Sharing Economy Companies Take A Bite Out of Established Businesses – Or Do They?

How will sharing economy companies impact established businesses? This week, we turn to the question of who wins and who loses as collaborative consumption companies gain ground.

Impact of Airbnb rentals on the hotel industry

In a newly released report, Boston University’s School of Management examined the impact of Airbnb rentals on the hotel industry in the US state of Texas. The 36-page report estimates that every 1 percent increase in Airbnb listings in Texas results in a 0.05 percent decrease in hotel revenues. “An estimate,” the report ominously notes, “compounded by Airbnb’s rapid growth.”

Impact of collaborative economy companies

The New York Times took the same pessimistic view and headlined its article on the report: “Sharing is caring unless it costs you your job.” Of course, that’s a finite way of looking at the impact of collaborative economy companies. The Atlantic Cities blog looks at it in a  different way: Say a person has $200 to spend on a New York weekend. Instead of booking a hotel for $175, the person books a room on Airbnb for $75. Will this person spend those savings on other New York businesses, and thereby benefitting the economy that way, or simply pocket the savings? Perhaps this is a question for a behavioral economist, but an informal poll at the Mila office shows that the majority here would simply spend the savings during that weekend as we reasoned we’d be sticking to the initial $200 budget anyway. So while, one hotel chain might lose revenue, several New York City restaurants or shops would benefit.

The report, however, does suggest that it is the lower end and more budget-minded motels and hotels that will bear the brunt of the impact. Of course, for the employees of these establishments, the threat of job losses is worrying. But in an online chat with Crowdsourcing Week looking at how businesses can leverage sharing economy principles, Collaborative Consumption’s Lauren Anderson noted that new complementary opportunities and businesses could arise from established collaborative economy companies. One such company is Key Cafe which has created a service that lets Airbnb and other P2P accommodation hosts simplify the process of handing off keys to guests.

Four tips from Lauren Anderson to leverage sharing principals

Anderson also had tips for companies who wanted to leverage sharing economy principles in their existing businesses:

  1. Look at their existing assets to see if the company can tap into idling capacity. Can businesses borrow or rent these assets – especially if they have a strong community of users already?
  2. Engage with consumers to meet their needs and resist the temptation of irrelevant promos. “Collaboration,” wrote Anderson, “uncovers product innovation.”
  3. Focus on creating additional revenue streams through rental, resale or brokering, rather than focusing on losing revenue.
  4. Finally, her secrets to success? Keep a specific focus, develop a critical mass of users, have the right values, and solve a real problem.

But back to the question: If you’ve ever used Airbnb on holiday and saved on accommodation, did you pocket the savings, or spend it on other places or things?

Let us know about your shareconomy experiences!

Your Mila Team

Leave a Reply