By Larry Mogelonsky, MBA, P. Eng. (www.lma.ca)
As of this writing, my home city of Toronto has been locked in a bitter, years-long feud between the established taxi companies and Uber, with legislation moving back and forth through the halls of municipal government. The taxis’ position is that Uber drivers don’t have to go through anywhere near the same number of legal hoops (read: upfront expenses) in order to serve customers, all while Uber drivers simply keep on driving.
Putting aside personal judgments on this case or any preceding one, I can’t help but think of the parallels this has with Airbnb and its disruptive impact on the hospitality industry.
Even though they exist in mutually exclusive spaces, a snapshot comparison between the two organizations yields uncanny similarities. Both founded around 2008-2009, they now operate on a global scale with valuations in the tens of billions of dollars and strong growth fueled by mounting consumer acceptance and new product offerings. Uber is a usurper to traditional car services while Airbnb challenges traditional accommodations, and yet they are both largely mobile and urban-centric with flawless apps and two-way user review accountability checks.
With so much in common, would it be reasonable to also say that Airbnb’s legal foibles might follow a similar path as Uber? More importantly, what can we, as hoteliers, learn about how traditional car services have fought back against and adapted (or not) to this ferocious new entrant? Can hotel properties coexist with this highly unregulated, free market enterprise or are we on the path of extinction?
Sharing Economy or Taking Economy?
The phrase ‘sharing economy’ is what’s used to describe this new market shift away from traditional forms of service and transaction. These sharing economy systems, Airbnb and Uber included, let buyers and sellers meet on the open market where decisions can be made on the fly and without serious penalties. To me, this sounds more like the ‘Taking Economy’ as it lets consumers say to themselves, “Hey, I’ve got a smartphone and I want everything without lifting a finger, damn the consequences.”
Airbnb now pose perhaps the single greatest threat to the hospitality industry. Think of what you go through to set up and sustain your commercial enterprise: occupancy permits, employee background checks, health inspections, fire alarm testing and so on. Next, consider what your city is losing in destination tax levies as well as state and property taxes. Think about how all that money cycles back through the local economy in the form of infrastructural upgrades, urban renewal, capital for new attractions and support for tourism bureaus. In the short run, endorsing Airbnb may translate into heightened travel to a region due to increased room supply, but thinking long-term (years or decades from now), without large-scale periodic upgrades shepherded forward by governmental institutions, a municipality’s incoming traveler numbers may go into decline.
Rise to the Challenge
While these above paragraphs may appear to be wildly anti-Airbnb, it is better to give this the glass-half-full perspective. That is to say, no matter what courtroom rulings or injunctions occur within the next decade, Airbnb is here to stay – it’s too entrenched and its gig-based exchange structure is too perfectly aligned with our capitalistic systems for it to dissolve.
Moreover, have you tried Airbnb? It’s actually pretty great! The website and app work flawlessly, and they have some truly remarkable rooms available. There’s a reason why it’s passed the billion dollar valuation mark within the first decade of its existence, and it’s because it gives customers what they want. Try it for yourself to see. And rather than wait for external actions to correct the issue, you best treat this company as a legitimate, bona fide competitor to your business.
Bringing it back to the current state of affairs for taxis versus Uber, you could make the argument that these cab services have ‘done it to themselves’. Uber beat them to the punch in terms of a developing a fluid mobile app that allowed for wallet-less transactions, GPS location tracking, better accountability via a driver-rider rating system and oftentimes cleaner interior vehicle cabins. What have taxi companies done to augment their product offerings since the arrival of Uber? What would compel, for example, a millennial with the Uber app on his or her smartphone to go back to the old ways of calling a cab?
Instead of complaining about Airbnb, this is your opportunity to rise to the challenge. Make your property the best it can possibly be and wholeheartedly authentic to your territory so that there is no question in the consumer’s mind as to who provides the best choice of accommodations. Just as third-party review sites have shined a spotlight on all of our operational deficiencies, so too is Airbnb forcing us to improve our products. In my mind, there’s only one solution to this sharing economy problem, and that is to be better hoteliers.
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