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A disruptive threat is something that has the potential to fundamentally change the way business is done in an industry or across multiple industries. Every industry has a potentially disruptive threat to the status quo and the hotel industry is no different.

What is Disruptive Change?

A disruptive threat can originate from a technological breakthrough, a Blue Ocean strategy or an innovation. Hotels and lodges should not confuse disruptive threats with changes made to maintain or increase minor market shares such as Wi-Fi, Internet marketing or having flat screen TV’s.

To understand the concept more clearly, some notable examples of successful disruptive events include:

Examples of Disruptive Events

  • Email: The postal service has never been the same as most messages no longer needs stamps or paper. Disruptive Technology
  • Personal Computers: Started as an inexpensive alternative to mainframes and subsequently created a whole new marketplace. Innovation
  • The Assembly Line: Ushered in a new age of industrialization by allowing for the mass production of products. Innovation
  • Digital Photography: Do you remember the Polaroid camera, film processing kiosks? Disruptive Technology
  • Southwest Airlines: Starting serving lesser airports/hubs with a no frills service. Blue Ocean strategy
  • Chrysler Minivan: A cross between a van and a station wagon, the minivan appealed to a mass market of families and also initiated the age of the SUV. Blue Ocean strategy

The idea behind all three disruptive threats is to make the competition irrelevant. Each type of threat is different but when successfully brought to market it can change the entire dynamics.

A New Hotel Industry Threat

The hotel and lodge industry is not likely to suffer from an attack by technology or innovation. However, it is vulnerable to Blue Ocean ideas. In short, a Blue Ocean is an uncontested market space whereas a Red Ocean is the known market.

For example, business and family travelers are a known market segment of the Red Ocean for hotels. Many services and amenities are geared toward capturing this market segment. Hotels view these market segments similar to how the automakers thought of families before the minivan came to market.

The threat to the major hotel chains is that business and families are susceptible to a different type of hospitality product. This was first seen in the modern era by the emergence of boutique hotels.

Boutique hotels offered a more themed, stylish or intimate setting. Although the concept was not large enough to be a disruptive threat to the hotel industry; most major hotel chains now operate a brand of boutique hotels to maintain market share.

Now, a new threat to the hotel industry has emerged, one that is capable of being a true Blue Ocean game changer. The company behind it is Airbnb. Their game plan is disruptive because of two major changes.

“Our business isn’t [renting] the house,” Chesky says. “Our business is the entire trip….His idea is to create a portfolio of new services that make the Airbnb experience more consistent from stay to stay, and that can generate lots and lots of additional revenue.”

Source: Austin Carr

The first is that the Airbnb concept appeals not only to business and families but also to baby boomers, millennials, youth and virtually all non-business or non-family travelers.

The second is that it brings one-stop shopping to creating a travel experience for almost all aspects that the hospitality industry can offer such as:

  • Home type atmosphere for individuals, couples or families. For example, a small family reunion of 10 people in one house.
  • Unique settings, you can find a mountaintop, beach house, an igloo or almost any other type of dwelling that a traveler has interest in.
  • Availability in major cities, small towns across the U.S., Europe and a growing number of international destinations.
  • An alternative to hotels in saturated markets especially for events.
  • Pre-arranged transportation, full itinerary planning and so on.
  • Cleaning services, event planning and the list of options is being expanded daily.
  • WiFi, cable etc…

Infographic By Valerio Pellegrini

Given the Airbnb’s meteoric ascent as a hospitality brand it is clear that travelers have a new option and are using it.

The Options for the Hotel Industry

Should the hotel industry fear Airbnb and its concept? The answer is an emphatic YES!!! Even though it would appear that Airbnb has a few potential regulatory battles ahead, the concept leaves the hotel industry with two clear choices of either fighting back or joining forces.

Fighting the travel experience concept of Airbnb would be like auto manufacturers coming out with a slew of new vehicles that offer a different part of what the minivan offered. The only viable fighting solution is to incorporate a complete travel experience and produce a similar product.

The major hotel players need to act extremely quickly. The Airbnb concept is brilliant and the chart above shows the impact. With a goal of having 1,000,000 listings in the near future, resistance would be futile.

Option 2 is a more likely scenario for smaller hotels, boutique hotels, lodges or individual establishments. The option is to sign up and be listed as part of the Airbnb brand. This would give smaller brands the opportunity to be found as a hotel alternative to a home rental.

Recapping the Hotel Industry Threat

To recap, the disruptive threat is real. It is a global marketplace and people like variety. With this new concept, anyone with a room to rent is a potential hotelier. The market just got much bigger and you can count on the growth to continue.

Most importantly, it would be a disaster for any hotel executive to think of Airbnb as a minor threat like boutique hotels were. With the potential for millions of more rooms being available at just the click of a mouse or touch on a smart device, hotel executives will need to find new ways to compete.

The biggest challenge for Airbnb will be how to manage the explosive growth in relationship to implementing and then maintaining standards for cleaning, maintenance and customer service that are being developed.

The second challenge for Airbnb would be not to try and recreate the wheel with regards to hotel systems. Hotel chains have crafted their hotel systems to maximize service efficiency, revenues asset management and operations.

Hotel systems work for a reason but even though one system does not fit every hotel’s needs, they can be incorporated to the scale necessary to fit the variety of places that are listed. This will give management at Airbnb the time to focus on the rest of the traveler’s experience.

What do you think of the Airbnb threat? How do you think the major hotel chains should or will react? Share your thoughts with us.