Is it time to include disruptors in our comp sets?
 
Is it time to include disruptors in our comp sets?
07 MAY 2019 7:19 AM

Home-rental platforms like Airbnb have become such a part of the travel industry that it might be past time alternative-accommodations supply was included in traditional hotel competitive sets.

As someone whose mind is focused on increasing asset value through top-line revenue, I tend to look at hotels’ pricing and distribution strategies from a unique perspective.

Historically, hoteliers only had to consider the traditional supply of hotels. However, supply is far different now than it was a decade ago. So for us to make smart pricing decisions, how can we properly assess that specific supply and demand in the market? How do we view the asset in the totality of its competitive set?

We all know by now that disruptors exist in our industry and they are here to stay. Let’s examine a complementary industry for a moment—the transportation industry. The taxi business model is a great example of an industry that did not evolve at all to keep up with continuously increasing technologies or customer needs. It’s generally known for adequate (not excellent) customer service, absence of customer loyalty and resistance to assisting customers who require shorter distances. Essentially this is an unfriendly user experience.

And then digital advancement arrived, resulting in the formation of agile and rapid companies (and applications) such as Uber and Lyft, which have forever changed an industry that was clearly stagnant in regard to customers’ needs and services.

The Age of the Internet of Things (IOT), with an increasing speed of technological advancements, has provided disruptors the ability to continually roll out new features and remain fresh. It allows disruptors to actually generate more disruption.

As hoteliers, we practice our trade with the daily recurrence of the home-sharing disruptor. Our industry is split on how to perceive this segment of the business. Some view home sharing as a threat, so much so that they have been rolling the business into their model to compete. It speaks volumes when hotels decide to play in this space; it means hotel companies need to evolve. In fact, the word disruption is a misnomer, isn’t it not? The proper term for such internet-driven advancements is simply ‘evolution.’

We need to accept the concept of disruption (evolution) and learn how to quickly recognize when a new threat is on the horizon. Consider that hotels have not just begun to embrace the home-sharing concept, but the leading home-sharing provider itself is now also in the traditional lodging space, too, via its acquisition of HotelTonight. Why would Airbnb broaden its business model with a hotel booking mechanism? To appease the lodging sector and show conformity? What Airbnb has managed to accomplish (with these bold and unexpected steps) is demonstrating that they not only can compete with traditional hotels for leisure-transient business, but also now for the business-transient segment, too.

Personally, I urge my team’s revenue managers to dig even deeper and look beyond the usual suspects and competitive sets to more thoroughly understand a market. With properties in strong home-sharing markets, I challenge my team to investigate how competitive the local home-sharing environment truly is. How many units are available? How many bedrooms? What types of amenities? At what rate?

While there are trend reports that exists for the home-sharing base, there is certainly an opportunity for one of our lodging data sources to bring that supply space together and present a useful combined report of traditional and non-traditional units. Can we actually count the supply in the market to help us better react and price properly? Revenue managers need to fully understand the true amount of supply in their markets, both on weekdays and weekends. And brands have to admit that home-sharing is truly “additional supply.”

Can our industry data collection leaders incorporate home-sharing units as part of the hotel market’s fair share data? With my revenue-management lens, anything that impedes our demand is a competitor. However I can boost that top-line revenue is how I can help drive the bottom-line asset value.

Kurt Furlong, 2019 Chair of the IHG Owners Association, is Chief Revenue Officer and Partner with Genuine Hospitality, LLC. He specializes in hotel asset management, bottom-line enhancement, revenue generation and revenue management. He previously served with management companies as a partner, overseeing revenue generaton and strategies. With more than 30 years of industry experience, Kurt has worked in all phases of hotel and restaurant operations.

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