Introduction
The sharing economy has increased opportunities in the hospital industry but has also caused significant disruptions. It has transformed the perception of the consumers on important aspects such as travel arrangement and reserving accommodations. The rapid growth of the sharing economy has been facilitated by technological advancement and flexibility in supply chain management. This has reduced transaction overheads, streamlined the market entry process for suppliers and given consumers searchable listings. Suppliers can easily join or leave the list of suppliers at any time and this has affected operations in the hospitality industry. This is why firms in the hospitality industry have to understand their strengths and weaknesses and make necessary adjustments to take full advantage of the sharing economy.
Aspects that have been impacted
The growth of the sharing economy has provided a formidable alternative to the traditional suppliers in the hotel industry. It has impacted occupancy rates which are an important metric in the hospitality industry. The various options provided by the sharing economy have increased the number of suppliers in the hospitality industry leading to intense competition. For instance, hotels have experienced a decline in short term rentals and this has significantly affected their occupancy rates. Pricing has also been affected as hoteliers have been forced to lower their prices in order to remain competitive. Customer decisions are often influenced by prices and the hotels set prices independently based on their own valuations. This implies that hotels can change their prices at any time to reflect new changes in the industry. Moreover, they use pricing to manipulate demand and attract specific customer segments. Most importantly, hotels can reduce prices to facilitate growth and then eventually raise their prices at the right time when they are well established. In addition to this, hotels can use pricing to influence their bookings to discourage temporary customers and reward their loyal customers. This is beneficial to the firms in the long run. The sharing economy has distorted this by sharing prices online thereby making it easy for the consumers to compare prices and make informed decisions. This denies the firms in the hospitality industry the opportunity of taking advantage of the pricing tool.
Hotels generate revenue from renting rooms, meeting places and selling food and beverages to their customers. Excellent customer service is essential in the hospitality industry given that it is a service oriented industry. The sharing economy has made it easier for the customers to get good rooms at lower prices. This has forced firms to reduce their prices in order to attract customers and remain in business. However, this has come at a cost as it has reduced the level of revenues that they generate from their business operations. For instance, a study by Zervas, Proserpio & Byers (2017) revealed that Airbnb significantly reduced the level of revenues generated by hotels in Texas. An increase of 1% Airbnb generated a 0.05% decrease in the quarterly revenues.
Strategies for Mitigating the Impact of the Sharing Economy
Firms in the hospitality industry need to have adequate knowledge on the level of saturation and market penetration in order to be able to make effective policies. They should then seek ways of ensuring that the supply and demand fits into their business strategy. The sharing economy can impact all the market segments in the industry and as the sites continue to get more popular, their effect on the industry can only increase (Aznar et al 2017). Managers need to regard the sharing economy as a formidable competitor that demand regular attention. Advanced revenue management strategies can help the managers of traditional firms to use data analytics in leveraging and growing their market share of the industry. This would ensure that the firms provide special standardized services to their customers in a manner that cannot be disrupted by the sharing economy (Cusumano, 2015). For instance, they can connect with more customers through vendors and provide targeted services aimed at attracting and retaining them.
What I would do if I were a restaurateur
As a restaurateur, I would look for means of providing the customers with the best services at the lowest prices. This involves scanning the industry and understanding the key drivers of consumer decisions. The services provided to the customers should be targeted to specific customer segments in order to be able to provide them with additional services at a discount. Achieving this may require partnering with other firms such as hauling firms and other suppliers to minimize the expenses and generate more profits. In addition to this, I would go to the local authorities to ensure that firms like Airbnb are not violating any regulations that would give them unfair advantage over me. There is need to have effective regulations that prevent firms in the sharing economy from gaining undue advantages through unfair business practices (Zale, 2016).
Conclusion
This study has illustrated that the sharing economy has significantly impacted the hospitality industry by influencing various variables such as pricing, revenue generation and occupancy rates. The sharing economy has disrupted the hospitality industry and as such the managers of traditional firms have to devise effective strategies that will enable them to remain in the business and continue generating revenues by minimizing the effects of the sharing economy on their business operations. Furthermore, there is need to make regulations that will ensure that the firms in the operating industry do not cause cumulative negatives and regulatory challenges.
- Aznar, J. P., Sayeras, J. M., Rocafort, A., & Galiana, J. (2017). The irruption of Airbnb and its effects on hotel profitability: An analysis of Barcelona’s hotel sector. Intangible Capital, 13(1).
- Cusumano, M. A. (2015). How traditional firms must compete in the sharing economy. Communications of the ACM, 58(1), 32-34.
- Zale, K. (2016). When Everything is Small: The Regulatory Challenge of Scale in the Sharing Economy. San Diego L. Rev., 53, 949.
- Zervas, G., Proserpio, D., & Byers, J. W. (2017). The rise of the sharing economy: Estimating the impact of Airbnb on the hotel industry. Journal of Marketing Research, 54(5), 687-705.
