Is the Sharing Economy an Opportunity or a...

IN THE FIELD OF TECHNOLOGYDEGREE PROJECT DESIGN AND PRODUCT REALISATIONAND THE MAIN FIELD OF STUDYINDUSTRIAL MANAGEMENT,SECOND CYCLE, 30 CREDITS

, STOCKHOLM SWEDEN 2018

Is the Sharing Economy an Opportunity or a Threat?A Case Study on the Swedish Hotel Industry

SALIM CHAHINE

HENRIK DANIN

KTH ROYAL INSTITUTE OF TECHNOLOGYSCHOOL OF INDUSTRIAL ENGINEERING AND MANAGEMENT

Is the Sharing Economy an Opportunity or a Threat?

A Case Study on the Swedish Hotel Industry

by

Salim Chahine Henrik Danin

Master of Science Thesis TRITA-ITM-EX 2018:375

KTH Industrial Engineering and Management Industrial Management

SE-100 44 STOCKHOLM

Är Delningsekonomin en Möjlighet eller ett Hot?

En Fallstudie på den Svenska Hotellindustrin

av

Salim Chahine Henrik Danin

Examensarbete TRITA-ITM-EX 2018:375 KTH Industriell Teknik och Management

Industriell ekonomi och organisation SE-100 44 STOCKHOLM

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Master of Science Thesis TRITA-ITM-EX 2018:375

Is the Sharing Economy an Opportunity or a Threat?

Salim Chahine

Henrik Danin Approved

2018-05-29 Examiner

Niklas Arvidsson Supervisor

Cali Nuur Commissioner

Nordic Choice Hotels Contact person N/A

Abstract The act of sharing goods and services is not a new or revolutionary concept in any way. In the internet age, the phenomenon of what has been titled the “sharing economy” has emerged, and touched many different industries and researchers around the world. Incumbent industries, operating in traditional manners, are in today’s society experiencing a pressure to transform. The hotel industry, in particular, is facing the tension of the customers’ shifting behavior, from staying at hotels to using accommodation sharing services instead, such as Airbnb. This study therefore seeks to explore how the sharing economy is impacting the hotel market. A question that has guided the research reads; Is the phenomenon, to the hotel industry, an opportunity or a threat? The research can be followed through a conducted explorative case study on the sharing economy’s manifestation in the Swedish hotel market, which encompasses an exploration of how hotel actors are perceiving and reacting to accommodation sharing. The case is based on gathered data from reviewing written material and conducting qualitative, semi-structured interviews with hotel actors, experts on the hotel industry and experts on the sharing economy. The empirical material has been complemented and processed with the transformational pressure theory and competitive strategic approaches in mind, along with having notions drawn from socio-technical transition theory whereas a Multi-Level Perspective approach is applied to discuss the transition the hotel industry is undergoing. This thesis contributes analytically to the research area of the current transformation in the hotel industry, with implications on how traditional hotel actors can adapt to the emergence of the sharing economy. The case study shows how hotel actors in Sweden, being in a currently prosperous state, are alarmingly positive towards the

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growing phenomenon of accommodation sharing hence they perceive it as an opportunity and a complement to the industry as minor negative financial effects are evident. However, we argue that traditional hotel actors will, after a coming period of recession, truly realize the effects of the accommodation sharing phenomenon. This since the adoption of sharing services is accelerated in a weaker financial landscape. We are of the perception that the phenomenon has resulted in the emergence of a new customer segment, “Mid Stay“ customers. In the study, we conclude that the hotel actors, no matter size or category, risk losing current customers, as well as the opportunity to attract new ones, if they do not transform and adapt to the ongoing change. Accommodation sharing should be perceived as nothing less than a threat that needs to be acted upon soon to remain sustainable in the now thriving hotel industry. However, the sharing economy is not necessarily a threat that needs to, or can, be eliminated, but rather one from which new profitable opportunities are made available for hotel actors to exploit in order to operate in symbiosis with the phenomenon. Key-words: Sharing economy, Accommodation sharing, Hotel industry,

Transformation, Transformational Pressure

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Examensarbete TRITA-ITM-EX 2018:375

Är Delningsekonomin en Möjlighet Eller ett Hot?

Salim Chahine

Henrik Danin Godkänt

2018-05-29

Examinator

Niklas Arvidsson

Handledare

Cali Nuur Uppdragsgivare

Nordic Choice Hotels Kontaktperson

N/A

Sammanfattning

Delning av tjänster och produkter har funnits i urminnes tider och har genom åren berört många industrier och forskare världen över. I eran av internet har fenomenet vuxit och kallas idag för “delningsekonomi”. Vissa etablerade industrier, som arbetar på ett mer traditionellt vis, upplever i dagens samhälle ett tryck på anpassning och förändring. En industri, som i synnerhet upplevt detta är hotellindustrin. Resenärer har nämligen förändrat sitt beteende och mer börjat använda sig av delning av bostäder.

Denna studie syftar till att utforska hur delningsekonomin påverkar hotellmarknaden. Frågeställningen har utgått från; Är fenomenet ett hot eller en möjlighet för hotellindustrin?

För att besvara detta är studien upplagd som en utforskande fallstudie. Syftet har varit att studera delningsekonomins manifestation på den svenska hotellmarknaden och hur aktörer uppfattar och reagerar mot delning av bostäder. Studien är baserad på granskning av insamlat skriftligt material samt från kvalitativa semistrukturerade intervjuer med hotellaktörer, experter inom hotellindustrin och forskare inom delningsekonomi. Det empiriska materialet har alternerats med teorier kring industriellt transformationstryck, konkurrensstrategier och socio-teknisk systemteori där ett multi-nivåperspektiv har applicerats för att analysera förändringen hotellindustrin utsätts för.

Denna studie bidrar analytiskt till forskningsområdet inom den pågående förändringen i hotellindustrin med förslag på hur traditionella aktörer kan anpassa sig till delningsekonomins utveckling. Idag är de svenska hotellaktörerna, som befinner sig i en blomstrande affärsmiljö, alarmerande positiva gentemot delning av

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bostäder. De anser att tjänsten kompletterar utbudet på marknaden med små direkta påvisbara negativa finansiella effekter. Emellertid, argumenterar vi för att efter en oundviklig kommande lågkonjunktur kommer hotellindustrin inse och erfara den negativa effekten av fenomenet med delning av bostäder. Detta orsakat av att delningstjänster ökar i popularitet och adaption under en tid då det finansiella landskapet försämrats.

