commentary

commentary
Collaborative Consumption cross-examined:
How the sharing economy is changing the face of the hotel industry
by Alexandra Herget
About Us
hcb is specialized in the consulting, development and realization of international hotel projects and tourist destinations. With our team
of architects, engineers, real estate economists, urban planners, economists and hotel and touristic experts we offer hospitality and
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commentary
future. Considering that travelers between the ages of 18-34
will make up 76% of room nights in six years’ time in Marriott
hotels, according to a senior executive at the hotel chain (Ferguson, 2014), it will be vital to participate and contribute to the
shareconomy as well as plan hotels accordingly, as this generation embraces it! Therefore, this commentary will look at the
sociological, technological and economic shareconomy drivers
through a hospitality lens in order to assess in how far the sharing economy is changing the face of the hotel industry.
Borrow, rent, share:
The potpourri of the sharing economy
“If the watchword of global capitalism is greed, as declared
back in the 1980s by Wall Street’s Gordon Gecko, the mantra
we are hearing more and more these days is share – as in sharing one’s car, one’s home, one’s food and one’s time” (Dubois,
Schor & Carfagna, 2014). The sharing economy, also referred
to as shareconomy, collaborative consumption or peer-to-peer
economy has been defined as an economy “where asset owners
use digital clearinghouses to capitalize the unused capacity of
things they already have, and consumers rent or buy from their
peers rather than rent or buy from a company” (Geron, 2013).
It is an ideal case of how technology has created a market that
has never been - at least a thriving - market place before. In
fact, the travel sharing economy has existed for many years,
but now has been drastically transformed by technological advancements. This is also represented in the estimated worth of
the economy, which has been predicted to lie at $26 billion (The
Economist, 2013).
I becomes we and mine becomes ours
In the Tourismusreport 2015, a compass reading for the travel
industry, Anja Kirig and Susanne Eckes write that individuality
will not play a superordinate role in future generations of travelers as it has become an ordinary state. Thus, they argue, the
individual experience is going to become more important. This,
for example, also explains the growing numbers of festival visitors, where the individual loses itself in the mass, but returns
home with unique experiences and stories. Hand in hand with
this goes a study by the UN Population Fund (2012), that found
out that Millennials seek “communitarian spirit” and the “emotional experience of collectiveness and belonging”.
All over sudden we are confronted with the opportunity to rent
out our parking lot (parku.de) and earn some extra money, work
in a co-working place instead of a traditional office (betahaus.
com), share a garden (sharehaus.net), meet people in one’s local community who share the same interests as you (meetup.
com), do sports together (freeletics.com), drive a car (drivenow.com) or a bike (callabike.de) that you do not own, get someone else to drive you (uber.com), share clothes (myonbelle.de),
invest in real estate with people you
do not know (kapitalfreunde.de) or get
a personalized local search experience (foursquare.com). The scope of
these examples shows that “the problem is not whether to bury and build
the sharing economy: it is already on
the ground” (Malhotra & Van Alstyne,
2014). An illustration of this offers Christina, a Berlin-situated
27-year-old freelance copyrighter, who rented out her home in
Neukölln for 24 days at a rate of €50 a night in 2014, transforms
her old Renault into a “taxi” via Uber two nights a week and
has a fashion flatrate for €49 a month on myonbelle.com. From
time to time she also rents herself a work desk at St. Oberholz
co-working space in Berlin-Mitte. “Millennials […] have been
culturally programmed to borrow, rent and share. They don’t
buy newspapers; they grab and disseminate stories á la carte
via Facebook and Twitter. They don’t buy DVD sets; they stream
shows. They don’t buy CDs; they subscribe to music on Spotify
or Soundcloud” (Geron, 2013).
It has become vital for travelers to make real connections to
local people and places and gain unique experiences. This,
amongst other reasons, explains the great
success of airbnb (see Excursion box for
further information). Marc McCabe, product
and business development lead at airbnb
outlines: “At airbnb we help our customers
bond around common ideals: being able
to stay anywhere, to meet other people, to
have an adventure. The focus of our marketing is on fostering the community that makes sharing possible” (Fournier, Eckhardt &Bardhi, 2013). This
strategy is most apparent on their website, where they do not
only offer apartments, but also a neighborhood guide that assists the searcher finding an appropriate surburb to live in. The
user cannot only filter by parameters such as public transport
connection or tourist attractions, but also unusal, more emotional criteria like “favored by Berliners“ or “trendy“.
Airbnb is not the only company that has gained a great knowledge about the modern traveler and their needs and wants.
