Combatting Digital Disruption: What Airbnb's Growth Means for Hotels

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Combatting Digital Disruption: What Airbnb's Growth Means for Hotels

10/29/2015
Much like Uber has changed the way consumers think about getting from point A to point B, Airbnb is revolutionizing the way travelers consider their lodging options. Airbnb’s rising popularity can be attributed to many elements of the service such as its diverse booking options that range from single rooms to entire homes and the sleek reservation process facilitated by its website and mobile app. While many hotel executives do not view Airbnb as a direct threat to their core revenue stream (e.g., accommodating business travelers), a recent study released by Boston University estimated that Airbnb can have as much as a 13% impact on hotel revenue in some markets. Nonetheless, improving the guest experience through unique hotel offerings and an effective digital presence are key priorities for many leading hotels seeking to remain competitive.  
 
Combatting digital disruptors 
There are several different actions hoteliers can take to appeal to the evolving consumer preferences that Airbnb targets (e.g., seamless, user friendly interface, authentic/local experience), such as investing in digital initiatives or modifying the physical layouts of their hotels - and many already are. Hotel executives must consider how these actions impact their core guest base and the incremental impact such investments have on RevPAR, occupancy, and ADR. Applied Predictive Technologies (APT) offers the following advice on how hotels should take a scientific approach to adapting their strategy prior to making any sweeping changes,
 
Weighing pros and cons of digital initiatives
 
Many leading hotels are pushing on innovative digital initiatives. Some, like Accor, are increasing their investment in digital capabilities to create a more user-friendly and seamless experience for consumers looking to book travel. While Accor is undergoing what it calls a complete digital transformation, Starwood is integrating the new Apple watch into its on-site technologies such as mobile check-in and keyless entry and Marriott is beginning to accept Apple Pay.
 
Such advances have the potential to improve guest satisfaction and to facilitate real-time, personalized messaging to guests around key marketing initiatives or promotions. However, they may also have unanticipated implications, such as lower Medallia SALT scores from guests who value  in-person service or decreased ancillary revenues due to a more streamlined check-in process.  Further, it is difficult to understand if these drive sufficient incremental RevPAR to pay back expensive implementation costs. Therefore, hotels should test these initiatives with a subset of customers to ensure they are profitable despite potential drawbacks.
 
Considering capital expenditure
 
As consumers increasingly seek a more genuine travel experience, hotels like Marriott are fostering a more authentic feel by adapting the physical layout and dÉcor of their hotels to match their locale or by providing local cuisine options in-house. Some hotels are even introducing new boutique brands, like Carlson Rezidor’s Radisson Red or Starwood’s Tribute Portfolio, to expand the range of their traditional offerings. While hotels experiment with new brands or formats to remain competitive, testing an idea in a subset of locations before a broad implementation is the most rigorous and reliable approach to understanding the effects of a program. Such a test could reveal that certain properties, perhaps those in urban areas with younger guests, respond favorably to redesigned rooms, while at other locations the investment does not pay back and may even drive some loyal guests away.