The balance of power has shifted: ’Hotels struggle to respond to the ‘sharing economy’by Demian Hodari and Arnaud Bertrand
How is the ‘sharing economy’ affecting hotels, particularly small hoteliers? How can they compete with alternative lodging providers such as HouseTrip and Airbnb?
The sharing economy is spreading fear in the hearts of hoteliers. They’re worried about their very survival, asking themselves: “How am I to compete when just about anyone can become a HouseTrip or an AirBnB host in a matter of minutes and offer a fully furnished home at the price of one of my hotel rooms?”
As the co-founder of HouseTrip and an EHL graduate, I am very familiar with these concerns and I think I am in a unique place to also understand the hoteliers’ point of view.
So where did things go wrong for the hoteliers?
First of all, it is interesting to place things in a historical context. Hotels are a relatively recent invention: From coaching inns catering to travelers and their horses in the 17th century, the modern version of the hotel only appeared in the 19th century. Before that, people would often seek shelter in homestays or rooms provided by various religious orders.
I wasn’t there in the 19th century but I imagine homestays were rustic at best. With the advent of hotels, I can imagine travelers exclaiming: “Your rooms are cleaned every day? And you have professional chefs? Damn right I’ll stay with you!”
Today, however, homes are generally more comfortable, better equipped and much bigger than the average hotel room. Dining options are more plentiful than 150-200 years ago: Travelers have an overwhelming choice of quality restaurants right outside their doorstep. So now the balance of power has shifted away from hotels in a big way. People are saying: “A whole apartment for the price of a hotel room? Free Wi-Fi? Great neighborhood restaurants? Where do I book?”
There is a certain irony to the fact that, centuries down the line, homestays are making such a remarkable comeback.
Are you saying hotels are stuck in the 19th century?
A few young kids have challenged the whole industry by creating businesses from their garages (to be more truthful, we created HouseTrip from our living room). One business precept endures: Companies must constantly adapt to customers’ needs. The plain truth is that the pace of customer-facing innovation in the hotel industry has been poor at best. How many hotels have been offering their customers virtually the same service - with the exception of maybe modern booking services and Wi-Fi - since the 1950s?
The message is clear: Customers have evolved while hotels, by and large, haven’t.
So what can hoteliers do to compete?
Hotels could respond in one of two ways: First, they can try to keep the sharing economy at bay by lobbying governments for laws that restrict or forbid it. From being on the other side, I can tell you that hoteliers have done plenty of that. The CEO of a large multinational hotel company even went on record to ask governments for regulations against sharing economy businesses.
The second possible response – and the one I think is the smarter response as you might have guessed by now – is to rise to the challenge, to listen to what customers are saying and to evolve and compete.
So what are customers actually saying? I think it boils down to two essentials: Value and freedom. Value is always a constant in business and the fact is that a fully-furnished apartment with all the amenities for the price of a hotel room is a very good value.
Freedom is less tangible but nonetheless just as important. From my experience at HouseTrip, I’ve seen that people love to bring their routine with them on holiday. People love the freedom of having breakfast their way (mine, if you’re looking for salacious details, is to sip my coffee in my underwear while checking my emails on my laptop), waking up at any time they want, watching movies while the kids are asleep, etc. And homes are great for this because people know they’ll be able to behave, well, just like at home.
Do you see opportunities for hotels to tap into the sharing economy frenzy?
There are so many things that hotels or hotel groups could do to adapt. And to be fair, a few hotel chains are already doing a decent job. For example, CitizenM is, in my view, doing very well on the freedom front: a lot of their services – from check-in to food – are self-service which empowers their customers.
Still, hotels are evolving at a snail’s pace: Frankly, I’m surprised that no hotel group has jumped on the bandwagon yet and launched a service where they offer private apartments and houses managed under their brand. Many hosts would certainly buy into it and guests would feel reassured by the stamp of trust a brand can bring. I am also surprised no hotel group has launched an “aparthotel 2.0” concept.
If I wanted to be cheeky, I’d say that hotels’ lack of imagination and foresight has played straight into the hands of sharing economy businesses!
Where do you see the sharing economy, especially with regards to lodging, in 5 to 10 years? Can anything stop it?
The hotel industry has a poor history of anticipating societal change let alone adapting to it. They got hammered by the rise of online booking, watching from the sidelines as the likes of Priceline became behemoths, and now they’re getting challenged by sharing economy business models. And this won’t be the last time: have hoteliers for instance noticed the rise in popularity of virtual reality? People will be able to visit Paris from their living room. I think that more than anything the sharing economy is not happening to hoteliers: The future is happening to hoteliers. And they should learn to anticipate it and to adapt.
What would be your advice to schools like EHL about adapting its curriculum to ensure students are fluent in the sharing economy, especially with regards to lodging?
I think there could actually be a role there for such a revered institution as EHL. I think it could become the OECD of the hotel industry, by that I mean an organization that excels in spotting trends and spreading best practices.
So what are you up to now?
I am finishing a book on the whole HouseTrip story, which I think will surprise readers by its honesty. I've read a lot of books written by entrepreneurs and what's always annoyed me is how soft they all read. It’s obvious the writers care about their image and are afraid to make enemies. While I am not suicidal and my goal is not to destroy my image or make enemies I've decided to simply tell the truth…come what may. My goal is to help fellow or prospective entrepreneurs and I think that nothing but the truth will achieve this. In addition, I am also an investor and a mentor for a few other startups and Junjun and I are preparing our next adventure!
Arnaud Bertrand, a 2009 graduate of the Ecole Hôtelière de Lausanne, is an entrepreneur who co-founded HouseTrip with his wife Junjun Chen. The idea emerged from a trip to Copenhagen where the couple decided to stay in a private apartment instead of a hotel. When Arnaud was CEO from 2009 to 2014, the online platform topped CHF 100 million in revenue and 400,000 properties across the globe. HouseTrip has won numerous awards including first place in the "Top 100 Swiss Startups Award" in both 2012 and 2013. Arnaud is an active investor in several other startups and he is writing a book about the HouseTrip story that is due to be published by the end of 2015. EHL recognized Arnaud’s trailblazing entrepreneurship by naming him Honorary Professor in 2015 and including him in their “Hall of Fame”.