Hotel companies need to change with the times or suffer a slow death

Change Tree

Here’s some interesting data: In comparing the 1955 Fortune 500 companies list to the 2015 Fortune 500 list, only 61 companies appear on both lists, including Boeing, Campbell Soup and General Motors—all household names. That’s right: Only about 12 percent of the Fortune 500 companies in 1955 have stood the test of time. Others, like American Motors, Studebaker and Detroit Steel, didn’t make it, merged or contracted; nearly nine out of 10 Fortune 500 companies, in fact, from 1955 are no longer on the eminent list.  

The evidence is clear: change with the times or be gone. You may never have heard of Joseph Schumpeter, but he came up with the term "creative destruction": a process of industrial mutation that incessantly revolutionizes the economic structure from within, incessantly destroying the old one, incessantly creating a new one. Summed up: newer eliminates older. Consider the computer industry and how companies like Microsoft, Intel and Apple made computing smaller and destroyed many mainframe computer companies in the process.

The hotel industry should heed Mr. Schumpeter’s warning. While travelers will always need a place to stay, their options continue to multiply, with nontraditional lodging alternatives, such as Airbnb and other home-sharing sites, continuing to eat into demand and market share.

Marriott International was ranked 221 on the 2015 Fortune 500 list, Hilton Worldwide, 280—will they still be on the list a decade from now?

Choice Hotels International isn’t currently a Fortune 500 company, but it’s making darn sure it’s around and viable for years to come. It, for one, hasn’t waited around for the sharing company to take a chunk out of it. In launching Vacation Rentals by Choice Hotels, it is effectively pivoting from traditional lodging while not turning its back on it. In the company’s first-quarter earnings call, CEO Steve Joyce referred to it before mentioning results or any of the company’s core brands.

“While we find that most travelers still prefer a traditional hotel stay, we also know that some customers have a desire for a different type of experience that is better met through vacation rental. We recognize the changing dynamics in the hospitality industry and the types of travel consumers now desire,” Joyce said.

Other traditional hotel companies are also seeing the bigger picture, from Hyatt, which last May invested in home-sharing site Onefinestay, to AccorHotels, which in April of this year ended up acquiring Onefinestay for $168 million. I have no doubt that the likes of Hilton, Marriott and IHG will soon steer their ways into the home-sharing business, whether that comes via an acquisition or organically—what if homeowners could market their properties on Marriott’s central reservations system? Sign me up! (Actually, I don’t own, so count me out.)

Perhaps there is no greater example of corporate paralysis than Blockbuster. While the company successfully navigated from VHS to DVD, it failed to adapt to the next big shifts: video-mail delivery, video-on-demand and streaming content. That’s where the likes of Netflix and Redbox effectively disrupted and where Blockbuster met its demise. What was a brick-and-mortar mainstay is now a cautionary tale in entertainment history. Blockbuster’s last tweet came on Jan. 12, 2014: “Last chance! Blockbuster stores close at 5 pm today! Discounts up to 90%! Get DVDs and Blu-rays for 99¢!” Gone in 140 characters or less.

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As a company, you want to be leading, not chasing. Hotel companies already have had a slow start in home-sharing adoption. The message is clear and history will tell, but the reality is that 50 years from now, a majority of the companies that populate the Fortune 500 list now will not be there, replaced by companies that were more fleet of foot, saw openings, created demand.

The question for hotel companies shouldn’t be: What are you doing now? Rather: What are you going to do?

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