You can’t seem to get through one travel industry meeting without hearing the words “Uber” and “Airbnb.” In fact, at this year’s GBTA Convention, execs from both Uber and Airbnb presented before more than 6,000 attendees. And they certainly have earned their spots at the speaker’s podium. This year, Uber was valued at $50 billion, besting companies like FedEx and DIRECTV. Valued at $20 billion, Airbnb is boasting similar financial success and now ranks third among its hospitality competitors, very closely behind Hilton and Marriott, with respective values of $28 billion and $23 billion. These are staggering figures compared to any company in any industry at any stage! But what if I told you that both companies can still look forward to huge potential revenue and margin upside from the most attractive segment of all! From where, you wonder? The answer is simple – corporate travel.
Both companies have done a phenomenal job in the B2C world and are reaping significant benefit from it. However, the B2B market holds an extremely profitable customer base with a very high willingness to pay, always craving new product offerings that can help them be more efficient. And Uber and Airbnb are on the verge of swooping in and appeasing that very lucrative appetite.
Make my life easier and I’ll pay for it!
The most attractive characteristic of the corporate market is the relative inelasticity and subsequent high profitability of its customer base. In fact, the same customer wearing a corporate hat is significantly more inelastic than when he or she is a leisure consumer. I most definitely am! (Probably not the smartest move to say this on my firm’s blog!)
The key is designing a value proposition that surgically targets the needs of corporate customers, while charging for it. Both new entrants will most definitely need to earn the trustworthiness of corporations and their travelers, and provide the level of quality assurance and safety that they enjoy with the incumbents. However, assuming this is table stakes, one way for both players to gain high traction is through a robust loyalty program. What if you could earn loyalty points while using Uber for business travel that you could in turn use for personal rides? Would that make you switch your loyalties from taxis, other limo services and even traditional car rental companies? I reckon so.
Now’s the time!
The timing is perfect for Uber and Airbnb to venture down this path. Both companies have the highly positive brand recognition critical for success in the segment. They speak the same language as new age professionals and already have their implicit recognition and acceptance. That said, both companies are going to have to invest heavily in developing B2B selling capabilities and expertise within their companies to drive this success. Firstly, both companies must focus on developing an overall B2B sales strategy, including a robust value proposition and sales process. Next, they will be tasked with building a well-sized and aligned B2B-focused sales force that is effectively recruited, trained, managed and compensated. Furthermore, developing partnerships with the right distributors, enablers and service providers will be as crucial an ingredient for success as any.
Gaining the lion’s share of an already saturated market
At the GBTA Convention, panelists of the session “Differentiating Brands in a Sharing Economy” offered perspectives about the rapid growth of a shared economy, and strategies around branding and differentiation for companies trying to succeed in this shifting marketplace. As the two new travel giants, Uber and Airbnb, appear to be making a deliberate effort to establish themselves in this space, it will be interesting to see how the incumbent behemoths react to the new kids on their respective blocks. We’ve seen the first move by local taxi services (arguably the most significantly impacted of all) use regulation and political pressure as a lever to curb Uber’s growth. But how will Hertz, Avis, Boston Coach and other car rental and limousine service companies react? Will they look to innovate and redefine their offering, potentially through areas such as car share? What if Avis, through Zipcar, was able to seamlessly offer a one-way solution to compete? In the hospitality space, there is potential for the likes of Marriott, SPG, Hilton, Hyatt and Choice to not only create innovative offerings to compete, but also to seek to form partnerships with Airbnb. Think about it: What if corporate customers received SPG reward points and elite status for their stays at Airbnb? Now wouldn’t that get all you road warriors thinking!
The writing is on the wall, and both companies are on their way to driving a paradigm shift in the corporate travel market. Brace yourselves, as this is about to get really interesting!