How to Lose Revenue and Alienate People

by Susan on May 7, 2014

ostrich

Have you heard the one about wrestling with the jewel case to listen to your new CD?

*Crickets*

Of course you haven’t – at least, not in almost 20 years – because no one buys CDs anymore.  According to Wikipedia, total revenues for CDs, vinyl, cassettes and digital downloads in the U.S. dropped from a high of $14.6 billion in 1999 to $9 billion in 2008.

When the music industry was faced with a new way of doing business, it reacted in a spectacularly absurd way: suing fans who downloaded songs, failing to adopt new technology, and working collectively to end music sharing online, most famously by shutting down peer-to-peer sharing site Napster in 2001.

Just to be clear: Record companies went after companies that were challenging the existing business model and won.  And yet, the industry still lost 38% of its revenue in less than a decade.

On April 29, the American Hotel & Lodging Association announced that they will fight Airbnb and other short-term rental companies.  According to Sean O’Neill’s Tnooz article breaking the story, AH&LA plans to “highlight the bad, unfair and in some cases unlawful business practices employed by short-term online rental companies.”

I’m scratching my head.

AH&LA says (as quoted in the same Tnooz piece) that they will go after Airbnb and “engage in select tax, safety, and health fights.”  I say that this is just another example of an established industry shoving its collective head in the sand when faced with a disruptor.  The big players in lodging may win some battles on the municipal tax front, but will hotels ultimately lose the war?

Let’s look back a few years at some other times the hotel industry has tried to pretend that change wasn’t happening.

  • The emergence of online travel agencies, starting with Expedia in 1996.  (I remember sitting in a hotel sales office in 1999 when the regional VP of sales told our team that this was just a fad.)
  • The disappearance of telephone revenue.  (Read this commentary by Michael Hraba for a detailed look at what happened)
  • The continued battle over free wifi.  (Here is HotelChatter’s most recent evisceration of hotels who still charge.)

If those examples don’t do the trick, just give some thought to other industries that have tried to stifle innovation and change.  When is the last time you watched a television commercial?  Has an encyclopedia salesman knocked on your door lately?

My advice to AH&LA and hotel companies that feel threatened by short-term rental companies like Airbnb?  Do the opposite of what the music industry did:

  • Stop encouraging cities to target individual Airbnb users. (Hello, New York!)
  • Build your own short-term rental revenue engine.
  • Create experiences and emotional connections that guests want.

In other words, hotel business, get your head out of the sand.

This article originally appeared as “Hotels: take your heads out of the sand and get over the Airbnb threat” on Tnooz.com.

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