Vi är av uppfattningen att fenomenet har resulterat i etableringen av en ny kundgrupp, vilken vi benämnt “Mid-Stay” kunden. Konklusionen är att hotellen, oberoende av storlek och kategori, dels riskerar att mista sina nuvarande kunder samt möjligheten att attrahera nya om man inte anpassar sig till den dagens verklighet. Enligt vår uppfattning skall delning av bostäder ses som ett så stort hot som föranleder en förändring. Dagens blomstrande industri är sårbar och en framtida anpassning är nödvändig för en fortsatt hållbar utveckling. Delningsekonomin bör för den traditionella hotellindustrin inte ses som ett hot som måste elimineras utan snarare en möjlighet för hotellen att finna nya lönsamma alternativ och leva i symbios med fenomenet.

Nyckelord: Delningsekonomi, Delning av bostäder, Hotellindustrin,

Transformation, Transformationstryck

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Table of Contents

Abstract ...................................................................................................................................... i Sammanfattning ......................................................................................................................iii Table of Contents ..................................................................................................................... v List of Figures ......................................................................................................................... vii List of Tables .........................................................................................................................viii Foreword and Acknowledgements ........................................................................................ ix 1 Introduction ........................................................................................................................... 1

1.1 Background ...................................................................................................................... 1 1.2 Problem formulation ........................................................................................................ 4 1.3 Purpose and research questions ........................................................................................ 4 1.4 Delimitations .................................................................................................................... 5 1.5 Expected contribution ...................................................................................................... 5 1.6 Layout of the thesis .......................................................................................................... 6 Chapter summary ................................................................................................................... 7

2 The sharing economy and understanding the transformation of the hotel industry ...... 8 2.1 Sharing economy .............................................................................................................. 8 2.2 The hotel industry in a transformation ........................................................................... 13 2.3 Reactions to the changes in the business environment .................................................. 17 2.4 A Multi-Level Perspective in the sharing economy ....................................................... 20 Chapter summary ................................................................................................................. 24

3 Methodology ........................................................................................................................ 25 3.1 Research process and design .......................................................................................... 25 3.2 Data gathering ................................................................................................................ 27 3.3 Research quality ............................................................................................................. 30 Chapter summary ................................................................................................................. 33

4 A case study on the Swedish hotel industry ...................................................................... 34 4.1 The sharing economy in Sweden ................................................................................... 34 4.2 Trends within the Swedish hotel industry ...................................................................... 38 4.3 Comparing the Swedish and American Framing of Accommodation Sharing .............. 43 Chapter Summary ................................................................................................................. 47

5 Analysis and discussion ...................................................................................................... 48 5.1 The importance of adapting to the transformation ......................................................... 48 5.2 A Multi-Level Perspective and the hotel industry ......................................................... 50 5.3 Understanding the competitive threat of accommodation sharing ................................. 52 5.4 Transformational pressure on the Swedish hotel industry and the necessity to act ....... 55 Chapter summary ................................................................................................................. 59

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6 Conclusions, implications and future research ................................................................ 60 6.1 Summary of findings ...................................................................................................... 60 6.2 Implications .................................................................................................................... 63 6.3 Limitations and future research ...................................................................................... 65

References ................................................................................................................................. a Appendix A. Interview structure and questions .................................................................. A

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List of Figures Figure 1. A simple illustration of the usual digital sharing economy transaction process, retrieved

from SOU (2017:26) and translated. ................................................................................................................................... 2 Figure 2. A bar chart showing the number of articles mentioning the sharing economy through the

years. Source: Martin (2016). .................................................................................................................................................. 9 Figure 3. Mappings of the user’s and provider’s motivations for participating in different sectors of the

sharing economy. Source: Böcker & Meelen (2016). ................................................................................................12 Figure 4. A diagram showing the accommodation alternatives being replaced with Airbnb by leisure

and business travelers. Mainly, and increasingly, hotels. Source: Morgan Stanley Research (2017). .................................................................................................................................................................................................13

Figure 5. Different approaches of change. Source: Sommer (2011). .......................................................................16 Figure 6. A diagram showing alterations in Airbnb host behavior due to law and regulations changes.

Source: Morgan Stanley Research (2017). .....................................................................................................................18 Figure 7. Three ways of competitive strategy designed accordingly after Treacy & Wiersema (1993).

Source: Treacy & Wiersema (1993). .................................................................................................................................19 Figure 8. A multi-level perspective on technological transitions. Source: Geels (2002). ...............................22 Figure 9. The process and design of how to answer the main research question. ...........................................27 Figure 10. The different types of written materials used in the thesis.......................................................................28 Figure 11. An illustration of the three different areas from where parties were interviewed; hotel

actors, industry experts and experts on the sharing economy.........................................................................28 Figure 12. Results from a multiple option survey on what it would take for individuals to start using,

or increase the usage of, sharing economy services. Source: SOU (2017:26, p.130) and translated. ........................................................................................................................................................................................36

Figure 13. An annual segmentation of the hotel customers within the Swedish market. The orange and grey bars (two to the left) represent business travelers, whereas the green and blue bars represent leisure travelers (two to the right). Source: The Swedish Statistical Office (2018) and translated. ........................................................................................................................................................................................39

Figure 14. The occupancy rate of hotel rooms, calculated as hotel rooms on record divided by disposable hotel rooms. 12-months average numbers illustrated. Source: Visita (2018). ...............40

Figure 15. One way of dividing the customer segments within the hotel industry. ........................................41 Figure 16. January-May 2017. Source: Invest Stockholm (2017) .............................................................................43 Figure 17. A MLP on how the technological niche of accommodation sharing alters regimes within

the hotel industry in a changing national financial state. ..................................................................................51 Figure 18. The competitive position of Airbnb and the customers they attract. ...............................................53 Figure 19. A simple illustration of the segment that has emerged from the changing customer

behavior. ...........................................................................................................................................................................................56

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List of Tables Table 1. Different approaches further elaborated. Source: Sommer’s (2011). ......................................................16 Table 2. List of interviewees .............................................................................................................................................................29 Table 3. An industry comparison between the Sweden and U.S. hotel market. ...................................................44

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Foreword and Acknowledgements We, the authors of this thesis, feel the need to express our gratitude to the people who have help us throughout the work. First of all, we want to thank our supervisor, Cali Nuur, for the professional guidance, help and support to ensure a high quality in the research, both in the investigation and writing of the thesis. Secondly, we would like to express a special gratitude to the commissioner and the team at Nordic Choice Hotels. Their insightful knowledge of the hotel industry, and the opportunity to share our thoughts and ideas with them, were extremely helpful during the whole process. Furthermore, we would like to thank our peer students at the Department of Industrial Engineering and Management at The Royal Institute of Technology for their constructive feedback and interesting suggestions on how to improve the work. Finally, we want to thank our families and friends for their support and belief in us no matter what challenge lies ahead.

