How incumbents respond to competition from innovative disruptors in the sharing economy—The impact of Airbnb on hotel performance

Abstract

This article investigates the impacts of Airbnb on hotel demand and the price and nonprice response strategies of incumbent hotels to Airbnb. We constructed a unique dataset of tourist hotels and Airbnb listings before and after the entry of Airbnb in Taiwan. We found that the entry of Airbnb makes the hotel industry more heterogeneous. Low quality hotels compete on price with Airbnb after Airbnb's entry. In contrast, prices and the investment in service quality increase for high quality hotels. These findings suggest that high quality hotels reposition themselves in the higher end of the lodging market as a response strategy to the entry of Airbnb. Managerial Summary: Incumbent hotels can use a number of strategies to respond to Airbnb's entry. Using a unique dataset of Taiwanese data from before and after Airbnb's entry, we found that hotels' responses differ across the value chain. Low quality hotels compete on price with Airbnb after Airbnb's entry. In contrast, prices and the investment in service quality increase for high quality hotels. The increase of investment in service quality allows high quality hotels to reposition themselves in the higher end of the lodging market.

The Sharing Economy and Business Model Design: A Configurational Approach

“…Existing research on the sharing economy has focused on its conceptualization and characteristics (Eckhardt et al, 2019; Gerwe and Silva, 2020); drivers (Stofberg et al, 2019); governance mechanisms (Benson et al, 2020); and social or environmental implications (Jiang and Tian, 2018; Zervas et al, 2017). Some strategy research has also considered the entry strategy of the sharing economy (Garud et al, 2020; Paik et al, 2019; Phung et al, 2020) and entry responses of the affected incumbent firms (Chang and Sokol, 2020). However, business model designs and their performance implications for sharing platforms remain poorly understood.…”

“…This phrase is more than a buzzword. Successful pioneers of sharing platforms, such as Grab and Airbnb, have transformed today’s business landscape (Chang and Sokol, 2020; Garud et al, 2020; Gerwe and Silva, 2020). [ 1 ] Yet, despite their economic significance, many sharing platforms perform unsatisfactorily.…”

Substitutability of hotels and peer-to-peer accommodations in Shanghai

“…The practical implications for hotels also do not differ from the implications for other markets. In particular, high-end hotels may compete against P2P facilities by providing higher value to travelers (Chang and Sokol, 2020). The results suggest that they may gain by offering amenities such as fitness facilities or pick-up and drop-off service.…”

“…Travel and hospitality industries are no exception (Altinay and Taheri, 2019). Specifically, accommodation-service platforms, such as Airbnb or Tujia, directly compete with hotels and motels (Chang and Sokol, 2020). Yet the magnitude of the effect remains an open question.…”

Competitors or Complements: A Meta-analysis of the Effect of Airbnb on Hotel Performance

“…On the other hand, the negative effect could diminish over time as the hotel industry became more prepared for the sharing economy. Low-end hotels can compete on prices, whereas high-end ones can invest in service quality (Chang and Sokol 2020). In later periods, the industry is also witnessing various types of restrictions and regulations on home-sharing services imposed by the local governments (Nieuwland and Van Melik 2020;Falk and Yang 2020).…”