HITEC Keynote: The collaborative economy

hitec 2014

After a surprising take on hotel security, the next keynote presentation at HITEC 2014 examined another force that is making big waves in the hotel industry and beyond: the collaborative economy. Author Rachel Botsman took the stage to talk about what this new way of looking at commerce means for hotels. 

"I'm a little nervous about this talk because I'm sensitive to the fact that many of the startups in this space are disrupting hospitality hard and fast," Botsman said. "But I'm not going to be how those startups win - I'm going to explain how these ideas are connected by the collaborative economy."

The collaborative economy (also called the sharing or network economy) is a term that describes how technology is changing many human behaviors to make new forms of commerce possible and attractive. 

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"With this new technology," Botsman said, "we have the ability to match millions of haves with millions of wants. Technology creates the social glue of trust between strangers."

That idea of trust, along with the efficiency that comes with tapping underutilized assets - called "idling capacity" - is at the heart of the collaborative economy, according to Botsman. The new form of commerce priviliges the idea of access over ownership. For example, companies like Zipcar provide access to a car, eliminating the costs that come with car ownership. Another example is the ride sharing service Lyft. 

"The reason why Lyft works is because of this whole notion of trust without layers of licensing," Botsman said. 

Trust is measured by reputation, Botsman said - the sum of what a community thinks of you. In collaborative systems, trust runs both ways. For example, in Lyft, passengers rate drivers and drivers also rate passengers. 

"In the 20th century we trusted large brands and institutions. Now what's happening is, we're moving into this whole world driven by peer trust," Botsman said.

As an example, Botsman described her first encounter with probably the most famous example of the collaborative economy in the hospitality industry: Airbnb. 

"I met the Airbnb founders in September of 2007," Botsman said. "They told me the story of the company's founding - the founders had moved to San Francisco, they had just run out of money, and a big design conference had come into town and hotels were completely sold out. They decided to blow up mattresses, put them on the floor and see if anyone would book them - they sold out in 30 minutes."

"My husband said, 'That's the worst idea in the world!'" said Botsman. "But what he was really talking about is, 'I don't trust people.' More, he was judging the idea by what it was then - not what it would become."

Botsman noted that many of the objections to Airbnb spring up around "friction  points" - common problems like "how will they hand over the keys? Who's going to make sure there's food for the guests?" But, she noted, startups often tend to encourage ecosystems of related businesses to spring up to smooth over those friction points. 

As for large organizations, Botsman described the main approaches to a disruptive startup - being an ostrich, fighting and being a pioneer. 

"Being an ostrich means saying - please don't let this happen on my watch," Botsman said. "This change is still five to 10 years off."

For fighting, Botsman cited the recent example of a series of protests by taxi drivers in Europe against the black car startup Uber. During the protests, signups for the Uber app increased by 850 percent within 24 hours. 

"Once the public decides that there is a new way, and that that new way is better, you can't reverse the story," Botsman said. "That's why the fighting mentality is difficult - the industry innovates around you."

As for pioneers, Botsman said that even large, established brands can react to disruptions in their industry in three positive ways: investing in the disruptors, forming smart partnerships and investing in innovation of their own. 

"In terms of innovation, I really mean true business model innovation, when you think about your products and services completely differently," said Botsman. "It's about judging ideas not for what they are today, but for what they could become."

Follow @HotelMgmtNet on Twitter for our live-tweet of HITEC's closing keynote, "Top 10 Things You Should Be Doing to Secure Your Company" by Eric O'Neill, a former FBI operative and subject of the film "The Breach," at 3:00 p.m. PDT / 6:00 p.m. EDT.