Salim Chahine & Henrik Danin

Stockholm, June, 2018.

INTRODUCTION

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1 Introduction This chapter introduces the topic of the ongoing disruptive transformation faced by the hotel industry with the emergence of the so-called sharing economy. The background includes a general description of the phenomenon and the interaction between participants in the associated Peer-to-Peer sharing platforms. A short explanation of theories on transformational pressure is then presented followed by an introduction of the transformation occurring in the hotel industry. Further, against the background, the problem is explained and the purpose for the thesis is presented. Lastly, suggested delimitations, the study’s expected contributions, and the layout of the thesis are described.

1.1 Background The “sharing economy” is a term that is nowadays discussed all over the world, both in the public debate and in some academic circles. The fundamental premise of the sharing economy is the action, between individuals, of sharing, lending or renting of certain goods and services, instead of owning or selling them (Wei & Lin, 2017). The sharing of resources among individuals is not a revolutionary concept, or even new, in any way. However, what has been dubbed the “sharing economy” has emerged with the internet age, which has enabled transparency and access to goods and services at an exceptional level of efficiency and scale, as a consequence of the advancement in information and communications technologies (Martin, 2016). Fueling its growth are social, economic and technological advancements towards a focus on sustainability and trust among peers (Schor, 2014). With collaborative consumption and transparency between participants characterizing the sharing economy’s activities, its adoption has been rapid and broad. There are some conjectures that estimate its economic growth will reach a global annual revenue of 335 billion US dollars by 2025. This is an increase from 15 billion in 2013 (Böcker & Meelen, 2016; PWC, 2014). The notion of the sharing economy, as discussed today, extends over a great range of activities, from peer-to-peer (P2P) online marketplaces, to lodging and car sharing services. A simple schematic view of the digital sharing transaction services is illustrated in Figure 1.

INTRODUCTION

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Figure 1. A simple illustration of the usual digital sharing economy transaction process, retrieved from SOU (2017:26) and translated.

An example of a sharing service is the growing lodging sharing company Airbnb, which has provided consumers with a platform where they can act as both lenders of their accommodations and guests to other users. This development is largely as a consequence of the proliferation of the Internet. From the sharing economy’s explosive growth in recent years, political and regulatory debates have sprung with mixed opinions on the sector. On the one hand, the technologies introduced, that ease the process of sharing, are said to empower the people and even reduce carbon footprints (Schor, 2014). On the other hand, the sharing economy is being criticized for being exploitive as digital platform providers sometimes have an economic self-interest in mind (Martin, 2016; Schor, 2014). To no surprise, the reality of the sharing economy sector is far more complex. Theoretically, in a report by Russell Belk (2014) on the subject of online sharing and collaborative consumption, two commonalities are identified in these practices. The first one being the models of temporary access of utilization and consumption. The second one is the reliance on websites and platforms that allows for connection and content contribution between users, commonly referred to as Web 2.0 (Berube, 2011). With the digital revolution going towards breaking out of its infant stage, it is safe to assume that for a company to survive, putting its head in the sand and expecting emerging challenges to pass is not an option (Zysman & Kenney, 2017). When studying previous cases of industries going through a transformation, a case that commonly comes to mind is Kodak’s downfall when entering the era of digital photography (Tripsas & Gavetti, 2000). Having underestimated the ongoing change, Kodak lost their momentum and leading position within the photographic film industry. Dahmenian theories of transformational pressure (Dahmén, 1988), become all the more relevant in the study of the occurring change. Dahmén’s work on negative and positive transformational pressure, resulting in tensions in the prevailing systems and forming notions of necessities and opportunities respectively,

INTRODUCTION

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could be essential in understanding whether new technologies and behavioral trends are to be considered threatening or beneficial. Furthermore, theories on business transformation and how to meet the challenges of change, along with competitive strategies as well, give rise to useful models and methods of understanding the phenomena around transformational change. Transformation in the hotel industry The sharing economy has an impact in the hotel industry where at one point or another, accommodation sharing platforms have come up in conversations. One such platform is as indicated above the case Airbnb. Going from a small start-up to a multi-billion-dollar corporation, Airbnb is spurring the discussion on the transformation of the hotel industry’s value proposition to the customer. Much like the debates on the sharing economy, opinions on the impact of the network platforms such as Airbnb are divided. Studies, forecasts and discourses on the phenomenon bring up some interesting points. One of which is that the phenomenon is answering to an increased demand for temporary lodging as tourism has risen (Guttentag, 2013; Dogru et al., 2017). Another point is the possible shift in customer demand, where the visitors go from hotel lodging to accommodation sharing, which would negatively affect the traditional hotel industry (Dogru et al., 2017; King, 2017). This is only strengthened by Airbnb’s penetration into the corporate travel market and the already flexible nature of their service (Morgan Stanley Research, 2015; Ting, 2017). The unfavorable economic effects of the emerging sharing platforms can therefore not be overlooked. The potential threats and opportunities with accommodation sharing need to be fully realized and taken into serious account by hotel actors, especially in Sweden who are behind in this regard, when moving forward in the digital age. Nevertheless, great potential lies in the mentioned sharing economy that is becoming a much more established form of business (Martin, 2016). Apart from the simplicity of sharing services and goods through structured community-based online platforms, the sharing economy’s rise to esteem comes from societal attitudes towards consumption, having shifted to an increasing concern over ecological and societal issues (Hamari & Ukkonen, 2016). Safe to say is that the use of a sharing economy in businesses will continue to spread. However, the question of whether the sharing of accommodations is a threat or not, and what or if, actions are to be taken, is still an ongoing debate. The sharing economy in the context of the hotel industry therefore gives rise to several questions; for instance, in what manner will the transformation impact incumbent hotel companies? Will P2P sharing of accommodations rise above traditional hotel lodging services? Is the sharing economy a threat or an opportunity?

