Discuss about the Sharing Economy for Traditional Hotel Industry.
This report analyzes the impact of the sharing economy selecting AirBNB as the case company on the traditional hotel industry in the Thailand. Apart from this, it discusses the pros and cons of the government intervention in sharing economy.
Sharing economy is a socio-economic eco system or model that allows to individual to take borrow or rent assets from someone else. This system allow to individual to share their own human, physical and intellectual resources. The sharing economy system includes the sharing of production, distribution, trade and consumption of products and services by the other peoples and organizations. Further, sharing economy known as collaborative consumption in which people share their goods and services by the others (Stephany, 2015). Sharing economy is a trending business concept that highlights the organizational and individual ability for the some others to borrow or rent the goods without the purchasing. The sharing economy is thriving in the current business scenario as hospitality, travel and tourism, manufacturing, and infrastructure.
For analyzing the impact of sharing economy on hotel industry in Thailand, AirBNB has been selected. AirBNB provides online booking services for hotel rooms. AirBNB supported the growth of the hotels in Thailand. This increased the demand of the people because it makes it easy for people to book the hotel rooms without visiting the hotel site. Local and traditional hotels have the platform to connect the people across the word in sharing economy. Sharing economy provide free market situation where demand and supply decides the rate of the product or services. Sharing economy erodes the competition in market. Monetary and fiscal policy is used almost in every country (Sharing Economy) to regulate the market situation. Monetary policy is contracted to reduce the supply and expanded to increase the supply (Batlle, 2012). AirBNB saves the time of people and provides the platform where people can books hotel rooms. This increased the competition in the market. Sharing economy decreases the demand elasticity because whether it charges somehow high price but provide convenience to people. The price elasticity is inelastic in sharing economy. Sharing companies continue to grow unless the government intervenes with its regulatory policies. AirBNB has very large market share and created a hurdles for the local hotels providing room on rent.
The sharing economy affects the growth of the hospitality industry in the Thailand. The hotels of the Thailand are sharing their services with various firms that help the customers in finding the services and rent or borrow the services. The Airbnb was founded in ye ar 2008 as a social website. The sharing economy as Airbnb has some positive and negative impact on the success to hospitality industry. As Airbnb connect the people who have space to share with those people who search place to stay. The company charges the fee from both the party’s guest and hosts. The exponential growth of Airbnb is increasing the revenue of hospitality sector particularly middle to low price range hotels. The strict rules and regulation slow down the growth of the company. The company provides the rental facility to customers on the minimum and affordable price that build the trust of customers and increase the profitability and market share of hotels. The emergence of the Airbnb has threat to hotels as traveler selects the host’s independent on the Airbnb rather than traditional hotels (Akaraphanth, 2016). The Airbnb does not overlap with the tourist’s majority in the Thailand which has no impact on the Thailand hospitality industry. Along with this, it attracts the customers beside the company that increase brand image and market share of the branded hotels.
The emergence of sharing economy affect the growth of hotel industry because it works as platform where from guests can choose the rooms and hotels. The Airbnb helps the hotels in attracting and influencing the customers by providing low price and quality services. It can increase the market share and profitability of the hospitality sector companies. Airbnb helps the hotels in providing their services to customers effectively by the providing the rent rooms on affordable prices that increase market share and brand image of the hotels. On the other hand, Airbnb has some negative impact on the success of hospitality industry. It affects and slowdown the growth of the traditional hotels. Due to lack of online faculty in the traditional and local hotels Airbnb provides the customers only to advanced technology hotels. It also reduces the market competition that reduces the market share and profit of the local hotel service providers.
Government intervention is a very crucial topic and subject for debate as some time the government intervention create irritation among people but at the same time and the same intervention may be hurdle for the people or companies in the country. Government intervention is just authoritarian action of the government to regulate the situation occurred. The government intervention in sharing economy is very beneficial because today most of the industries and companies are linked to each other. If one company fall than other also has to suffer. If the government saves the company falling, then this action may be good for many people working in the company and other companies having most of their business from that company (Poynter, 2012). The government intervenes to maintain the economic condition and protect the interest of people. The government intervention causes the cost of the companies to be increased in terms of hiring cost, product cost and other costs.