Expedia, for example, has realized that tours and activities are
becoming a vital aspect for the travelling nomad in the shareconomy. As a response they launched the video travel blog “The
Germanness” in Germany in the end of 2014. Every week for
one year they will publish a new video about
Germany’s most extraordinary characters,
craziest places and charming stories. Another example is Tripadvisor, which acquired
Viator, a tours and activities agency, for approximately $200 million in mid-2014. Both
brands have understood that many of today‘s
travellers seek a different type of vacation or
travel experience. Marriott also identified the need to embrace the “communitarian spirit” and its Six Degrees application
will soon allow guests staying at the same hotel to connect and
make the hotel lobby more of a social gathering place by means
of a mobile app, an interactive table in the lobby as well as pu-
The sharing economy bears its strengths, weaknesses, opportunities and threats. First, it offers value for money and uses
under-utilized resources. In addition, it gives the opportunity for
niche markets to develop, for example via specialized sharing
sites. However, there are many shareconomy businesses that
do not meet the legal obligations, such as hospitality tax payments and health and safety regulations.
Despite of this and needless to say, the hotel industry is part
of the collaborative consumption evolution, which has challenged and altered the industry and will continue to do so in the
© hcb hospitality competence berlin GmbH
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commentary
blic displays showing information about upcoming events and
active Six Degrees users at the hotel (MIT, 2014). InterContinental Hotels & Resorts announced in February 2015 that they have
partnered with food, culture, art and fashion artisans and experts to create „Insider Experiences“, real behind-the-scenes
experiences for guests. This will demonstrate local knowledge
and help guests „unlock the secrets of the
cities“ (Independent, 2015).
used to express opinions, feelings and critique. For example,
only 2 months ago airbnb launched a 70-second video on youtube with hand-crafted effects that dives into the airbnb world
(Title: Welcome to airbnb). The video has already been viewed
over 4.200.000 times. How many hotels actively and successfully engage with their target group via youtube?
Make money collaboratively
Furthermore, what most of the shareconomy platforms have in common is that they
are using the power of technology to build
trust between strangers. “To a great extent the viability of shared services hinges
on the quality of review systems because people rely on them to
decide whether and what to purchase” (Malhotra & Van Alstyne,
2014). That trust is the capital of the 21st century has also been
identified by IHG, who published their trend report in January
2015 with the title “Building Trust Capital: The new business
imperative in the Kinship Economy”. Here they write that “many
companies focus on the 3Cs of organizational wealth: Financial Capital, Intellectual Capital and Human Capital. However,
in today’s world, corporations must add a fourth C: generating,
gathering and growing Trust Capital” (IHG, 2015).
And then there is an economic driver to the share economy. The
demand and supply of shareconomy services are often driven by
economics, such as saving or making money.
How can hotels participate in this economy and utilize its vibe?
With “open-lobby concepts” for example – a liaison between
lobby, bar and restaurant. We are seeing the check-in counter
disappearing and a hotel employee picking up the guest at the
door, greeting him and sitting down with him on the sofa to do
the check-in on a tablet.
RED by Radisson is one of the newer brands on the market that
will incorporate the open-lobby concept. It says on their homepage: “Some would say we are re-interpreting the guest experience, and we start it with a wow: the sense of arrival is a gallery,
in those eyes it‘s artistic, energetic and proactive,[...]. There‘s a
great bar and deli just beyond, simple food and drink done really
well, all truly connected. Space to work, space to play, space to
be social, if that‘s what you want, shop, browse, admire, watch,
Nonetheless, there still are a great number of hotel websites
without trust-enhancing buttons or visuals, such as testimonials of guests or review sites, secure payment buttons or a hotel
director’s or chef’s personal address to the website‘s guest. In
fact, IHG was one of the first hotel companies to launch guest
ratings and reviews on their brand websites in 2013.
Excursion to the world of airbnb
A firm that has often been put equivalent to the sharing economy is airbnb. Airbnb has expanded to 800.000 room’s listings
in 190 countries and claims that more than 25 million people
have stayed in their apartments (airbnb, 2015). For each stay,
the firm makes 3% from the host’s booking and 6%-12% from
each guest. In addition to this, the company, which started in
2007 in San Francisco, when the founders had an extra room
to rent and decided to offer it to attendees at a local conference, has raised $826 million in venture
capital and is valued at $10 billion. In 2013
estimated revenues were $250 million
(airbnb, 2015).
Technology: The key to shareconomic
success?
