Why airbnb won't win the battle for corporate bookings.
A while ago one of my friends had the opportunity to invest in Airbnb, which he foolishly passed on. At the time he couldn’t see the difference between airbnb and bookabach.co.nz, which is a niche site for finding and booking holiday homes in NZ. In a way he was right – practically speaking they are very similar. They both use smart tech to distribute accommodation inventory that they don’t own, but with two very important differences: marketing-might and global scale.
The concept of using smart tech to distribute someone else’s inventory is really (really) hot right now and its changing markets seemingly overnight. Think about these three examples:
20 years ago, if you’d have told someone that you could create an accommodation business worth literally billions of dollars without owning a single property they’d have thought you were bonkers… but in today’s topsy-turvy world you can. So, for now at least, the world belongs to the disruptors….
The interesting thing about disruption is that it’s a continuous cycle. At some point in the future someone will disrupt the disruptors. A lot of people will lose a lot of money (potentially) and the world will get that bit smaller again. Try imagining a mobile app that shows you where all the licensed taxis, Uber’s Lyfts and Sidecars are in your locality and gives you the ability to compare prices and calls the one that most closely meets your needs. See where this ends up?
But anyway, back to airbnb…
What’s particularly interesting about airbnb is that it’s not just creating a new market for people that have a spare room they want to rent, it’s also starting to impact the traditional hotel industry, which in our opinion is an industry that’s more than ready for a little disruption. Today, as a percentage of room nights stayed, airbnb still constitutes a fraction of a percent of the global accommodation market, but it is growing quickly and the big hotel chains are starting to take note.
One area of the hotel market where airbnb is unlikely to get any meaningful traction is the corporate market, which accounts for a significant chunk of the room nights booked globally. Over recent week’s airbnb has announced a number of enhancements to their services aimed at wooing the business traveller; none of which are likely to work based on what we know about business travellers.
For sure, there will be a small proportion of the business community that like the homeliness of old sheets and shaky wifi, but by and large most business travellers, particularly corporate travellers that aren’t footing the bill themselves, value the traditional benefits of hotel dwelling. And indeed recent changes to legislation reinforce corporates’ commitment to the traditional hotel model.
Imagine yourself as the CEO of a public business. Now, can you honestly, hand on heart, condone the use of airbnb style accommodation for your employees when you have no idea what the accommodation is going to be like and how safe it is going to be? We’ve seen this problem first hand when one of our female travellers booked into a three story apartment only to discover it had no lift. In the process of lugging a large suitcase up steep stairs she broke a heel, tripped and injured herself.
So it’s pretty safe to say that corporate hotel disruption isn’t going to come from airbnb anytime soon. So if not airbnb, then who?
Today, the corporate market for hotel rooms is dominated by the Travel Management Company's selling inventory provided through the Global Distribution Systems (GDS) through Online Booking Tools. It’s a tried and tested model and it works well. But, as the supply market consolidates, technology improves and corporates start to get price-savvy, the opportunity for digital disruption emerges.
As we now know, disruption comes from supply chain distribution, changing the channel and influencing buyer behaviour through subtle nudges and incentives. So who out there in the market has the inventory, sharp prices, and an existing relationship with a large proportion of business travellers? Easy. Expedia and Booking.com. The relationship that they have today may be leisure-centric, but we’re all influenced by brands and many of us are members of leisure loyalty programs, which means that they tick all the boxes for a disruptive play.
Given that these organisations tend not to take ‘no’ for an answer, we think there’s about to be a sea change in the way organisations source their hotel accommodation. And it’s long overdue.