INTRODUCTION

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1.2 Problem formulation What we are witnessing is a transformative pressure on the hotel industry that contains both necessities and opportunities. On the one hand, the sharing economy will certainly impact the incumbent hotel industry, with necessities to transform their business models and their general business strategies, including new target segments, offerings and services. On the other hand, the sharing economy brings opportunities as to better utilize resources, creating new revenue streams and increasing customer loyalty through digital platforms (Schor, 2014). Overall, this trend would certainly impact the hospitality industry (SOU 2017:26; Dogru et al., 2017; Martin, 2016). In particular, the hotel industry faces the challenge of customers shifting from hotels to accommodation sharing platforms (Morgan Stanley Research, 2017). This is a problem that is further strengthened by the fact that travelers are less likely to return to booking hotel rooms once they have used accommodation sharing services, such as Airbnb (Verhage, 2016a; Kokalitcheva, 2016). The industry is undeniably looking at different kinds of actions to develop and evolve, including personalizing the traveler’s experience by utilizing new technology (Oskam & Boswijk, 2016). However, these efforts are mainly focused on driving the traditional hotel business forward, and not on the growing trend of the sharing economy, specifically the service of accommodation sharing that is breaching the hotel industry. As argued by researchers at Morgan Stanley (2015), actors in the industry have largely disregarded the potential threat of accommodation sharing Furthermore, the hotel industry is not homogenous and varies from country to country. For instance, in America the biggest customer segment is leisure travelers (U.S. Travel Association, 2017), whereas in Sweden, the customer base has in the last decades consisted mainly of business travelers (The Swedish Statistical Office, 2018). With accommodation sharing platform’s recent entrance into the business traveler segment (Oskam & Boswijk, 2016; Vidalon & Denis, 2017), this thesis is therefore focused on the Swedish market, meaning it analyses the nature and impact of the sharing economy in the Swedish hotel industry. The potential threats and opportunities need to be fully realized, if actions are to be taken to sustain the now thriving hotel industry in Sweden in the future.

1.3 Purpose and research questions Against the above background, the purpose of this thesis is to explore and identify how the sharing economy is impacting the Swedish hotel market and how Swedish actors within the industry are reacting to it. This thesis seeks to contribute to the case of the ongoing transformation in the hotel industry, with an analysis of the subject along with implications on how hotel actors can adapt to the emergence of the sharing economy in the context of the accelerating growth of companies within the sector of accommodation sharing. This, in order to make the hotel industry sustainable in the future and avoid a decelerating growth (Codagnone & Martens, 2016). The investigation includes a closer look at the potential threats and benefits

INTRODUCTION

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towards the hotel industry coming from the diffusion of the sharing economy. Threats such as price pressure and loss off market shares in times of recession, and benefits like opportunities to prosper from the sharing economy. In order to achieve the stated aim, the following overall research question is posed; Main RQ: Is the sharing economy an opportunity or a threat to the hotel

industry? The following sub-questions are explored;

RQ1: How is the sharing economy manifesting itself in the Swedish hotel industry?

RQ2: What are the implications for actors in the Swedish hotel industry

to meet the rise of the sharing economy?

1.4 Delimitations This thesis is delimited to the sharing economy’s manifestation in the Swedish hotel industry, particularly the impact of accommodations sharing platforms on the hotel’s lodging services. Meaning our thesis excludes an analysis of the effects on other hotel services, such as restaurants, bars and various forms of entertainment. Further, the study only focuses on the bigger established actors in the industry since these are the ones seemingly neglecting the negative effects of the growing trend of accommodation sharing.

1.5 Expected contribution The study intends to contribute to the understanding of business transformation and the theory of competitive strategic positioning in the digital age of the sharing economy. In 2017, an investigation was conducted on behalf of the Swedish government to analyze the onset of the sharing economy from a user perspective. This study concluded that additional research is needed on the sharing economy along with the future risks and opportunities that accompany the phenomenon (SOU 2017:26). This thesis will also contribute empirically to this debate as it sheds light on the threats and opportunities tied to the accommodation sharing phenomenon, in particular in the hotel industry. Further, the study will contribute to the understanding of how a well-established firm, built on a traditional business model, shall handle the emergence of digital “no-asset” models, as the one by Airbnb. The idea is to take note of the transformative pressures that come with the emerging digital sharing economy and the adoption of it, in order to draw conclusion on how Swedish actors are to position themselves in accordance to the phenomenon and its casualties.

INTRODUCTION

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1.6 Layout of the thesis The chapters following the introduction are structured in a way to provide necessary information on the phenomena at hand in order to fully understand the analysis and conclusions made in the end. Chapter 2 builds on what was introduced in the introductory part, starting by delving deeper into the notion of sharing economy. A literature review of the phenomenon is provided, going in to its origin and discussing its impact seen from an economic, social and environmental standpoint, both on the hotel industry as well as some of the other sectors it is touching. The second part of chapter 2 goes on to present previous research and findings, on the success story and adoption of the accommodation sharing phenomenon in particular. The hotel customer’s occurring behavioral shift is described, along with what actions are being taken to mitigate or promote the disruptive phenomenon around the world. Chapter 2 proceeds to present the theoretical concepts and frameworks used throughout the report. It includes a presentation of the different competitive strategies a business can choose from, a description of business transformation and its elements in short terms, as well as a presentation of Dahmén’s (1988) theories on transformational pressure. The chapter concludes with a description of the Multi-Level Perspective (MLP) model, which is used to explain the adoption of accommodation sharing in a changing financial landscape. Chapter 3 introduces the methodology of the thesis; we conducted a case study to understand the sharing economy’s impact on the hotel industry in Sweden, along with the intended research process and design. A motivation is given to the chosen gathered data of both written and oral sources, and the research quality is argued for. In chapter 4, the exploratory case study is presented. This delves into the sharing economy’s progress in Sweden and the trends within the hotel industry, including the actors’ perception and reaction to it. In order to provide a holistic perspective, additional collected material is presented in an industry comparison between Sweden and the U.S. Chapter 5 includes the analysis of the study, along with a discussion on the importance of adapting to the transformation coming with the adoption of accommodation sharing. This is underpinned by the aforementioned use of the MLP within the hotel industry transformation. In chapter 7, the findings of the study are summarized and concluded in order to answer the formulated research questions. This is followed by our implication for how hotel actors should react to the emerging phenomenon. Lastly, proposed further research for future studies on the subject is presented, some of it tied to the limitations of this work. To make the thesis easier to follow each chapter is summarized at the end of it.

