Vail Daily column: The sharing economy: Opportunity or threat?
“The world hates change, yet it is the only thing that has brought progress.” — Charles Kettering
Change is hard and nothing has brought change to the travel business quite like the emergence of the sharing economy. The sharing economy, in which consumers are able to borrow or rent assets owned by someone else, has existed for hundreds of years. It’s not a new concept.
What is new is the role of the Internet and the way in which enterprising entrepreneurs have capitalized on the sharing economy in a very real way. The following has been making the rounds on social media and shows the power of the sharing economy:
• Uber is the world’s largest taxi company, yet owns no vehicles.
• Facebook is the world’s most popular media owner, yet creates no content.
• Alibaba is the most world’s most valuable retailer, yet has no inventory
• Airbnb is the world’s largest accommodations provider, yet owns no real estate.
The financials of these organizations are remarkable. For example, despite being less than six years old, Uber is projected to earn $10 billion in gross revenue this year, and the company was recently valued at $40 billion ($40 billion! For a company with no inventory). Entrepreneur Magazine recently had an article reporting that the sharing economy’s global size in five key sectors was approximately $15 billion in 2014. It’s projected to reach $335 billion by 2025.
Entrepreneur further suggests (maybe for those in denial of the way business is done today or those who still think the Internet is just a trend for that Millennial generation) the success of organizations such as Uber and Airbnb isn’t a fad, but is a new way of doing business. It’s hard to argue with that as these organizations continue to grow, continue to succeed and continue to face amazing pressure from traditional businesses playing defense to protect their (often) old-fashioned business models.
What’s the common thread in the sharing economy? What do taxis, vacation rentals, and other successful sharing economy businesses have in common? Other than being viewed as a threat from traditional service providers?
It’s an easy answer when you think about it. These companies grow so fast, and become so successful in a short time, because regardless of what business they are in, they are about customer service and being customer centric. They fit a need that the consumer wants. They target their niche audiences and are often more nimble and more responsive than traditional business operations. It is undeniable that the model appeals to customers as it allows consumers do to things their way and not by the (seemingly) old-fashioned rules and regulations set forth by traditional industry (think minimum-night-stay requirements at a hotel or taxi licensing requirements and permits).
Unfortunately, many traditional organizations and industries have forgotten the importance of being consumer focused and instead focus on the needs of their own organization instead of their customers. The fact is, the sharing economy offers constant change. Traditional businesses that get scrappy and embrace it — and make it work for them — are the businesses likely to grow their market share.
Positive Results of Embracing Change
A free market economy that embraces change and that welcomes competition allows businesses — both traditional and new — to focus on their customers and will benefit those who do this consistently and who do this well. Guests know what they are buying and the Internet makes most every transition completely transparent (think user reviews for VBRO type units).
The real question, in my view, is the potential unintended consequences of renting short-term in a residential neighborhood on the community (parking, noise, neighbor impacts, etc). The conversation thus far in ski towns has focused on the property managers seeing a risk to their business model, and municipalities focused on sales tax collections. Both of these are legitimate discussions and real risks. Yet, no one really talks about the impacts on the residents, although unless you’re in an unincorporated area chances are you have POA rules, regulations and/or covenants that can be (or already do) amended to restrict the sharing model.
Entrepreneur Magazine said it best when they stated, “In a few years, we’ll no longer debate the merits and dangers of the sharing economy. It will simply be a fact of life. Traditional businesses can fight it, but doing so means setting themselves up for a loss.”
Businesses can work to embrace change and make these trends work for you. Those who do will likely survive and thrive. Those who don’t? Then the sharing economy really is a threat.
Summed in up haiku form:
Think of the customer first
Embrace change and thrive
Chris Romer is president and CEO of the Vail Valley Partnership.