Technology has without a doubt made communication, coordination, networking and payment easier than before. It has created a world where ease has three dimensions: easy to choose,
easy to use and easy on my mind (IHG, 2015). It has also been
a catalyst for meaningful personalization, where offers can be
tailored around past search enquiries or newsletters be sent
with a personalized salutation at a planned time of the day
where the probability of obtaining the highest click rate is most
likely. Also, geo-based applications have given consumers the
possibility to have real time information on services and offers.
The individual choice of a specific room upon arrival will only be
one of the results of this technological advancement.
Compared to Marriott, Hilton or IHG,
airbnb’s performance stands out. Hilton, for example, has 679.000 rooms in 91
countries, revenues of $9.7 billion in 2013
and a market value of $25 billion. IHG counts 674.000 rooms
in 100 countries in 2014 and $1.9 billion of revenues in 2013.
Currently, the market value is set at $9 billion. Marriott has
675.000 rooms in 74 countries and revenues of $12.7 billion
(not including franchisee’s revenues). In September 2014 its
market value was at $20 billion. Comparing the valuation to
revenue it becomes evident that airbnb’s valuation is about
40-times as high as its revenue. In terms of valuation, Marriott
(1.6 times), Hilton (2.5 times) and IHG (5 times) hence only see
the back lights of the fast car called airbnb. According to Euromonitor private rental value sales amounted to US $39 billion
globally in 2013, and are expected to grow 19% over 2013 till
2018 to reach US$46 billion by 2018 (Euromonitor, 2014).
In addition, even though the usage of mobile phones is accelerating at a great pace, many hotels have not yet created mobile
user-friendly websites that encourage browsing and enhance booking conversion – even
though this development has been foreseen
years ago. A great deal of hotels do, in fact,
not even have representative desktop version.
Lastly, social media emphasizes the shareconomy. “Like”, “Share”, “Comment” and “Thumbs Up” buttons
have become currencies of the 21st century and are actively
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A hotel chain that has identified the underutilization of area is
Marriott, which partnered with LiquidSpace, an online platform
that lets people quickly book flexible workspaces by the hour
or day. “It wasn’t just hotel guests reserving spaces, but also
locals – from lawyers to independent workers to consultants”
Fang Roe, chief sales and marketing officer in Marriott’s Asia
Pacific division, explains (Botsman, 2014). In Germany as well,
desk-sharing and co-working has become more popular. Already 11.000 people work in such communities, according to the
magazine deskmag (2014).
Communications meets the
shareconomic spirit
SOHO House
Your home away from home
25hours Hotel Company
Almost Home
Moxy Hotels It’s just like home, but with a bartender
Hotel Indigo Infused with Local Flavor
Room Mate Hotels
“[…] …we have created a space with a decoration that no one
is impartial to, inviting you to stay in, where in addition we
make you feel like being at a friends’ house.”
Another shareconomic trend that has been observed, is the
crowd-funding of real estate projects including hotels. In 2014,
for example, the 5-star resort WEISSENHAUS Grand Village Resort & Spa at the German Baltic Sea received 6.726.300 Euro
from more than 1.500 small investors on the platform Companisto.
HTL Hotels
“Since HTL is your home in the city, we don’t want you to
feel like a stranger. Find the hidden gems in town where the
locals eat, drink, shop and have fun… […]”
It’s all about homespitality
Lastly, in order to approach the future tech-savvy guest, an authentic and holistic corporate identity will be necessary (Kirig &
Eckes, 2015). A scan through the slogans, taglines or descriptions of highly successful hotels and hotel chains worldwide
manifests that the concepts of personalization, communitarian
spirit and localization have arrived in the communication strategy (see box Communications meets shareconomic spirit).
ACE Hotels
“We are not here to reinvent the hotel, but to readdress its
conventions to keep them fresh, energized, human. We accept the hotel as a potential for real, fluid community […]...”
mingle, meet, space to simply be whomever you want to be.”
To conclude, “the defense to disruption is to be great. You need
to be great with the products and information you have; you need
to offer a multi-product customer experience; and you need to
understand how to use new platforms to deliver these products
and services in a fun, friendly, and integrated way”, advises Peter Weill during the MIT CIO Symposium 2014 (MIT, 2014). Understanding the marketing strategies that are being employed
by sharing economy brands, conceiving the target groups they
are communicating with and the sociology, technology and economy behind it is essential to remain competitive and thrive in
this new era. And remember that there is nothing to stop traditional companies from getting inspired by their shareconomic
counterparts: Learn from the hip guys!