CHAPTER SUMMARY

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Chapter summary This chapter begins with presenting the basic functions within the concept of the sharing economy and expresses its likely growth. The concept of accommodation sharing is introduced, along with a presentation of the theoretical concepts applied in the thesis, such as Dahmén’s theory on transformational pressure. These are then tied to the subjected tensions the traditional hotels are experiencing. Furthermore, different opinions on how hotel actors are perceiving the situation are brought up, leading down to the problem formulation, which reads that both the potential threats and opportunities with accommodation sharing need to be fully realized as they are currently being largely neglected in Sweden. This thesis is focused on the Swedish market, meaning it analyses the nature and impact of the sharing economy in the Swedish hotel industry. This led to the purpose of this work being to explore and identify how the sharing economy is impacting the Swedish hotel market and how Swedish actors within the industry are reacting to it. The study is delimited to the impact of accommodation sharing platforms on the hotel’s lodging services and focuses only on the bigger actors within the industry. Further, it intends to contribute to the understanding of business transformation and the theory of competitive strategic positioning in the digital age of the sharing economy, along with adding an empirical contribution to the Swedish understanding of the accommodation sharing phenomenon.

STATE OF THE ART, LITERATURE & THEORY

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2 The sharing economy and understanding the transformation of the hotel industry In this chapter literature and theory relevant to the study is presented, along with previous research and the development of the subject at hand. The sharing economy and its growth is described, along with the associated accommodation sharing phenomenon. This includes the impact on incumbent industries and consumers. This is followed by an explanation of the occurring transformation on the hotel industry and previous research on the perception of the disruptive concept of accommodation sharing. Throughout the chapter, theoretical material is described, aiming to contribute to the understanding of the phenomenon at hand, namely business transformation and transformational pressure. The chapter concludes with a description of the Multi-Level Perspective model. The material is later applied in the analysis in chapter 6.

2.1 Sharing economy Interest around the sharing economy and its influence has in recent years seen a rapid growth among entrepreneurs, innovators and academic researchers alike. This accelerating trend largely comes from the Silicon Valley success stories of two companies that, in a time span of less than five years, made the jump from entrepreneurial start-ups to multi-billion dollar international corporations. These are Airbnb and Uber. The former being the online P2P-platform that allows users to act as both guests and lenders on a short-term basis of their own residential. The latter is Uber, another platform built on a P2P-network that provides taxi services (Lashinsky, 2015; Konrad & Mac, 2014; Martin, 2016). The impact of the sharing economy has flourished into a vibrant diffusion, covered by the media across the world, and paving a road to prosperity for new entrants, entrepreneurs and incumbent companies alike (Schor, 2016). Much due to its means of promoting sustainable consumption practices, and expectations to mitigate problems such as hyper consumption and pollution. This, along with the potential for economic growth tied to a reduction of costs for economic coordination within society, and lack of the requirement of extensive physical assets (Martin, 2016; Codagnone & Martens 2016; Hamari & Ukkonen, 2016). There has been an increase in references to the sharing economy in newspapers between 2011 and 2014, seen in Figure 2, which stands as further proof of its emergence and rise in popularity.


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Figure 2. A bar chart showing the number of articles mentioning the sharing

economy through the years. Source: Martin (2016).

With companies tied to the sharing economy being praised for being innovative and sustainable, with for instance, Airbnb being hailed as a contributor to increased tourism, the companies have faced a lot of critique as well (Martin, 2016). The most common being the resistance against Uber by traditional taxi companies, and recent fears of the threat Airbnb’s rapid growth will pose on the hotel industry and prices on the housing market (Codagnone & Martens 2016; Verhage, 2016b; Benner, 2017; Oskam & Boswijk, 2016). The economic impact of the sharing economy has been unclear as these conflicting arguments are presented. Nevertheless, PwC (2014) released an estimation of the sharing economy’s growth, saying that it will potentially grow to a global annual revenue of 335 billion US dollars by 2025. Defining the “sharing economy” So what is the sharing economy? Defining the sharing economy in a way that reflects a common usage of the concept has proven to be very difficult as it stretches over a large and diverse spectrum of activities (Schor, 2014; Martin, 2016). The focal point of what makes the term hard to define is the word “sharing” and what it actually entails, as it differs depending on the context of its usage. For example, a common way to interpret an occurrence of sharing is an exchange between two parties, and not a case of borrowing where the object or some equivalent is expected to be returned. In that sense P2P-asset rentals, such as the service provided by Airbnb, should be excluded from the sharing economy (Oskam & Boswijk, 2016). However, if attention is on the sharing of access to an asset, as opposed to the asset itself, then a P2P-network is only a channel for sharing and therefore this form of asset rental can be included in the sharing economy (Belk, 2014; Martin, 2016). Schor (2014) describes the sharing economy by defining four broad categories in which the activities fall into, effectively covering the whole spectrum in what can be considered as common practice of the concept. Two of which cover the recirculation and increased utilization of physical assets, including both common goods and more durable assets such as accommodations or vehicles. The other two categories focus on the exchange of services and sharing of productive assets, such as skills and knowledge.


