This article is part of our May series about travel and hospitality. Click here for more.
Stay in someone else’s home while vacationing? Ten years ago, when Airbnb first launched, that notion seemed strange, noted CEO Brian Chesky, while celebrating the company’s anniversary earlier this year.
Now Airbnb services 300 million consumers, many of whom are Millennials—a generation marketers agree is more focused on experiencing their trips like a local than they are on luxury.
Indeed, ever since the global recession, the travel and hospitality industry has become fertile ground for the “sharing economy,” in which smartphone-equipped travelers are renting apartments and rooms via services like Airbnb, hailing rides from Uber, or getting a car for the day from Zipcar.
“Clearly we think it's very important right now. And we know our customers want it,” said Glen Fogel, CEO of Booking Holdings, the parent of online booking site Booking.com. In its most recent quarterly report, the company reported “alternative” room listings were up 28% and continue to be a big focus for the company.
As you’re about to read, the sharing economy has disrupted the travel and hospitality industry almost as much as the arrival of the Internet affected the way airlines and travel agencies do business. How far have brands come? And where are they heading? Let’s explore.
By The Numbers
In the past decade, home-sharing services have evolved from Couchsurfing—which now claims 14 million travelers and 400,000 hosts around the world—to luxury homes via onefinestay, while ride-sharing now ranges from cars to private jets and even bikes, with services like NetJets and Flexjet.
More signs that this collaborative-consumption business model is working: Nearly one-fifth of the U.S. population hailed an Uber vehicle last year, while 16.9% stayed in an Airbnb at least once, an eMarketer study found. And the disruption has not peaked yet: Juniper Research has estimated that the sharing economy will more than double to $40.2 billion in revenue by 2022, as will the number of drivers working for ride-sharing services, to 8.6 million. At the same time, growth in the number of users is going to accelerate. According to the eMarketer study, the sharing economy will reach 86.5 million users in the U.S. by 2021, led by Airbnb and Uber.
Underpinning all of this growth are mobile phone apps that have enabled cars, rooms, and even private planes to be shared on peer-to-peer networks.
“An app is currently the most efficient method to facilitate this information, just as dial-up or time-based internet usage was the standard a long time ago,” explained Julie Hoffman, head of industry strategy and marketing, travel & hospitality, at Adobe (CMO.com’s parent company). “Apps have provided both aspects of ID authentication and geolocation to enable a service marketplace, and they remain the best way to create efficiencies in processes.”
To be sure, all segments of the T&H industry have adapted, co-opting digital features, adopting business models, and even acquiring some of the sharing-economy companies, such as Avis buying Zipcar in 2013.
Car companies are piloting their own car-sharing services, too. Cases in point: General Motors launched Maven in 2016; Fiat’s Cadillac brand launched a subscription service, Book By Cadillac in 2017; Audi is currently piloting Audi on Demand in San Francisco; and Daimler and BMW recently agreed to merge their car-sharing services, Car2go and ReachNow, in order to scale them, especially in the U.S. market.
In the hotel sector, Airbnb has a wide lead, with 4 million listings available worldwide. But it’s just the tip of the iceberg of the home-sharing market that includes platforms such as Homestay and Turnkey. Homeaway Corp. has become an umbrella of companies, including its namesake, as well as other platforms such as VRBO, VacationRentals.com, and OwnersDirect.
Like the car companies, traditional hoteliers, who initially touted their service advantage over home rentals, have also gotten into the sharing-economy act. AccorHotels CEO Sébastien Bazin, for example, has been open about Airbnb’s effect on his brand and his desire to address digital disruption with its acquisition of onefinestay.com in 2016. In 2017, Hyatt invested in the vacation rental platform Oasis and rebranded its offering as The Unbound Collection, offering rewards on its loyalty program and other hotel-like perks. Marriott recently announced a six-month pilot program in London in partnership with Hostmaker to offer rentals, with loyalty program features included, as well.
As Marriott CEO Arne Sorenson noted in a briefing to investors, established players bring an advantage in their brand equity and loyalty program connections.
“As some of these platforms have grown into millions and millions of units, there is almost a paralyzing array of choices,” he said. “The lack of branding and the lack of real attributes of quality around service and product makes this an area where we think we can bring our brands, we can bring our service and product focus, and deliver something which is simply a better product than much of what is out there.”
‘Meeting Consumers Where They Are’
At the center of the sharing economy, of course, is the customer experience, especially as younger digital natives join the market expecting apps, chatbots, social sharing, and the like.
“Young people today prioritize things that make their life easier,” said Meredith Ferguson, managing director of research firm DoSomething Strategic. The common denominator to the sharing economy is convenience, enabled by digital tools, she added.
As part of that, brands have started partnering in order to offer their apps as infrastructure to other services. For example, Uber recently partnered with peer-to-peer car-sharing service Getaround—which includes among its investors carmakers Toyota and Shanghai Automotive—and Ford added the Hertz 24/7 app to its FordPass auto app. In February, Airbnb partnered with hotel-booking platform SiteMinder to list traditional hotel rooms on its platform; Expedia bought Homeaway in 2015 for $3.9 billion; and FlipKey was acquired by TripAdvisor going back a decade.
“Yes, they want greater reach and perhaps even positive brand association, but these brands also know that in order to win they have to add value to their consumers’ lives,” Ferguson told CMO.com. “It’s about meeting your consumers where they are.”
In addition, developing partnerships gives consumers more choices and lets communities flourish, Adobe’s Hoffman said.
“Gaining scale and breadth is one purpose,” she said. “The second purpose is meeting another unmet need of Millennial travelers who are eco-conscious or want more emotionally relevant experiences.”
There is practically no segment in hospitality that the sharing economy has not affected. Cruises may be a harder sell, but peer-to-peer tour guides and even yacht-sharing have been around for some time, Hoffman noted.
The next evolution will keep building on services and experiences, such as digital assistants that can manage travel tasks including arranging luggage handling or child-care services, Hoffman added.
“This all exists to some degree today but is ripe for disruption based on current accessibility and ease of use,” she predicted. “Basically, any process that is old, outdated, or causes friction in travel where a buyer and a seller can seamlessly come together to support each other will be a part of this next wave.”