BUSM4448 Business Research Design - Assignment Solution

Introduction

Today travel and tourism industry in rapidly growing and accounts for 9.5% of GDP globally (Global Newswire 2019). The consistent increase in travel and tourism industry is considered to be a key driver of economic growth at local, regional and global level. The travel has increased across all segments, which include corporate, leisure and group travel (Global Newswire 2019). The development of travel and tourism industry has played an important role in development of hotel industry. Food and accommodation for people travelling is essential and hence tourism and hotel industry are dependent on each other (Walker, 2016). Hotels can be categorized based on budget of the people into economy, luxury and elite types of hotel. With the rapid development of technology, which led to increase in e-commerce companies also impacted the hotel industry posing different challenges (Walker & Walker 2015). 

Airbnb is one of world’s largest accommodation platform and is an online marketplace that enables hosts to list their rental properties (Airbnb 2019). Airbnb was founded in 2008 and provided the customers healthy travel, which is local, diverse, authentic, inclusive and sustainable. The accommodation marketplace of the company provides access to more than 6 million unique places in nearly 100,000 cities and 191 countries (Airbnb 2019). Airbnb follows a people-to-people platform that benefits all the stakeholders, which includes hosts, guests, employees and communities that it operates in (Gallagher 2018). Airbnb’s increased growth is having a significant negative impact on certain performance metrics within hotel industry as per the researchers and the metrics are hotel room revenues, average daily rates and occupancy rates (Nordqvist, 2019). The increased competition from the company is affecting hotel prices and revenues and the occupancy rates are also slowing down (Heller, 2019). Airbnb is making its brand more mainstream by introducing new categories for high-end customers. The categories include vacation home, unique space, B& B and boutique. It is increasing the accommodation options for a broader demographics (Nordqvist, 2019). Through this it is aiming to directly compete with mainstream hotels. Thus, there is an increasing threat to mainstream hotels, and it can face increasing competition. The popularity of Airbnb is increasing both with leisure and business travelers and hence the mainstream hotels will have to implement strategies that can differentiate them from Airbnb. The introduction of boutique hotels and acquisition of last-minute booking site Hotel Tonight has led the company to enter the mainstream hotel market even deeper. According to latest data from Second Measure, US consumers spent more money on Airbnb as compared to Hilton and its subsidiary  in 2018 (Molla 2019). There is a need to analyze the impact of changing trends in hotel industry for the mainstream hotels to achieve sustained growth, which is being challenged by Airbnb’s accommodation services. The purpose of this research plan is to analyze the level of impact of Airbnb on the mainstream hotels and how the hotels can sustain in consistently increasing competition. The research plan will help in understanding the influence of Airbnb on aspects of the mainstream hotels and determine the changes that are required to be made by the mainstream hotels to achieve sustainability. 

Research Problem 

Airbnb is revolutionizing lodging market by reducing the hotel rates considerably and making additional rooms available in the best travel spots across the world during peak periods (Nordqvist, 2019). It provides best options to leisure and business travelers at the best price when hotel rooms often sell out in peak time and the rates are significantly high (Gallagher 2018). It provides a good alterative at much better price. The mainstream hotels and others face increased loss due to this as they traditionally earn their biggest margins during peak periods when rooms are scarce as it forces customers to pay higher rates (Geredeman 2018). This benefits the travelers but reduces the pricing power of hotels, which is leading to intensified competition. But the problem is not just about competition and reduction in profitability. The hotels are forced to increase capacity and bring down the prices to keep attracting the visitors (Molla 2019). The mainstream hotels have to be flexible to accommodate more at a lesser price, which they cannot afford due their fixed investment. The problem is that Airbnb can impact the business of  mainstream hotels to a great extent by providing different experience packages at a better price than the mainstream hotels. This can put increased pressure on mainstream hotels and force them to reduce their pricing to attract customers and can also affect their revenues and profitability significantly. This can lead to increased sustainability challenges.