LATTE chats with Rachel Botsman, entrepreneur and author of ‘What’s Mine Is Yours’, about the effects of the collaborative economy on the travel industry and what it means for the future of the travel trade.
1. For those who are unfamiliar with the term, can you explain what the collaborative economy is?
The collaborative economy is an economic system that unlocks the value of underused assets through platforms that match ‘haves’ with ‘wants’ in ways that enable greater efficiency and access. The asset could be a spare room, it could be a seat in the car or it could be a skill people have. Most people are familiar with the likes of Uber and Airbnb but there are examples of the collaborative economy across many different areas of our lives.
An important part of the collaborative economy is how technology creates both the efficiency and trust to match providers and customers directly.
2. In what ways do you think the travel industry has been disrupted or transformed by the collaborative economy?
Travel marketplaces from Couchsurfing to Airbnb to onefinestay to Love Home Swap have provided people with a different way to travel both in terms of the physical space but also the experience. Given that Airbnb now has approximately 60 million total guests staying in rooms booked via the platform and is estimated to be the most valuable hospitality brand in the world right now valued at $25.5 billion, it is clear that this type of travel is tapping into unmet needs and latent demand.
It opens up travel options for people – from treehouses to igloos to islands – we now have a marketplace for all kinds of spaces and experiences that never had a market before.
Travel platforms do not just service the lower end of the market but also the business segment with a myriad of support services popping up, from key exchanges to room cleaners and butlers. Soon you will be able to get the service of hotel, in someone’s home. As someone who travels a lot, sometimes I want to be in a hotel but many times I just dread walking into the same old room and feeling like a total stranger in yet another city. I’d like a different environment and have a more personalised guest experience.
I think it is also interesting in how it changes the way we think about travel brands – what are travellers trusting?
Finally, I think it will make many hospitality players significantly improve their mobile experience because players such as Airbnb are so far ahead of the field. It was born in the age of the mobile so it’s embedded into the entire experience versus with hotels who for the most part are still just at search and booking.
3. Any predictions for how this will evolve in the future?
Rooms are just at the tip of the iceberg for assets that can be unlocked through technology. We can now share our boats, planes, local knowledge, cars, dinner tables, office spaces in ways that will collectively come together to create a new ecosystem of how we think and experience travel.
4. What do you think this will mean for companies that trade within this arena in more traditional ways?
I don’t think it will be called the ‘collaborative economy’ or will even need a label because these businesses will become the norm.
People will not regard these behaviours as quirky or cheap ‘alternatives’ that they can access through cool apps, but just a better way to bank, travel or consume. They will traverse sectors without even thinking whether they are part of the collaborative economy or not.
5. In what way can established businesses in the travel trade industry profit from the sharing economy and what changes do they need to make to keep up with this socioeconomic shift? Are they embracing this shift or rejecting it?
A few years ago, leaders in many industries including travel considered collaborative economy businesses as mere trends. Some thought they were just a reaction to the recession; people wanting cheap places to stay. The sentiment has definitely changed. There is now a widespread realisation (and fear) that not only are these companies here to stay but that they are tapping into new behaviours they need to embrace.
Some business leaders had the foresight to partner with collaborative start-ups. Examples are: Marriott and LiquidSpace; Wyndham and Love Home Swap; Accor acquiring onefinestay; W and Deskspace. It’s still early days.
A common mistake I see incumbents making is trying to co-opt the technology without understanding the bigger behavioural changes that have happened. They think a better booking system on the website or mobile app is all that is needed to compete with these start-ups. Or say, offering personalised Netflix and Spotify streaming in rooms. The number of leading hotel brands who are trying to reinvent their version of ‘boutique’ such as Aloft by Starwood or MGallery by Sofitel by Accor is telling.
It’s a definitely a move in the right direction but the shift is deeper. Customers want to access something without owning it, they want to have choices, they want on-demand control, they care more about the experience and less about the brand, and they are more open to peer trust versus traditional brand trust.
Imagine when you have a generation that the norm is not owning a house or ‘travelling’ but a combination of the two. This is happening. Roam and WeLive are examples of how people will pay a subscription to live in say Sydney for three months, New York for three, London for one and who knows the rest of the year. I think the travel industry is in reactive mode but they need to think bigger picture and longer term around behavioural changes.