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Sharing in general has a long history and remains a common and frequent practice all over the world today. This, in the form of everything from a craftsman sharing the fruit of his labor, to a supply of water being shared in a community. In other words, it is a concept as old as mankind. The sharing economy as it is discussed today, on the other hand, emerged in the internet age, introducing new ways of collaborative consumption, as well as having older traditional ways facilitated on a digital plane. Online platforms have emerged, enabling individuals to exchange assets and goods through P2P-networks on a previously unprecedented scale (Belk, 2014). Meanwhile, the sharing of knowledge through channels such as Wikipedia, and open-source development of products like Mozilla Firefox and Google Chromium, are being explained by scholars using the term “sharing economy” as well (Martin, 2016). All of it built on what is termed “Web 2.0”. This is, in short, referring to online technologies which support an interconnected and social foundation, where any user is able to meddle and alter the information space, adding or editing content for example. Terms often affiliated with Web 2.0 include user-generated content, social media platforms, and also the sharing economy. These are all highly dependent on the social nature of Web 2.0, as opposed to the Web 1.0 generation which limited users to simply the viewing of content (Berube, 2011; Anderson, 2007). Impact and criticism The sharing economy’s impact on the world is often split into three segments. These include the environmental, the social and the economic impact (Codagnone & Martens, 2016). In its initial years, the positive attitudes towards the sharing economy were for the most part driven by the expected ecological impact, that is related to the notion of the Circular Economy (Korhonen et al, 2018). The perception was that the recirculation of goods would increase, effectively decreasing the production of new goods, as well as facilities in the case of hotels and shared lodging. This while also decreasing the consumers’ dependency on ownership (Frenken & Schor, 2017; Belk, 2014). However, the environmental impact is not as obvious as the hypothesized effects entail. Many participants claim to be eco-friendly and advertise their platforms as such, but despite the common belief of reduced demand for new products, empirical evidence to these claims have yet to be presented (Frenken & Schor, 2017). This is excluding the realizations of reduced individual CO2-emissions from the car sharing phenomenon (Chen & Kockelman, 2016; Nijland & Van Meerkerk, 2017). The social impact of the sharing economy is also commonly advertised by the platform providers. Attention is put on the benefit of meeting new people and getting to know your neighbor (Frenken & Schor, 2017). Airbnb is a site that is considered to have succeeded very well in this regard. Hosts are known to socialize, eat and in some cases even become friends with their guests (Frenken & Schor, 2017). This ties to the findings by Böcker and Meelen (2016) stating that social motivations were for a time parallel to economical ones. While heartwarming cases of these happenings exist, many platforms fail in delivering durable social connections. For example,


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Schor (2014) describes how a study on car-sharing services have shown that two parties in a transaction never met because of the remote access technology available. Further, a study by Parigi and State (2014) shows that even the housing platform’s ability to form these social ties have declined since the services’ inception. The study also raises the question of whether the social aspect of these platforms will be of importance in the future, as is seems the motivation of using the service for social interactions will decline as more people participate for economic reasons. The economic impact of the sharing economy has been expressed to be undeniably positive. Putting this in context, people who take part in a typical transaction within the sharing economy only do so if it is to both parties’ benefit (Frenken & Schor, 2017). In the case of lending a certain product, it is of little cost to the lender as the person most likely does not need the product during the specified period, whereas the consumer in this case gains access to it as opposed to purchasing one for himself. Frenken and Schor (2017) go on to explain that the economic impact can be seen in the rise of consumer capital as a direct effect of decreased transaction costs. Moreover, the authors state how millions of transactions occur today that were too expensive in the past through stranger sharing. The economic effects, much like the environmental impact, have a complexity of their own. For starters, the sharing economy and P2P-platforms are known to indirectly affect other market segments. For example, Crittenden et al. (2017) argues that an increase in short-term rentals could increase the monthly fees on the housing market. In another study, on the impact of Airbnb on the hotel industry in Texas, Zervas et al. (2013) found that low- to mid-price hotels in areas where Airbnb have risen, are experiencing a significant decline in earnings. Further, the analysis shows how the impact hits hardest on less established and lower-priced hotels, along with those that are not targeting corporate travelers, acting somewhat as a substitute for hotel nights. Additional concerns with the rise of home sharing services, described by Frenken and Schor (2017), are the problems with neighbors experiencing nuisance and feelings of unease as the neighboring apartments are rented by strangers. Another aspect tied to the economic impact of the sharing economy is the highly lucrative environment for third-parties participating in the transactions. Online sharing platforms are characterized by strong third-party actors, such as Airbnb and Uber, that give rise to a tendency for monopoly, along with the possibility to charge high rates for platform usage (Frenken, 2017). The revenues obtained through accommodation bookings are by charging hosts a 3 percent fee and guest’s 5-15 percent (Airbnb, 2017). This fee is however lower than what Online Travel Agencies (OTAs), third-party websites such as hotels.com and booking.com, are asking of hotels in order to post their rooms and offers on their websites (Morgan Stanley Research, 2017). OTAs were initially considered a compliment to the hotel industry, as a way to reach new customers (Lentz & Obermann, 2015). However, eventually OTAs had grown so big it made hotels too dependent on the business generated by it,


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making it hard to unsubscribe by the time they realized how disruptive the phenomenon actually was (Lentz & Obermann, 2015). To summarize, the environmental, social and economic impacts of the sharing economy are complex and affect each market differently. This, with the hotel industry pretty much solely being affected on an economic level, as the user base turn to the service for economic reasons. The motivations for participation in each sector can be seen in Figure 3, showing that both users and providers of accommodation sharing services motivate their participation with mostly from an economic standpoint (Böcker & Meelen, 2016).

Figure 3. Mappings of the user’s and provider’s motivations for participating in different sectors of the sharing economy. Source: Böcker & Meelen (2016).

Considering a service such as the one provided by Airbnb; even though financial motivations have been acknowledged to be the most important for the users of accommodation sharing, it does not imply that the social or environmental motivations are contraindicated in any way. Those aspects, and groups of consumers, still exist and need to be considered as these might shift down the line (Oskam & Boswijk, 2016). Participants’ driving motivations and what they might seek in the sharing phenomenon in the future still remains to be seen. Furthermore, while the sharing economy is providing the consumer with an increased welfare due to a larger variety of available goods and lower prices, it is also affecting certain traditional providers negatively. This encompasses the increasing percentage of Airbnb participants replacing traditional hotels for the sharing platform, as illustrated in Figure 4 (Morgan Stanley Research, 2017).


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Figure 4. A diagram showing the accommodation alternatives being replaced with Airbnb by leisure and business travelers. Mainly, and increasingly, hotels. Source:

Morgan Stanley Research (2017).

