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Railroads Business or Transportation Business - The AirBnB Story
I’m a fan of Business Insider. BI is a great app to get a different perspective on the news, particularly financial news.
For instance, in a recent story, BI reported that the home-sharing site Airbnb is eating away at hotel chains' market share. The interesting part is that the cannibalization isn’t limited to the marginal hotel customers. Rather, Airbnb is even stealing their core customers by converting loyalty program members to Airbnb users.
This is yet another sign of Airbnb's success in garnering share the travel space, as it rolls out additional offerings that keep users engaged with the platform beyond one-off bookings.
In fact, Airbnb is stealing hotel chains' most valuable customers! Consider the following:
· Loyalty program members are more likely than nonmembers to try Airbnb — 36% of travelers enrolled in a hotel chain loyalty program have used Airbnb, compared with 15% of travelers not in a loyalty program.
· This extends across frequency of travel, as well — 51% of hotel loyalty guests who travel more than 11 times per year have tried Airbnb. This is compared with just 27% of nonmembers who travel the same amount in a year.
The statistics speak for themselves, but I confess they also apply to me – although I never realized it until I read the article. I am a member of both groups mentioned above – an active loyalty program participant in several hotel chains’ plans, as well as a high-frequency user. And yet, Airbnb has become a major “go-to” site for me. I check it out first before I go to the hotel sites in most cases, and currently stay in Airbnb locations at least as often as at hotels (for leisure purposes). There are many reasons for this, and economics are only one of these reasons. In fact, Airbnb can be more expensive than a hotel room when you use points… But who can beat the space, the kitchen, the personal touch, and in some instances, the location that Airbnb offers? For us it’s a fantastic solution, especially in places that are familiar to us where we rarely use hotel services such as concierges or other amenities.
The hotel industry was caught by surprise by this development. Vacation rental homes have always been available, but Airbnb, through its thoughtful systems and processes, boosted availability hugely. Airbnb clearly dominates other competing vacation rental sites, and its impact on the entire hospitality industry is undeniable.
In addition, the company's new air travel booking project Flights, coupled with an upcoming capital injection, will likely enable Airbnb to expand its offerings around the globe to onboard even more travelers. As Airbnb continually folds in new travel offerings, it could compete more directly with OTAs for bookings, increasing its hold on the travel industry and extending its reach beyond room and board. It might not be successful, but the potential is there. Think Amazon, which started as a book-seller…
Competitors will have to find new ways to stave off Airbnb's threat. The home-sharing site has already become a powerhouse in the online travel space, with its cemented domination of hotels, bed and breakfasts, and other vacation rentals.
As you consider Uber, the story is similar. Both providers tackled heads-on the major issues that inhibited others from succeeding in their space.
· Vetting the service provider (the driver or renter)
· Providing a payment mechanism to avoid security problems for both user and provider
· Creating a marketplace to match buyers and sellers
· Providing immediate user feedback and highlighting “best” drivers or renters to give customers additional comfort
· Building a set of safety mechanisms to significantly reduce the uncertainly of both parties to the transaction
These safeguards build trust not in the individual provider but in the brand itself. Positive experiences reinforce that trust and build brand loyalty, which has grown tremendously over a very short period of time.
Here are some of the key takeaways from the BI article:
· Within digital, consumers are spreading out their retail purchasing across channels, forcing retailers to spread out their online marketing budgets. Paid search, affiliate marketing, and email all increased their share of e-commerce referrals last year, according to Custora.
· Paid search especially stood out as a major source of spending by retailers. Search ad spending grew 18% YoY in Q4 2015, according to IgnitionOne.
· Mobile (AB: my highlight) continues to drive the most sales growth for retailers, but sales still aren't keeping up with retail traffic. IBM found that smartphone traffic beat both tablet and desktop, making up 53% of all online traffic. But mobile still only accounted for 29% of all online sales.
· Retailers only have themselves to blame for underperformance on mobile (my highlight), as many still aren't using best practices for mobile websites and apps. Only 60% of the top 100 global retailers currently have a dedicated mobile website, according to The Search Agency.
· The increase in online shopping has put stress on the shipping and logistics industry. The number of UPS ground packages delivered on time during the holidays fell from 97% in 2014 to 91% in 2015, according to ShipMatrix.
· Retailers are beginning to explore alternative shipping options. Earlier this year Gilt Group switched its primary ground shipper from UPS to Newgistics. (AB: Think Amazon, which vertically integrated the shipping and warehousing aspects of the process to take control over delivery reliability)
· Retailers that can't afford to invest in alternative shipping options are offering consumers more fulfillment options using what many of them do have — brick-and-mortar stores. Buying online and picking up in-store, also called click and collect, made up about 30% of e-commerce sales at Sam's Club in 2015.
As I reflect upon these developments and their impact on their respective industries, I feel our industry is caught between a rock and a hard place. The statistic that only 60% of the top 100 major global retailers have a dedicated website says it all. Successful retailers, bankers included, relied on physical distribution as the cornerstone of their distribution strategy from time immemorial. Technological developments have challenged this value proposition by giving users ubiquitous availability coupled with reliability and trust (e.g. no-questions-asked return policy of Amazon and other major online retailers; the security aspects of Airbnb and Uber). Many of us prefer that channel to consume products and services, and that number continues to grow.
Banks are aware of the quandary but aren’t quite sure how to handle it. On the one hand, they don’t want to cut off their branch-bound customers, especially as evidence mounts that even remote channel users use the branch and find its presence key to success. At the same time, continuous investment in ALL channels is not feasible.
I think the solution lies in the value proposition that underlines the brand. Ask yourself: what does my bank represent to my customers? Why do they bank with me and not with the bank across the street? The answer should guide your investment in channel accessibility and innovation.
Not all markets are the same, and not all banks even within the same market are the same. While none of us can ignore disruptors and technological innovation, our adoption of these changes should vary by who we are and who our customers are.
This year will bring with it more disruption and innovation. Much like the old days when banks started their foray into online banking, many initial providers will disappear, with negative customer impact. The question is, will waiting for the perfect solution impact your customers even more? In my view, the answer is definitely yes, so it will be key to begin utilizing the channels best suited to your brand as soon as possible. Airbnb and Uber have taught us that time waits for no business!
New in the Nest:
This column will offer fool proof recipes, restaurant suggestions and other foodie tidbits for your consideration and consumption.
You can find more tasty recipes in the Recipe Archive