With the open-lobby concept also comes cost reduction. If the
check-in counter ultimately becomes the bar as well, money can
be saved in the development. The
lobby area could also be used for
online start-up firms displaying
their products for a limited period
of time. Westwing, an e-commerce
furniture start-up, could for example exhibit and sell small interior accessories in an underutilized
lobby and thus make its brand more known while generating
some extra revenue additionally to making the lobby more lively
and attractive, also for locals.
Are you fit for Generation “Share”?
It has also become essential to plan a hotel so that it becomes part of the city. This implies, for example, that there are
no curtains, so that the passerby can look into the lively hotel
restaurant. A hotel that has established a strong tie to its location is the Michelberger Hotel in Berlin-Kreuzberg. As MTV and
Universal Music are just located around the corner, the hotel
often invites musicians to play in the lobby for one night. Worldknown Damien Rice as well as announced Phox are only few
amongst a repertoire that can be put next to line-ups of known
concert halls. The 25hours Hotel Bikini Berlin, a hcb-project,
has also achieved this with its gastronomy. The „Monkey Bar“
has become a place-to-be for locals as well as tourists and the
restaurant NENI with its cross-over kitchen is often booked out
weeks in advance! This goes along the lines of IHGs 2015 report:
„It is important to make a brand’s total branded experience live:
think about staging ‘events’ that help people feel connected and
safe to a created family or with their own family“ (IHG, 2015).
In context of global and social developments, hcb is concerned about the role of hotels in cities and towns around
the world. We want to create vital habitats, avert “lobby
and reception cemeteries”, integrate globally successful
“share-systems” and allocate hotels’ societal and social
roles in the city going beyond the “only a bed and breakfast”
trend! Ways to achieve this, encompass looking amongst
others at the following questions:
got the local flavor?
how is trust currently generated?
open-lobby concept possible?
how about co-working space?
corporations with shareconomic businesses feasible?
crowd-funding for the next refurbishment?
Want to become shareconomically fit? Contact us!
© hcb hospitality competence berlin GmbH
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commentary
What we read
Airbnb. (2015). Accessed 11th February 2015 from airbnb.com/about/about-us.
Botsman, R. (2014). Sharing’s Not Just For Start Ups. Harvard Business Review, September 14 Issue.
Cusumano, M. A. (2015). How Traditional Firms Must Compete in the Sharing Economy. Communications of the ACM, Vol. 58 (1), pp.
32-34.
Deskmag. (2014). Die 4te Global Coworking Survey. Accessed 19th February 2015 from www.deskmag.com/de/die-coworking-vorhersage-2014-marktbericht-befragung-marktforschung
Dubois, E., Schor, J. & Carfagna, L. (2014). Connected Consumption: A sharing economy takes hold. Rotman Management, p50-55.
Euromonitor. (2014). Travel and the sharing economy. Accessed 11th February 2015 from www.slovenia.info/pictures/TB_board/atachments_1/2014/Travel_and_the_Sharing_Economy_19148.pdf
Ferguson, M. (2015). Marriott prepares for new generation of travelers. Accessed 12th February 2015 from www.travelweekly.co.uk/
Articles/2014/11/04/50987/marriott+prepares+for+new+generation+of+travellers.html
Fournier, S., Eckhardt, G. & Bardhi, F. (2013). Learning to Play in the New “Share Economy”. Harvard Business Review, Vol. 91 (7/8),
pp. 125-129.
Geron, T. (2013). The Share Economy. Forbes, Vol. 191 (2).
Independent. (2015). Intercontinental Hotels and Resort unveils new insider experiences to unlock secrets of the city. Accessed 3rd
March 2015 from www.independent.com.mt/articles/2015-03-03/company-news/Intercontinental-Hotels-and-Resort-unveils-newinsider-experiences-to-unlock-secrets-of-the-city-6736131509
IHG. (2015) The new kinship economy: From travel experiences to travel relationships. Accessed 11th February 2015 from
http://library.thegroup.net/ihg/client_upload/file/The_new_kinship_economy.pdf
Kirig, A. & Eckes, S. (2015). Tourismusreport 2015. Frankfurt: Zukunftsinstitut.
Malhotra, A. (2014). The Dark Side of the Sharing Economy… and how to lighten it. Communications of the ACM, Vol. 57 (11), pp.
24-27.
MIT. (2014). How should hotels respond to the sharing economy? Accessed 12th February 2015 from http://executive.mit.edu/blog/
how-should-hotels-respond-to-the-sharing-economy#.VNjHny7wBoM
The Economist. (2013). The rise of the sharing economy. Accessed 11th February 2015 from economist.com/news/
leaders/21573104-internet-everything-hire-rise-sharing-economy.
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