Additionally, it is argued that people would still have taken the specific trip without the service of Airbnb, see Figure 4. A shift in behavior is steering actors, in this case within the traditional hotel industry, towards a need for transformation (Muzyka et al., 1995).

2.2 The hotel industry in a transformation The concept of business transformation generally entails that a firm changes the way they do business. Since the term encompasses a broad spectrum, it is difficult to agree on a single unanimous academic definition of business transformation (Mckeown & Philip, 2003; Adler, 2018). Nonetheless, the definition presented by Muzyka et al. (1995) is the one commonly used:

“A fundamental change in organisational logic which resulted in or was caused by a fundamental shift in behaviours” To capture the essence of business transformation, a holistic model of the concept was identified by Spector (1995) consisting of three dimensions that ought to be considered for our purpose of exploring how hotel actors are reacting to the sharing economy’s manifestation on the market. The first one is ‘Customer alignment’ which refers to the need to consider the requirements of the customer, since this is usually what initiates a transformation, much like the occurring behavioral shift among travelers. The second one is ‘Sequencing’ which is the process of pinpointing what is to be prioritized, and the sequence of which the implementation is to occur. Lastly is ‘Learning’ which emphasizes a party’s need to maximize the experiential intake throughout the process of transformation. This means learning as much as possible from customers, market developments and other participating parties involved.


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Before the process of transformation can even begin, the need for a transformation has to be realized (Spector, 1995). This is where hotel actors are seemingly situated as the success story and spread of Airbnb’s accommodation sharing service have raised different understandings and opinions around the impact on traditional temporary housing alternatives. From accommodation sharing being neglected by the hotel community for having a faint impact on the industry, to having the potential problems realized and to some extent acted upon (Guttentag, 2013; Oskam & Boswijk, 2016; Morgan Stanley Research, 2017). Accommodation sharing as a disruptive concept Guttentag (2013) studied the development of the emerging trend of accommodation sharing, and more specifically the company Airbnb seen through the lens of a disruptive innovation theory as pioneered by Christensen and Overdorf (2000). The Airbnb business model, enabled by the internet, and rising in a period of recession (Goree, 2016), initially targeted adventurous customers looking for cheaper residences during special events, and succeeded in building a base for a prosperous future in lodging services (Guttentag, 2013). Observing the non-users’ liking of the accommodation sharing phenomenon, Varma et al. (2016) states that although non-users appear to be unfamiliar with such services’ existence, they still express a positive attitude towards participating in the future. The concerns they do have are mostly based on security question (Varma et al., 2016). Today, over 100 million room nights are booked annually (Anthony et al., 2018) and both the supply and demand is forecasted to continuously grow (STR, 2017). In a report by PwC (2017) it is concluded that Airbnb is attracting new visitors to cities due to more affordable residencies. Managers of hotels have also seen accommodation sharing as a complement to the hospitality business, especially in times of big events as the demand usually becomes greater than the supply (Guttentag, 2013). Either way, Guttentag (2013) notes that accommodation sharing is indeed a disruptive concept for traditional hotels and continues to propose what future research could be interesting on the subject. This includes questions on how hotels would respond to Airbnb as they grow stronger. In his work, Guttentag (2013) presents some arguments from several experts within the hotel industry. These split arguments have remained through the years. On the one hand, it is argued that Airbnb will pose a limited, to no threat towards traditional hotels and instead of taking a piece of the market Airbnb will only make the market bigger and co-exist with the hotels (Shankland, 2013; Mayock, 2013; PwC, 2017). In fact, Airbnb themselves have claimed that they are targeting a different customer segment than that of hotels, and is therefore complementing the market (Lawler, 2012), with an average of 4.5 nights long stays (Morgan Stanley Research, 2017). On the other hand, Airbnb’s accelerating growth is also considered a potential threat as the service operates on the same market as traditional lodging services (Guttentag, 2013; Zervas et al. 2013; Oskam & Boswijk, 2016; Morgan Stanley Research, 2017).


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Further, Guttentag’s (2013) research asserts that only a limited number of corporate traveler would use the sharing network. Nonetheless, in recent years Airbnb has increased its focus on engaging corporate travelers in the sharing network of accommodations (Lawler, 2014; Vidalon & Denis, 2017; Haywood, 2017) and in 2015, 250 businesses used the service, which has grown to 250,000 in 2017 (Jet, 2017). Even though Airbnb only possess a single digit percentage of the market shares for temporary lodging across regions (Overfelt, 2017; Haywood, 2017; Invest Stockholm, 2017), Bjorn Hanson, a clinical professor at NYU and expert on the hospitality and tourism sector, states that a company like Airbnb, who is accounting such numbers, can and shall not be ignored (King, 2017). Radcliffe (2017) emphasizes the importance of understanding and managing the impact of new disruptive trends and how, in ignoring them, a company risks losing market shares to competition that finds a way to use these new advancements first (Radcliffe, 2017). A common occurrence in this regard comes in the form of established companies disregarding change as they find the risk of it violating the organizational identity too great (Jacobs et al, 2013). Nevertheless, one needs to evaluate whether or not change is necessary, and what opportunities it brings with it, along with understanding the degree of business model change. Transformational pressure; Necessity or Opportunity Johnson et al. (2008) presented five strategic cases that can push for an adaptation or transformation of a business model;

1. “Opportunities from so far unserved customer segments, e.g. in emerging markets.”

2. “Opportunities to introduce new technology into an existing market or vice versa.”

3. “Opportunities from unmet customer need neglected by established players.” 4. “The need to fend off low-end disruptors.” 5. “The need to respond to a shifting basis of competition.”

The nature of change needs to be understood in order to decide upon which direction to take. Sommer (2011) describes different change models for managing business model transformations. One of which is an adaptation of Linder and Cantrell’s (2000) different approaches to change, illustrated in Figure 5, which shows whether or not incumbents need to make a business model change.


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Figure 5. Different approaches of change. Source: Sommer (2011).

These different approaches can be described accordingly in Table 1; Table 1. Different approaches further elaborated. Source: Sommer’s (2011).

Realization Model • No change in core logic or

business model • Maximize profit by optimization

like geographical expansion, additional sales/service distribution channels, increase share of wallet or product line extension and more.

