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Airbnb and Its Impact on Ritz-carlton

Introduction

Despite its noticeable acclaims, Ritz-Carlton is not impervious to the effects of disruptive technology. The company, as well as many other major hotel and hospitality chains, have been facing an imposing issue in the face of Airbnb services. Airbnb is a service company that is based on innovative technology. Its services provide a platform that aims to connect customers and housing providers across the globe, focusing on the authenticity of places and customer experiences (Mody et al.). Due to its unique approach to hospitality services, Airbnb has earned worldwide brand loyalty and continues to experience significant growth every year.

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Airbnb has a noticeable impact on the Ritz-Carlton and hotel industry as a whole. Mody et al. claim that “the popularity of this platform has significantly affected the hotel industry, causing hotel companies to revisit their branding strategies.” Hotels that we’re unable to fulfill customers’ expectations and were on par with what regular housings could provide by sharing the living space on the platform have found themselves at a great loss of income (Gerdeman). While this statement does not include Ritz-Carlton, whose hotels specialize in providing the highest luxury to their customers, it also suffered from Airbnb’s entry into the market.

This impact is visible in the lowering revenues of the hotel industry. Gerdeman states that “the entry of Airbnb resulted in 1.3 percent fewer hotel nights booked and a 1.5 percent loss in hotel revenue.” Ritz-Carlton acknowledges the need for change and praises Airbnb for the value it gives to its customers (Sorrells). Airbnb places a significant effort in investments and acquisitions of companies in the hotel industry, especially the ones that put technologies upfront (Valinsky). Ritz-Carlton needs to delve into the online market business and become relatable to millennials to stay at the top of hospitality industry providers.

The Plan of Action

As it has been stated in the company’s overview, Ritz-Carlton has shown its readiness to accept changes. Its recent inner workings have shifted the focus of the company from traditional hotel booking procedures to providing a service similar to Airbnb that includes Ritz-Carlton rooms, as well as a variety of luxury houses (Gerdeman). The company that owns Ritz-Carlton has been searching for new ways to provide hospitality services to its customers.

Several key trends brought Airbnb success and popularity among travelers. Recent shifts in customers’ demands have forced hotel industries to change their approach to the concept of luxury and standards of service. In his interview with Sorrells, Ritz-Carlton founder Horst Schulze states that “Millennials demand the same level of service excellence as their forebears and […] prioritize experiences over ‘things.’” Nowadays, the company has to upgrade its views on the definition of luxury to stay relevant.

Marriott International, the company that owns Ritz-Carlton, W Hotels, and Courtyard, has joined the market of rental services by creating a new platform, not unlike Airbnb (Valinsky). The service called Homes & Villas operates similarly to Airbnb, although it focuses primarily on superior quality properties. Currently, it includes over 1 million listings in 130 countries and continues to experience rapid annual growth (Valinsky). However, it does not yet reach the level of accessibility and authenticity that Airbnb provides, as it has over 6 million rooms available in over 190 countries (Valinsky). Therefore, this service requires additional upgrades to compete with Airbnb, as its primary competitor continues to expand.

As has been discussed, the authenticity of the customer experience about the location and the intention of staying in a hotel must match the current trends. To achieve that, the company needs to shift its vision from physical luxury to the availability, quality, and originality of services. Personalization of customer experience is the key component for the current and next generations of travelers.

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Resources for Solution

Ritz-Carlton and Marriott International need to continue both of their current projects that provide different booking experiences for customers. First and foremost, the company needs to draw inspiration from the places where its hotels are located. Mody et al. argue that the companies must satisfy the “desire among tourists to have more authentic, individualized, and intimate embodied experiences with the people and places they visit” (65). Ritz-Carlton needs to move away from institutionalized “bland” designs of a luxury hotel to become more appealing to modern tourists. To achieve that, staffing will require additional qualifications in the local culture and history.

It is also necessary to take into consideration the political regulations regarding sharing housing space via Airbnb and similar marketplaces. Ritz-Carlton needs to consider showing higher support for governmental efforts to regulate the lodging industry. One of the primary reasons for the addition of these regulations is the fact that security and safety measures in the apartments rented via Airbnb are not always following the standards that apply to hotels (Sorrells). It is vital to keep in mind that this move will not bring the brand any popularity and most likely be viewed in a negative light by customers. It can raise the costs of operation for Airbnb hosts, which will return a portion of customers to the traditional hotel chains.

At the same time, Marriott needs to keep upgrading and expanding its service. Airbnb does not show any signs of staggering in its growth, as it continues to purchase companies that specialize in the hospitality industry, such as HotelTonight (Valinsky). By expanding its shared housing platform, Marriott can create a meaningful opposition to slow Airbnb down while simultaneously increasing its reach and making people more aware of the brand.

Technology is the key innovation driver in modern days and can provide new ways to expand the business and solidify Ritz-Carlton’s place at the top of the industry once again. The founders of Ritz-Carlton are already considering the usage of mobile technologies to improve customers’ experience by giving them higher access to the hotel’s services (Sorrells). A company that is willing to implement meaningful technologies that surpass customers’ expectations of its services is on the right track towards the future.

Conclusion

In conclusion, the company needs to put more effort into adapting its hotels to the local culture, propose additional safety and security standards for Airbnb hosts, and continue to adapt to new customer-oriented technologies. The costs of additional staff hiring and legal teams that will help with lobbying new regulations are negligible. The budget for these measures is expected to have a significant sum, primarily due to the cost of innovations. Ritz-Carlton should consider acquiring a tech-oriented company that can help with the optimization of current and plans to implement new technologies in its services.

Works Cited

Gerdeman, Dina. “The Airbnb Effect: Cheaper Rooms For Travelers, Less Revenue For Hotels.” Forbes, 2018.

Mody, Makarand, et al. “Parallel pathways to brand loyalty: Mapping the consequences of authentic consumption experiences for hotels and Airbnb.” Tourism Management, vol. 74, 2019, pp. 65-80.

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Sorrells, Mitra. “Q&A: Ritz-Carlton Founder Horst Schulze on Tech’s Role in Luxury Hotels.” News on Travel Technology, Distribution and the Digital Economy | PhocusWire, 2019.

Valinsky, Jordan. “This is Marriott’s Answer to Airbnb.” CNN, 2019.

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