer something unique in terms of location, stylish living space, or local atmosphere – each of which might position it favourably versus short-term rentals. Airbnb recently announced that its customers could also participate in local activities or tours – and another suggestion in Atlanta was that this too could be a collaborative effort between hotels and the short-term rental business. This is arguably a win-win for Airbnb and hotels.
The lesson here is not unique to hotels and Airbnb. All ‘legacy’ industries need to review how disruptors in their space can be exploited to leverage their unique strengths and how they in turn can benefit from the unique elements of the disruptors.
In the airline space, for example, the large US carriers are battling the Middle Eastern airlines that are aggressively competing in certain markets. But American Airlines, for one, is partnering with Etihad Airlines, one of the fastest growing Middle Eastern carriers. And Qatar Airlines, another such carrier, is in American’s global alliance, oneworld. American is effectively teaming with the disruptor even as it seeks to limit their growth in competitive markets.
jetBlue and Delta both now have a private jet partnership. These airlines recognise the value of private jets and seek to benefit from them even though, for some customers, they represent a competitive alternative to their standard product.
What’s clear, however, is that disruption is occurring more often than ever, across industries and across the globe. Sometimes, legacy firms, threatened by the disruption can benefit from partnering with the disruptors to share in their growth.
Tom Bacon has been in the business for 25 years as an airline veteran and now industry consultant in revenue optimisation. He leads audit teams for airline commercial activities including revenue management, scheduling and fleet planning. Email Tom or visit his website