Discuss about the Collaborative Economy Business Model.
The collaborative economy business model is now considered being a known occurrence in respect of customers as well as businesses throughout the globe due to the technological development. The strength of individuals participating in the collaborative economy has increased immensely and businesses like Airbnb as well as Zipcar functioning amid its impact are in equal competition with large chain of hotels as well as car rental services. There will occur the existence of the collaborative economy only when individuals will be having the willingness for sharing. However, in respect of sharing there is the need for both the parties in being reliable. Therefore, it is necessary that the users as well as the owners of the business do the leveraging of reviews for providing assistance in building reliance all through the process. Also, due to the development in the technological aspect, there is occurring a bright future in respect of the collaborative economy. For getting success in the collaborative economy, the companies are required building the trust among the users and do the conveying of authenticity as well as transparency. In this respect, there is the requirement for having awareness regarding the four significant values that are associated with the social aspects, economic aspects, practical aspects as well as sustainable aspects, and integrating them as a significant part of the collaborative economy experience.
In respect of Airbnb, it can be stated that the company does the selling of products that are considered being uncommoditized. Individuals are caring a lot on respect of where they would stay and therefore, variety is considered being significant. The key is the process of listing. Airbnb is having at present, more than a million listings. In addition with the economic advantages, collaborative economy will be contributing as well to new experiences, new associations and, most importantly, the capability of getting the service or product at a convenient time as well as location.
Collaborative economy is also considered as the sharing economy that will be allowing individuals in sharing assets, services as well as time with other individuals and getting incentives, in monetary or in kind. Nevertheless, collaborative economy is having its own advantages as well as disadvantages. Collaborative economy has brought with itself various opportunities related to outsourcing. There occurred benefit for businesses through the supply of part-time workers that are having the availability at reduced expenses. They will be hiring freelance workers and will be continuing to do their employment when they prefer. Uber as well as Task Rabbit are considered being the examples of such organizations (Lu 2016). This aspect states that the collaborative economy is considered being effective in respect of businesses and professionals.
Amongst the other advantages of the collaborative economy, lower cost is considered being an advantage along with affordable price and regarded as one of the major criteria associated with the selection of collaborative economy. For instance, to rent a luxury apartment on Airbnb can be compared to the price regarding a hostel and a ride utilizing BlaBlaCar will not be costing more than a train ride. Along with the economic advantages, collaborative economy will be contributing as well to new experiences, new associations and, most significantly, the capability of getting the service or product at a convenient time as well as location (Zhou 2015). For instance, there occurred the launching of the Airbnb service naturally when decision was made by the homeowners for renting it out to the conference visitors when there wasn’t the availability of any hotel rooms.
Irrespective of the various advantages, collaborative economy is also having certain disadvantages as well. One of the major concerns is associated with the aspect of lacking adequate attention relating to security concerns. For instance, Airbnb can also do the raising of issues relating to customer safety as well as annoyance in respect of the hosts’ neighbours. Hotels are having regular inspection for ensuring that they there are no fire traps and they are not posing any threat respect of the visitors. But, the hosts of Airbnb are not facing any such scrutiny. Also, in respect of Uber it can be stated that the company is presently having disagreements with the regulators over whether its cars are meeting the safety as well as insurance needs imposed on normal taxis (Norman 2017). One more disadvantage of the collaborative economy is that it will be leading towards the degradation of wages.
The hospitality industry is being challenged by the collaborative economy model. With the coordination of transactions through the internet and taking place amongst private individuals, key brands within the hospitality industry is facing the economic influence of the online resource sharing platforms. It has been estimated that the hotels are losing approximately $450 million in direct revenues every year to Airbnb. According to a report, between September 2014 and August 2015, there occurred the reservation of 480,000 hotel room nights while there occurred the booking of more than 2.8 million room nights on Airbnb. By 2018, it is being estimated that Airbnb room nights will be reaching 5 million every year (Kitchin 2016). Therefore, it is clear that Airbnb (vacation rental site) has reduced the demand in respect of traditional hotel rooms (Dino 2015). In addition, many hotel staffs are facing job losses due to these plummeting demands. Also, the vacation rental site is less labour intensive in comparison to hotels since they are not requiring similar level of service. There have occurred almost 2,800 direct job losses to Airbnb and a loss of around $200 million in income in respect of the staffs of hotels. Because of the reduced demand of the hotel rooms will be occurring an additional adverse impact in respect of the hotels as well as their staffs. When guests will be selecting not to stay in a hotel then the money that would have been spent on foods and beverages at the bars and restaurant of the hotel will be spent somewhere else (Gundry 2014). As a result, the hotels are losing out on the profit they would have otherwise received from the visitors and to be precise, around $108 million of food and beverage revenue is getting lost since travellers are making the choice of booking with Airbnb.
The incumbent business model in the hospitality industry has started evolving in due course of time, because of the impact of the technological, social as well as economic factors. The social factor, the changing aspect regarding the customer behaviour was having the highest influence in relation to evolution of the business models towards the innovative model of business. The new technological developments has turned out to be a way to ensure success as it is offering the scope to expand the channels of distribution, reducing the reservation processing time as well as creating the organizational network that is having the involvement towards the maintenance of the value chain (Ahlin 2014). For meeting the higher power of negotiation regarding the buyers as well as competition, hospitality companies are required making continuous innovation for maintaining their market position. Moreover, there is occurring continuous change relating to the needs of the customers, and there occurs the triggering of this change through new technological aspects.
