How the leisure industry will survive the sharing economy

Can hotels combat the disruption of AirBnB by using its own business model?

According to a recent study, it has finally been proven that AirBnB has had a negative impact on the hotel industry, as revenues have dropped with the growth of AirBnB. Seemingly, this growth will continue, as it is estimated that the number of bookings will surpass the largest hotel chains within the next few years. Other businesses in the accommodation space include VRBO, HomeAway, FlipKey, Roomorama and CyberRentals.com.

How the leisure industry will survive the sharing economy

In 2013, the Marriott chain launched Workspace on Demand, a programme for guests and non-guests to book small work and meeting spaces mainly in the San Francisco and Washington areas. Some spaces, like lobby areas, are free to use, whereas more private spaces with more amenities are charged at 50 USD per hour. The online booking system is supplied by LiquidSpace, a company, which offers its members workplaces on-the-go through their site. The paidfor spots at Workspace on Demand can be characterised as a “Company as a Service” model, whereas the free workspaces are based on a freemium model. LiquidSpace also partners with a number of other hotels such as Hilton, Rich Carlton and Holiday Inn, but also hosts real estate agents and even private companies for employees to book desk space in their corporate offices.

The ease of booking as well as flexibility of location caters for a younger workforce according to Jenny Hsieh, Vice President of insight, strategy and innovation at Marriott, who says:

These next-generation professionals, they grew up working in Starbucks, Panera, libraries, working outside. So sometimes, they are most creative, most effective in non-traditional environments.

Jenny Hsieh, Vice President of insight, strategy and innovation at Marriott

Marriott has tapped into a huge market as predictions suggest that one third of the global workforce will be mobile workers by 2015, according to a research report by IDC, and these people will need places to meet and work even on-the-go.

There are several reasons why Workspace on Demand is a good idea for Marriott:

  • There is an untapped opportunity for revenue in the empty space in hotels, especially at night, so by renting this out, even small transactions can help increase revenue.
  • Customers have told the hotel group that they would sneak into the lobby or use the hotel wifi from their cars before the programme was available. By systematising this use, it creates the opportunity for revenue.
  • The renting of space is at the core of Marriott’s business; renting workspace is not that different from renting bedrooms. Therefore, daily operations do not change much and with a plug and play system like LiquidSpace to handle bookings the effort is minimal compared to the gains.
  • Much of the available space is located in close proximity to a bar or café with waiters offering food and beverages, so there is a good chance that sales of food and drinks will increase as the space is occupied with more people.
  • Younger workers are attracted by the concept, which opens up for a new segment for Marriott.

The results

Numbers show that 56 percent of the people who use the programme are Generation X and Generation Y Millennials and that 18 percent never use Marriott otherwise. This is a chance for the hotel chain to build relations and upsell to the young workforce, who in return can try Marriott quickly and cheaply without commitment.

Marriott is a leading hospitality company with 3,900 properties scattered around the globe. The company was founded in 1927 and now employs 325,000 associates worldwide. Marriott has 18 brands that all cater to different segments from luxury hotel suites to extended-stay executive apartments. The company is headquartered in Maryland, United States and reported earnings close to 13 billion USD in 2013.

This article is part of a master thesis "The Share Economy: Motivations and strategies for corporations". For list of references and sources, please contact the author Sara Green Brodersen.