THE rapid growth of services like Uber and Airbnb over the last decade make it clear that the “sharing economy” is not a passing trend. These businesses are causing some concern for traditional travel suppliers, with the potential to impact both volume and pricing in the long-term.
What is less clear, however, is the level at which corporate travel managers should integrate these suppliers into their travel programs. While using sharing economy suppliers presents an opportunity for transaction-specific savings, there are also several challenges and concerns associated with using these suppliers that must be considered.
Low usage of sharing economy suppliers
The use of sharing economy suppliers still represents a relatively small portion of most corporate travel programs. A 2015 survey by the Global Business Travel Association (GBTA) indicates 24% of companies do not allow their travelers to use ride-sharing suppliers. The study also indicates ride-sharing options as the least used by business travelers with only 11% using these services, while the majority opt for traditional transport options like renting cars or hailing taxis.
While travel managers in Asia are beginning to explore the viability of working with sharing economy suppliers – largely at the request of their travelers – they are cautious and calculated in their approach, given the concerns around traveler safety.
In Asia, the use of these suppliers varies widely based on the market. While the sharing economy is not a common phenomenon in markets like India and Vietnam, markets such as Australia and Japan have been much more receptive. Differences in the demand and supply in a market are a key factor in determining whether sharing economy suppliers are an attractive option. A place such as Tokyo, for example, which has some of the highest hotel occupancy, is a very interesting place to consider sharing economy accommodation providers.
The relatively low integration of sharing economy suppliers into managed travel programs thus far leaves a number of questions around the actual savings that can be achieved, and how best to work with these suppliers, still to be answered.
Serious savings or the price of service?
CWT Solutions Group recently analyzed the use of Airbnb vs. traditional accommodation such as hotels and serviced apartments, by looking at 68,200 stays made by various companies that have included Airbnb in their travel programs.
Findings from the study indicate that while tracked sharing economy usage is still marginal at only 2.5% of total accommodation bookings, the average paid rates were 37% lowerthan traditional lodging. In Singapore, the average daily guest rate for Airbnb was 27% lower than traditional lodging.
The study also identified a clear pattern in the length of stay; Airbnb stays are twice as longas traditional hotels, with 7 nights’ stay on average. Travelers to Singapore stayed in Airbnb accommodations for 17 more days, on average, compared to hotel stays. On the other hand, in destinations such as Tokyo or Shanghai, travelers actually booked Airbnb accommodations in lieu of traditional hotels, even for shorter stays.
Yet, before rushing to savings, buyers and travelers must also understand the price difference may be the price of service.
Any traveler requiring a sense of service or other assurances licensed providers offer such as video cameras, fire detection systems, deadbolt locks, safes and more, may not be a good match for Airbnb. In addition, if a larger living space with a full kitchen and multiple sleeping rooms is needed, seasoned travelers well know that many traditional suppliers already offer these amenities via extended stay brands and without compromising safety and security requirements.
Proceed with caution
While the cost savings are tempting, price is only one of many criteria used to judge whether a supplier belongs in a corporate travel program, and given a variety of concerns, it is understandable that very few companies or travel managers have endorsed or prohibited sharing economy solutions broadly in their travel policy.
For businesses, the first step for any corporate travel program is to determine their position on sharing economy usage and educate travelers accordingly. Left ambiguous, traveler leakage and compliance issues will inevitably arise from their lack of understanding around benefits and/or risks.
As Asia varies tremendously from one country to the other, the challenge of the Asia travel manager is to form a consistent travel policy around shared economy suppliers. Besides safety and security concerns, there are also concerns around the validity or legality of such suppliers in each market. Opportunities to work with these suppliers definitely exist in pockets, but it could be a serious challenge to develop a consistent shared economy policy across all markets in Asia.
At the same time, sharing economy suppliers like Airbnb and Uber must provide greater transparency to address corporate travel concerns. Today, neither Airbnb nor Uber load rates via global distribution systems (GDSs) or any platform that allows a third-party to book. Although Airbnb has recently launched a business travel platform to boost efforts to meet some of the needs expressed by travel managers, some of the most critical “must-haves” remain unavailable to corporate buyers, such as consistency of the service and products, assurances around safety, traveler tracking, and integrated distribution and booking channels.
In the long term, these suppliers will have to create key additional business travel features to become widely accepted in travel managers’ tools and processes. As long as they don’t, they will likely remain on the cusp of acceptance in travel policies and not be overly encouraged by travel managers concerned with more than bottom-line pricing.
When to move ahead?
There is no single, definitive way to determine whether a sharing economy supplier is a good fit for your program. Indeed, it is often a matter of combining unique program and supplier data with corporate culture and industry know-how to find the right solution for a specific program.
Hence, we have proposed a 5-stage process (below) to help buyers identify both the specific pains and gains of using sharing economy suppliers and make informed decisions.
Ultimately, it is up to the company to evaluate if the opportunities afforded by using a sharing economy supplier solve one or several business issues?
Conversely, if companies rule out sharing economy suppliers, it is important for the company, in terms of compliance and employee understanding, to communicate this to its employees with its rationale.
By Akshay Kapoor
Akshay Kapoor is the Asia Pacific Head of CWT Solutions Group, Carlson Wagonlit Travel’s global consulting arm specialized in travel program optimization. CWT Solutions Group helps corporate travel and procurement professionals worldwide find opportunities for savings and deliver more value in air, hotel and ground transportation sourcing, travel policy and compliance, and more.