The framework of Porter will also be referring to the power of suppliers as well as buyers. The suppliers of Airbnb will be having limited power, or else their rooms will be remaining vacant. The buyers of Airbnb are similarly having limitation due to the dearth of competition in the space. They could possibly do the identification of the space they would like renting on the website of Airbnb and then contacting the seller in a direct way, evading the Airbnb premium, but to do the seller will be bypassing the insurance clause of Airbnb as well as the payment collection process. The last part of the Porter’s framework is concerned with the threat that the substitutes are posing. There is another service similar to Airbnb that did the actualization of remarkable opportunity but has not been able to achieve Airbnb-type profits. Couchsurfing.org will be facilitating free stays on “couches” in respect of members regarding their network, but the business model and experience is very much different from Airbnb (Dawson 2014).
An existing collaborative economy firm within the hospitality industry is Airbnb. Within a span of only seven years, Airbnb did the disruption of the 1300-year-old hotel industry through the creation of a “collaborative travel revolution” where everyone will be capturing superior value. Airbnb started its operation in 2008 and did the creation of an online marketplace that connects travellers to the potential hosts. At present, Airbnb is having more than 1,50,000 host listings offered in more than 30,000 cities and more than 190 countries. It all begins with the basic supposition that home owners are having vacant rooms that might not be getting used. Airbnb is allowing these home owners in making some additional cash by posting these rooms on listings, together with photographs as well as details, making connection with potential guests and renting them out (Florida 2014). Airbnb is considered being a marketplace that is facilitating the exchange between the home owners as well as travellers and providing an online method of reservation that is facilitating transactions in an honest as well as dependable way.
Having a flexible platform, transparency, trust as well as dependability, Airbnb did the management of relying upon listings as well as contents that are generated by the users. It’s function is facilitating as well as assisting the value creation of other individuals and through that the value is getting multiplied in an exponential manner. In respect of that, Airbnb is charging a 3% host service fee in respect of every booking as well as 6 to 12% of the cost of reservation in respect of the guest.
Unlike linear businesses within the hotel industry, Airbnb will be scaling at an incredibly fast rate at little to no marginal expense. By making their customers partners, Airbnb did the creation of a platform for the creation of value for every individual as well as sharing that value through the orchestration of the network as well as facilitation of the connections. With a solid platform, a better reputation as well as a developing community, Airbnb will be finding itself to be in a strong position for the sustenance of its competitive advantage. Through innovation as well as proven consistency, Airbnb will be continuing with the creation of value.
The ways by which the collaborative business model in respect of Airbnb will be maintaining a competitive advantage is mentioned as under,
The collaborative economy is having a steadfast growth. Websites such as EBay, TripAdvisor that are relying on peer to peer communications are established, everyday services. An increasing number of sectors are having a peer to peer component, from accommodation and travel to lending as well as retail. In general, this has been a positive growth. There is occurring the circumvention of the old structures of power as individuals are providing things in respect of one another. Increasing number of individuals is having the ability of making an income from their interests, their vacant rooms as well as with the spare time they have. But from a different perspective, it can be stated that the broad shift in the cultural aspect is creating winners as well as losers (Ludvig 2016). At times, mistakes are taking place. In certain places, the authorities are acting fast for getting acquainted with the business models that are blurring the boundaries amongst the individual as well as commercial interests in certain new as well as confusing manners (Dentchev 2016). For instance, when a website such as ‘Zopa’ will be set up and peer-to-peer lending becomes a possibility, it will be undermining the voracious banking industry and will be feeling like financial power getting redistributed.
When collaborative economy substitutes will be undermining the traditional small businesses, it must be dealt with utmost concern. For instance, let us consider the situation of a family-run bed & breakfast that will be seeing its number of visitors getting reduced due to the coming up of new Airbnb rooms in close proximity. In another scenario, it might occur that all of a sudden, individuals start facing eviction from their rented apartments due to the fact that owner had felt he could be making more money doing temporary lets (Pacione 2014).
In another scenario, taxis in San Francisco might be taken into consideration. In 2012, there was the launching of the ride-sharing app Uber and in the next two years there has been the dropping of the number of cab journeys by 65%. This might be regarded as a matter of ease in respect of the users but on the other hand, this has been proved to be a overwhelming income loss in respect of taxi-drivers (Dawson 2014).
This challenging situation is occurring in Britain in recent times in respect of courier services. Certain courier services that are considered being the cheapest are keeping their costs low through the hiring of freelance drivers or ‘lifestyle couriers’. These drivers are being paid as less as 35p per delivery in certain cases, making it a very underpaid work in respect of those that are depending upon the income (Pillay 2014).
There also occur concerns relating to taxation as individuals who are running little businesses on the side are not making declaration about it. There is also occurring the aspect of overlooking the rules regarding health and safety that will be getting applied to traditional businesses. Finally, it needs to be understood that there is nothing completely positive regarding peer-to-peer models of business (Cropley 2014). It cannot be assumed that these business models are always better, that there always occurs sustainability of the ‘eco-products, or that the digital products are having a reduced carbon footprint in comparison to the physical ones.
Conclusion
To conclude the assignment it can be stated that the advantages as well as disadvantages regarding the collaborative economy have been explained briefly. Then, there has been the selection of the hotel industry that is being challenged by a collaborative economy model. An explanation has been provided regarding the hotel industry’s incumbent model and ways to create as well as capture value. A selection has been made in respect of one existing collaborative economy firm such as Airbnb within the hotel industry. There has also been the requirement for analysing in what ways the collaborative economic business model will be able to do the creation as well as capturing of superior value. Moreover, the competitive advantage regarding the collaborative economic business model has been discussed as well. Also, there has been the identification of certain unintended outcomes of the success regarding the collaborative economy model.
References
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