Hilton's Major Problems - Essay Example

Introduction

Despite being a high value and large chain hotel, Hilton faces extreme competition from Airbnb. When it comes to the question of business models on Airbnb, large hotel chains, and bed and breakfast operators, a diversity of responses can be observed. Due to the differences in the nature of operations and the approaches used by these players to avail their products and services to the market, it is established that their business models consequently differ. For instance, Airbnb's business model features a multifaceted marketplace where the hosts, the individuals linked with ensuring optimum consumer experience, and the travelers meet to complete business transactions. It is not wrong to infer that Airbnb has increasingly disrupted the hospitality and tourism industry's landscape, especially the hotel business. The kind of service and standards associated with an Airbnb has stood linked to significant waves in the housing sector.

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Experiences and Accommodation

The most important part of the Airbnb business model is the fee that travelers pay in terms of experiences and accommodation, directly linked to how the company makes money. Compared to the business model of a typical high-value chain hotel such as Hilton, the shifts in the hotel industry caused by Airbnb become more apparent. It is essential to consider that for a hotel chain as large as Hilton, the business model relates can be perceived as a franchise model. In this model, there is a multitude of ways through which Hilton makes money with regards to its business model. In addition to franchising, the Hilton brand manages many hotels as opposed to pursuing full ownership of these hotels. As a result, Hilton features two very diverse streams of revenue where one is exemplified by the management of other hotels and the other by the franchising approach.

The most discernible difference between Hilton business model and the one used by Airbnb is that the latter seeks to solve different problems and targets different ways in which its consumers' ambitions can be addressed. The business model defined by a bed and breakfast is much more similar to the Airbnb business model. Still, that bed and breakfast feature owners interact with travelers in a small establishment. Also, a bed and breakfast source its primary revenue from the accommodation fees collected from the travelers.

Another issue experienced more by large hotel chains such as Hilton and Marriot than Airbnb is that they enjoy increased profit margins, which can be tied to their high diversification level. More specifically, large hotel chains constitute a brand name appeal connected to their existence in different regions worldwide. Due to this global operation capacity, large hotel chains experience significantly reduced risks of incurring losses and competition. Since they exist in diverse locations, their competitive capacity is increased. As part of another strength of large hotel chains such as Marriot and Hilton, their reservation systems function as incredible tools positively influencing their power to drive consumer loyalty and positively impact the rates of occupancy in these hotels. This can be observed in their consumer attracting strategies, including the availability of discounts when reserving occupancy from a region where many people make these reservations in advance.

Analysis

Airbnb has seen exponential growth over the years. The company has grown so much so that it grosses approximately a million guests in a day. Many are the influential attributes of Airbnb that have aided in this exposure. Unlike large hotel chains, Airbnb has actively appealed to consumers consistently fulfilling their tastes and enhancing their experiences in different homes. One of the most apparent weaknesses of a large hotel chain, including Hilton and Marriott is the lack of a personal feel on the consumers’ part. For instance, a large hotel chain has a way of making people feel that their importance is tied to what they are paying, which goes away after they depart from the hotel, and another guest arrives.

Among the most notable weaknesses of Airbnb is the limitations in terms of size, limiting the number of guests that can stand accommodated in one establishment at a specific time, especially when guests are accommodated in homes not meant for rent or Airbnb listings. More specifically, the rapid changes in which consumer demand for Airbnb changes can be viewed as both a stronghold for success, but also a source of weakness. Whereas new markets such as China constitute increased potential for the business to succeed, challenges of having to deal with peaks and troughs in the market allow large chain hotels to continue to dominate the hotel and industry market.

Nonetheless, Airbnb's unique strength lies in how these businesses offer experiences tailored to the needs of the consumer at the prices they want. Since they entered into the hotel and tourism industry, Airbnb's have been recognized for their affordability compared to alternative large chain hotels. The competitiveness of their prices and the suitability of location allows customers to independently choose a location and price that is best suitable to them in addition to the rating options provided for each Airbnb; these are essential elements for creating and maintaining consumer trust. It has since been noted that the transactions occurring in the Airbnb community involve strangers. As a result, it becomes easier for situations to escalate, resulting in legal violations connected to housing regulations and laws.

Significant Changes

Just as the hotel industry has undergone significant changes over time, so has the consumers in these industries. For example, the hotel consumer has essentially moved away from the old fashion hotel landscape and is now demanding what is collectively termed as a home away from home value, efficiency, connectedness, and trends offered by Airbnb. Additionally, baby boomers had been a large population of hotel consumers with their domination of occupancy. During this time, the primary focus remained tied to consistency, exemplified by consumer demands such as custom checking, availability of beverage and food provisions, and televisions in hotel rooms. However, the simplistic way in which Airbnb operates has pulled more and more consumers from the large scale hotel chains creating a competitive ground between the two.

However, millennials' emergence and the diversification of the industry associated with mobile technologies and connectivity have almost entirely replaced this consumer in hotels. Airbnb's value proposition is perfectly suited for these changes in the hotel and tourism industry. This is because it follows an information-based provision where Airbnb is not the owner of its related properties. The company is not concerned with providing value to consumers in real assets.

Even though important elements such as market dynamics, consumer demand, and changes in seasons continue to influence the success capacity of Airbnb, several other factors possess the ability to influence the success or failure of Airbnb. These are mainly connected to how consumers assess an Airbnb in terms of effectiveness. One of the most important factors is the click-through rates. This defines the number of times that guests click on an Airbnb listing after requesting an official Airbnb search. While the assumption that an increased number of views translate into many clicks, it is essential to consider that when it comes to click-through rates, guests must have interacted with the booking calendar of a listing for their viewing to translate into clicks. Another critical factor is the listing images. When it comes to Airbnb listings, the visual aspects matter significantly because they influence the guest's willingness to click on a listing and maybe proceed to book the listing. However, the impression imparted on the guest by the images featured in the listing plays a vital role as contributors to the success or failure. The rate of response to booking and inquiry messages is another factor affecting Airbnb's success and failure.

Conclusion

As part of the recommendation to improve Airbnb’s competitiveness considering the different travel patterns and the diverse ways people use Airbnb would be an excellent way to enhance profitability and tailor listings to consumer-oriented needs a way of bettering their experience. In the same light, the company should work to improve the efficiency of its algorithms.

For example, when a traveler searches for a listing in a specific location, the results include listings that are nowhere near the searched location. By improving the search algorithm, the company could eliminate these bad results and create a balance in poorly and favorably reviewed listings and how they appear during a search. Airbnb faces stiff completion from hotels.

Large chain hotels mainly include amenities such as room service; some offer free meals and gyms while Airbnb may lack in this aspect. In anticipation of future changes in consumer demand and market dynamics, exploring why and when consumers prefer hotels to Airbnb would be a step in the right direction towards improving the company’s competitiveness.