“We’re mad as hell and we’re not going to take it anymore.”
That clip may be from the 40-year-old satirical movie Network, but it might as well be the declared mantra industry leaders and CEOs are shouting regarding perceived industry interlopers.
They’re mad because the generation of leaders before them didn’t see the future importance of the Internet and essentially ceded pricing power to the online travel agencies at the dawn of the Internet. My hunch is that moment in time will be studied in perpetuity as one of the most brutal beatings the hotel business ever took.
They’re not going to take it anymore because they learned their lesson. Now they're girding themselves to battle disruptive upstarts. That’s right, they’re talking about you, Airbnb.
“We will not let this happen again. Twenty years ago we had our collective heads in the sand [regarding OTAs] and didn't work together,” said Dave Johnson, president & CEO of Aimbridge Hospitality.
“For a long time we have been taken advantage of because we are so fragmented. It is obscene as an industry we have ceded power to OTAs," said David Kong, president & CEO of Best Western Hotels & Resorts.
So true. This is a wound that still cuts deep. Especially with today’s leaders. And while the OTAs have done a nice job partnering with hotel companies, there’s still an air of resentment that has not fully dissipated.
To keep things well balanced here, let me point out that my friends on the OTA side of the business posit that their booking engines are not a threat. In fact, Lou Zameryka, director, global accounts with Booking.com, argues OTAs are a valuable way for non-loyal customers to connect with brands and the brands themselves still do not fully appreciate this fact. It’s up to the brands to convert non-loyal OTA users to loyal brand.com bookers.
On the hotelier side, people argue OTA ad budgets dwarf hotel company ad budgets, which makes it harder to connect with customers. Tough luck, that’s life. Comically, when I fact checked the Network quote, an Expedia ad played. Point proven?
But that ship has sailed, and hoteliers are finding their collective Spidey Sense is tingling at the potential threat regarding companies like Airbnb.
Taking a page out of the if you can’t beat 'em, join 'em, handbook, Choice Hotels has smartly jumped into the vacation rental business to halt this potential threat.
When announcing the plan last month, CEO Stephen Joyce said in a statement: "We've seen strong demand from vacation rental managers for distribution, branding and technology solutions, and at the same time, we've had increasing demand from consumers who desire longer term stays and larger accommodations with the amenities of home. With these trends in mind, we've created Vacation Rentals by Choice Hotels."
I love the forward -hinking nature of Choice. They were one of, if not the first, to start soft branding (Steve, I trust you will set me straight on this one). This new move ties in with the company’s Choice Privileges reward program, which should give pause to some potential Airbnb buyers and convert them to the light side.
I expect other brands to follow, which in my opinion will serve the hotel industry well while taking some of the bite out of the perceived Airbnb sting.
Editorial aside: The real question I think the industry is dancing around is whether Airbnb is the next OTA or just a red herring, distracting the industry from another, more ominous threat. The real hidden hotel industry threat to me is rising xenophobia here at home and empty threats of wall building, combined with a general sense we should return to pre-WWII isolationism policies. I ask would-be voters in our business to carefully consider how the next presidential election could affect the influx of foreign visitors to the United States, and what that means to the health of the hotel industry and those that supply it. That sounds like an article for a different day, however.
As for Airbnb, I’ve been preaching for the past year or so that Airbnb is not as big of a deal as people say it is, though I am glad the industry is taking a preemptive strike to ensure this is not another ceding of control. It’s the only sensible move.
Last May, I told the New York Times I thought Airbnb was a lot of ado over nothing, and that while people would sample the service, it would be a very tough task to permanently convert the masses. People sample, but the benefits of a hotel over other places to stay is clear cut in the vast majority of instances.
That prediction seems to be panning out.
At last week's Hunter Hotel Conference, Jan Frietag, SVP lodging insights with STR, said Airbnb is “not really an impact,” adding that it usually just helps ease demand during super-high-volume events such as the papal visit to Philadelphia last summer, when all hotels were essentially bought anyways.
Tyler Morse, CEO and managing partner with MCR Development, sums the Airbnb threat up perfectly. “Eventually it will just be another OTA. There will be fire codes, life-safety rules and they’ll have to pay taxes. It won't be the Wild West it is now,” he said.