Technology of the week (team 7) – The shake-up of the hotel industry


Introduction eMediaries
The travel accommodation industry has experienced various changes and disruptions over the last years. The reasons for these disruptions are however various. The emerge of the internet enables customers to get reliable and accurate information in a quicker and more convenient way than offered by the traditional high street travel agencies. Furtherbookingmore, the internet gave rise to numerous new tourism eMediaries who distribute their products directly to consumers by using a different business model. These eMediaries often work with an agency model instead of a merchant model. When working with an agency model, the online travel agency simply gets a commission from the hotel. The benefit is that the customer has the option to pay at checkout, instead of paying immediately when booking, and customers tend to appreciate having a choice. Booking.com, one of this eMediaries, was able to shake-up the market with this new agency model.

Airbnb
airbnbIn 2008, however, a new disruption entered the market, Airbnb. This platform provides a social network where apartment owners can offer their accommodations to travellers online. You are able to create your own profile, representing useful information about yourself, to give the owner the chance to evaluate a potential fit. This suddenly gave the traditional agencies even more competition since private accommodation owners were now able to offer their property online.

Sharing economy
The trend of a sharing economy, such as Airbnb, caused a heavy debate, along with a rapidly growing level of attention by legal and regulatory bodies. The individual customer has definitely benefitted from Airbnb. Customers can derive incremental income by renting properties through Airbnb, as well as individuals selecting an Airbnb rental as an alternative to a hotel stay. This is an example of Say’s law by generating a new demand that did not previously exist through the supply of new products and services. Airbnb can therefore increase the travel industry as a whole with the supply of more inexpensive accommodations. Big chains will however feel this new supply in their business. The entry of Airbnb into the Texas market has for example had a quantifiable negative impact on local hotel revenues. As Brian Chesky, the CEO of Airbnb, predicts, there will be fewer big chains and less ownership in the future market.

Future
The projected growth of the sharing economy needs more research to understand all the benefits. But it is definitely an important future trend to consider for the traditional travel agencies. Travel agencies have lost parts of their business to eMediaries like Booking.com, but need to be careful again for new trends. One clear future trend is the empowerment of the customer. The introduction of social platforms like Airbnb gave the customer even more options; to rent alternative options next to hotel stays. New technological innovations can make the market even more transparent, by providing all information and possible accommodations to the customer in an even quicker and more convenient way. It will be interesting to see what the future will bring, any opinions?

Sources
Buhalis, D. and Law, R. (2008). Progress in information technology and tourism management: 20 years on and 10 years after the Internet—The state of eTourism research. Tourism management, 29(4), pp.609–623.

Buhalis, D. and O’Connor, P. (2005). Information communication technology revolutionizing tourism. Tourism recreation research, 30, pp.7–16.

Henne, J. (2014). Business model dynamics in the tourism industry. University of Twente.

Kates, S. (1998). Say’s Law and the Keynesian Revolution. Edward Elgar.

Skift, (2014). Airbnb’s CEO Said These 6 Things About the Future at an Ideas Festival. [online] Available at: http://skift.com/2014/07/03/airbnbs-ceo-said-these-6-things-about-the-future-at-an-ideas-festival/ [Accessed 12 Sep. 2014].

Zervas, G., Proserpio, D. and Byers, J. (2014). The Rise of the Sharing Economy: Estimating the Impact of Airbnb on the Hotel Industry. Accessed, 3, p.2014.

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