Marriott And Hilton Stay Ahead Of Sharing Economy, Proving Airbnb Is Not Uber Of Hotels

On Wednesday this week, two giant hotel chains-Hilton and Marriott-announced their 2016 earnings. Inc., the owner of the Waldorf Astoria, reported increased earnings per share (EPS) for its fourth quarter at $0.70, beating $0.65 per share in the last year’s quarter. Inc., which acquired Starwood Hotels and Resorts Worldwide in September, reported a surge in quarterly profits to $244 million from $202 million a year earlier.

The onslaught of the sharing economy, in particular, the rise of Airbnb, should have put Marriott and Hilton on the defensive. Whether renting a hip studio in Manhattan for a night, or a week-stay in a historic Chateau in Southern France, Airbnb prides itself for connecting people to authentic travel experiences, at any price. With its latest acquisition of the vacation-home rental company Luxury Retreats, Airbnb is poised to eclipse the two hotel chains.

As a privately held start-up, Airbnb is valued at $30 billion based on the company’s latest round of funding, serving over 3 million listings in more than 65,000 cities in close to 200 countries. The market capitalization of Hilton and Marriot is hovering around $20 billion and $34 billion respectively.

This raises an interesting question. Will hotel chains find themselves besieged by new competition like GM and Ford who are wrestling hard with Uber and Tesla? Or worse, like Kodak and Polaroid who were decimated by digital photography?

What is Disruption Anyway?

In the early 1990s, Professor Clayton Christensen at Harvard Business School noticed an interesting pattern among companies facing the emergence of a new technology. When technological progress was incremental, even if the increments appeared in rapid succession, powerful incumbents always triumphed.

Companies that were endowed with vast resources, extensive networks of suppliers and a loyal customer base were, as would be expected, able to command great advantage against their rivals. This is what made IBM a formidable player in the computing industry or General Motors a bellwether organization in automotive.

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