Disruption in Hospitality: The Sharing Economy's Rising Threat to the Traditional Hotel Industry

This paper examines the fundamental problem statement of: How can the hotel & resort industry resist and overcome the new competitive challenge that the sharing economy and Airbnb have imposed on it? This wasn’t a problem up until this past decade, as hotels had long been the world’s main solution for individuals looking for a place to stay in exchange for a fee. That has changed nowadays as the rise of the sharing economy has created a new, fast-growing demand for Airbnb in the hospitality industry. We have witnessed powerful companies die as a result of not taking disruptive technology seriously, as seen with Blockbuster and Kodak; however, we have also seen impressive reactions to disruptive technology in other cases such as Walmart and Alibaba that use it to enhance the customer experience. Hotels arose from humble beginnings and progressively became more than just a place to sleep. This is evidenced by the progression from 16th century humble inns to large luxury hotels in the 19-20th century to many hotels being significant tourist attractions themselves nowadays. While some factors such as security, hygiene, and consistency currently remain on the hotel industry’s side, the main factors fueling the growth of Airbnb are closely tied to consumer preferences and Airbnb’s ability to create unique, authentic experiences. A questionnaire with 756 responses from ASU students was conducted for this project’s primary research. The results concluded that this demographic travels often, slightly prefers hotels over Airbnb, and values location, convenience, and cost the most. Results were consistent with findings discussed in literature, since the bulk of respondents said they look at Airbnb for low-cost options and hotels for high-end options. Hotels reign supreme in the high-end market and benefit from their location and convenience factors, but Airbnb might have an opportunity to leverage their attractive capabilities while also incorporating some of hotels’ best aspects. This can cause the preference of hotels over Airbnb to diminish further going forward. Hotels can combat Airbnb in multiple ways. One is for hotel chains to customize more hotels to fit the local destination like Airbnb rather than keeping a more standardized vibe and design across all locations. Another is to continue focusing on creating unmatched service experiences in the high-end market that are hard for Airbnb to replicate. A third one is to implement more competitive pricing relative to Airbnb during peak seasons across different cities. Finally, given the increased awareness on hygiene and health that the COVID-19 crisis will likely bring after the pandemic, hotels should put greater emphasis on their hygiene factor when conducting publicity efforts, since this remains in favor of hotels rather than Airbnb and can attract customers who are still reeling with fear from the pandemic. All of this can help hotels to retain their crucial competencies while leveraging Airbnb’s competencies to create an incredible customer experience that is the best of both worlds. All of it prevent the hotel industry from going down a darker path than it has gone through before.