The government intervenes in business policies of the hospitality industry impact on its business. Government provides remuneration policy, working condition policy, and health and safety policies, working hours and other that generate the more cost in the company. This increased cost in passed on customer in terms of product or service price that hurts consumers. The government use regulatory action to maintain the economic condition well but it cause sometime hurdle for others. The government increases the taxes, tariffs, and other charges to maintain the demand and supply in the economy at equal level (Poynter, 2012). However, the increased services taxes and other taxes on the companies indirectly transferred to customers.
Government intervention generates economical benefit for short term. The positive effect of government action is not for long time because economic system as very dynamic. The action adopted by the government has to be revised after sometime otherwise it might create adverse situation. Suppose, government has increased the interest rate then the flow of money will continue to decline that is why the interest rate has to be increased or decreased to maintain the healthy economic condition in the country. If the government increase the service tax it affects the business of the service sectors companies even in sharing economy such as hotels and tourism companies that regulates the demand and supply of the services. This curtail the consumer expanding that reduce the inflation but at the same time service companies experience increased cost. Suppose, if Thailand government increases service tax then it increase the Airbnb, Uber, and Hotels will be affected by this action.
The profitability of service companies will be reduced as demand of the customers for hotels room, flight tickets, and travel and tourism. The online taxi services affected the business of the local and roadside taxies. At the same time, online hotel booking services affects the business of the local and traditional hotels (Edelman and Geradin, 2015). Government intervention in developing geographical and economic infrastructure affects the business of the taxies or hotels because people will finish their work at the same day without visiting the hotels and using the taxi services. Government in sharing economy (Thailand) focuses on digitalization and technology development to provide easiness to people in shopping. Technological advancement creates tough competition before the traditional hotels. The Thailand also promotes online and internets service that makes the economy sharing economy but people has to pay for whatever they get. Price fixing for the product or services by government is for the wellbeing of customers. In sharing economy, price is just decided based on the demand and supply of product and services in market. Therefore, based on the above analysis, overall it can be said that government let the economic depend on the market. It should just intervene when the unfavorable economic condition occurs. Sharing economy reduces the level of competition. Therefore, government should intervene just to maintain the level of competition for quality and affordable product and services in economy.
Conclusion:
From the above analysis, it can be concluded that sharing economy has impact on the success of the Thailand hospitality industry. The sharing economy has both positive and negative impact on the industry as Airbnb provide the rental facility to the guests and linked the hosts and guests. Government intervention has both pros and cons. Therefore, Thailand government should intervention in the market whenever unfavorable economic situation occurs.
References:
Akaraphanth, L. (2016) Airbnb’s impact on the Thai hospitality sector. Available at: https://www.scbeic.com/en/detail/product/2960 (Accessed: 4 December 2016).
Batlle, C., Pérez-Arriaga, I. J., & Zambrano-Barragán, P. (2012). Regulatory design for RES-E support mechanisms: Learning curves, market structure, and burden-sharing. Energy Policy, 41, 212-220.
Edelman, B. G., & Geradin, D. (2015). Efficiencies and regulatory shortcuts: How should we regulate companies like Airbnb and Uber?. Harvard Business School NOM Unit Working Paper, (16-026).
Poynter, T. A. (2012). Multinational enterprises and government intervention(Vol. 32). London: Routledge.
Stephany, A. (2015) The Business of Sharing: Making it in the New Sharing Economy. USA: Springer.
Virajoti, M. (2016) Will the sharing economy have much impact on Thai business? Available at: https://www.nationmultimedia.com/news/business/EconomyAndTourism/30254629 (Accessed: 4 December 2016).
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