6. In the conversation about the collaborative economy there are names that are recurring, such as Uber, Airbnb and TaskRabbit. Have you encountered any exciting start-ups in the travel sector recently?
Yes! Guests staying at The Cosmopolitan of Las Vegas can rent a high-end evening dress and a matching purse from Rent the Runway, a high-end clothing rental service.
Sailing enthusiasts can rent a boat from Boatbound without worrying about the cost of owning and maintaining a boat.
People looking to rent luxury apartments in nice neighbourhoods can do so with onefinestay.
I am a fan of Love Home Swap.
I also think the ecosystem of supporting services are interesting such as DogVacay that solve other problems such as where to leave your pet when you travel.
No company has really cracked the local travel guide market. The likes of Vayable and Trip4real have tried but I think this is a big and up-and-coming space.
7. If collaborative consumption is gaining breadth in the economic spectrum, what does this mean for the future of luxury?
Luxury is a massive growing category for collaborative platforms. The one per cent can participate in the collaborative economy; they can access different kinds of professional talent (like lawyers on UpCounsel and consultants from HourlyNerd) and can gain access to different kinds of luxury assets such as villas, watches, boats, evening bags, cocktail dresses and planes.
I think there’s a misperception that these ideas are thrifty or cheap. For many people they provide more choice. Handmade hospitality for the one per cent is a growing segment for the future of travel. If I can book Francis Ford Coppola’s home in Italy or Richard Branson’s Necker Island on Luxury Retreats that’s a unique, personalised experience that I may not have had access to. It’s definitely a different price point and higher touch curated service but the principles are exactly the same.
8. Virtual behaviour, reputation and identity for a person and/or business are key to the idea of collaborative consumption. What do you think this means for businesses in the future? Do we overstress or undervalue the importance of digital presence and reach?
Yes, trust is the social glue that makes the collaborative economy work. But trust is intangible; it needs a measure, namely ‘reputation capital’. Our reputation will be our currency in the 21st century and it will transform how we gain access to different opportunities in our lives.
I think we undervalue our reputation because there is a misconception that it is only contained in our Facebook, Twitter or LinkedIn accounts. Our interactions on social networks are just our digital footprint, but reputation is the sum value of our online and offline behaviours across communities and marketplaces. For example, the information of how I behave in the offline world, say, in an Uber car or in an Airbnb accommodation, is now available online for other people to see through my Uber rating and my Airbnb reviews. My ratings and reviews will not just affect my ability to rent a room or book a ride in the future but many other things such as my bank loans, insurance policies and even job applications. Yes, there are many exciting upsides to this idea, but there are also big downsides that we will have to navigate such as fake ratings and constantly being rated. We all have bad days!
The future will stretch, pull and transform how people perceive ‘trust’. The idea of trusting ‘peers’ over a traditional ‘institution’ or brand is becoming increasingly normal and this will create shifts around the way we engage and interact with the ‘wider’ world in ways we can’t yet even imagine.
9. How have the effects of the collaborative economy enhanced your own travel experiences?
This year, I spent about two months teaching a term at Oxford. I did a house swap through Love Home Swap with a professor who was coming to Australia; he stayed in my home in Coogee and I stayed in his house. It made all the difference to settle into a real home for two months because I have two young kids; they need the space. I also got to borrow the professor’s car and he got to borrow mine. We exchanged tips throughout the trip; I gave him tips for where to eat the best Thai food and he gave me ideas where to eat the best Indian food. I didn’t have to take a toy, book, plastic cup or high chair with me!
I was really satisfied with the experience because it made the family comfortable, and it was convenient and cost effective. The previous year, I got a lease for a house and a car from traditional providers, and the experience was not as pleasant. The bills were absurdly high and the house and the car felt like ‘rentals’— people who managed the assets did not care for them like an owner would.
Aside from the practical benefits, there was a social reward. We both genuinely felt like we were helping each other. It was very different from renting my home or being a guest on Airbnb. The personal relationship was deeper.
10. Finally, our LATTE signature question: What’s the best coffee you’ve ever had?
Mmm. It would have to in a tiny café in Florence in Italy. It was run by a quintessential Italian family. The nonna made the coffee and the biscotti. I think it was less the coffee and more the experience.