Renewal Model • Usually no change in core logic or

business model • New service offerings, enter new

markets as well as disruptive products or services platforms.

Extension Model • Usually significant change of core

logic. • Adding new business operations

rather than replacing old ones. • Can be realized through value

chain integration, or by outsourcing an internal capability.

Journey Model • The most radical change model • Includes commoditization (going

from a focus on product to price) or the avoidance of it, globalization, moving upmarket in products or service.

Whichever approach is used depends largely of the contexts of change, along understanding the general business environment and the coming change. One way to evaluate the reason for why a transformation is needed is by looking at the pressure being put on an industry or a business. Eric Dahmén (1988) describes, in conjunction with his development block theory, the theory of transformational pressure. This is referring to the occurrence of structural tensions during industrial and technical changes in a cognitive space, caused by imbalances in the development, leading to


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pressures for change (Dahmén, 1988). These are further divided into positive and negative pressures. Positive pressure is often distinguished by, for example, the emergence of new methods, products and services or the rise of a new market space, whereas negative pressure ties to the moving on from outdated functions and products, or the fall of a previous market space (Dahmén, 1988). Depending on which of these pressures are affecting a business or an industry for instance, they give rise to either opportunities or necessities. Opportunities to exploit new possibilities, such as the introduction of a new technology, comes from positive pressure, while negative pressure leads to threats or necessities of change for an entity to survive (Dahmén, 1988). In this thesis, the theory of transformational pressure has been applied to the industrial perspective of hotels, and whether the sharing economy and accommodation sharing phenomenon puts a negative or positive pressure on the industry to change.

2.3 Reactions to the changes in the business environment Actions taken in response to the emergence of accommodation sharing platforms vary around the world. In the U.S. for instance, various companies in the American Hotel and Lodging Association have turned to the government in attempts to take legal actions, with the aim to establish regulations that hinder the sharing of accommodations (Benner, 2017), such as regulating the acceptable number of short-term rentals per host or acceptable amount of letting days (SOU 2017:26). The legislations mainly regulate the activities and not the user relationship within the sharing network (SOU 2017:26). In France for example, a host is allowed to offer short-term rentals until earnings reach 23 000 euros annually, but in Great Britain focus has been promoting the service through tax deductions to foster a good environment for transactions within the sharing economy (SOU 2017:26). In parts of Spain the government have regulated the allowed short-term subletting period, as well as banned the lending of individual rooms and introduced minimum lodging requirements in terms of housing standards for lenders (Hellekant, 2015a). Thus, regulations, fines and such, apply mainly to the hosts, not the guests in the transaction. In Sweden however, there are no laws or regulations hindering the sharing of accommodations as long as landlords, or housing associations (“bostadsrättsföreningen”) approves of the letting (Fastighetsägarna, 2015; Axelsson et al., 2017; Ödman, 2017). Instead parties tend to turn to existing legislations, such as market, consumer or property law, in the operating area, before pushing for any new legislations (SOU 2017:26). In the U.S. and Europe, legislative changes have generally led to an increased use of the sharing economy and accommodation sharing in particular. Shown in a study done by Morgan Stanley Research (2017), the regulations have made it easier for hosts to lend their housing. Figure 6 shows statistics from the study conducted in this regard.


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Figure 6. A diagram showing alterations in Airbnb host behavior due to law and

regulations changes. Source: Morgan Stanley Research (2017).

Arguably, the sharing of accommodations through online platforms is an unregulated market. That is, existing legislations are not explicitly linked to the actual act of online lending or related platforms (PwC, 2017). Participants are only subjected to current laws in the respective country, which on their own can be regulating to such services as explained above. Either way, some hotel actors have pushed for such legislative actions and regulations, while others have acted by adopting different strategic directions to gain a competitive advantage. Strategic directions taken by traditional hotels Kandampully and Suhartanto (2000) state that to gain a competitive advantage, hotel managers usually use two key strategies; either a low-cost leadership approach, or a focus on developing customer loyalty. As Airbnb enters the market offering alternative lodging for a lower price than many established hotels, some hotel actors have begun reducing their prices following the low-cost leadership strategy (Zervas et al, 2013; Oskam & Boswijk, 2016; Codagnone & Martens, 2016). Lowering the prices may, however, result in negative consequences for profitability in the long run (Kandampully & Suhartanto, 2000). Nonetheless, Morgan Stanley Research (2017) suggest that the pricing pressure from Airbnb is not as ample as can be presumed, as its impact should not necessarily equal lower prices for traditional hotel lodgings but will rather lead to driving down the growth of the prices. Kandampully and Suhartanto (2000) further mention that, to maintain a successful business, one needs to consider expanding, while at the same time keep up a loyal customer base. Their statements tie into the three competitive strategic approaches described by Treacy and Wiersema (1993), that are generally applied by businesses; “product leadership”, “operational excellence” and “customer proximity”, see Figure 7. Commonly, a combination of these are used (Engwall et al., 2017).


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Figure 7. Three ways of competitive strategy designed accordingly after Treacy &

Wiersema (1993). Source: Treacy & Wiersema (1993).

Competitiveness through Product Leadership: The offered products are perceived as superior, both on a functional and feature level compared to the competition. The company brand ensures quality, and mediates a positive image. To retain a product leadership position, heavy investments in product development and innovation are required. Commonly, this strategy entails premium prices on the value proposition in order to be successful. (Engwall et al., 2017) Competitiveness through Operational Excellence: A company following an operational excellence strategy, aims for an effective and standardized production in order to offer low prices, in relation to the offered quality, as a competitive means. By striving for a high volume and low variety the manufacturing costs can be kept low. Common is that these products and services are based on well-known technology and it is important for the business survival to keep low prices. (Engwall et al., 2017) Competitiveness through Customer Proximity: The product offerings shall be tailored to the customer’s needs. Each and every product is made to order and therefore unique. A customer proximity strategy is based on customer loyalty and customer relationship, which are of great importance. The key is to keep a high operational flexibility, in order to meet the customer’s unique requirements. (Engwall et al., 2017) Nonetheless, Kandampully and Suhartanto (2000) underline an increased focus on continuously improving customer loyalty, through constant development of services tied to the current needs of the guests, incremental improvements if you will. This is where hotels nowadays generally have their focus, as developments in the ongoing transformation have been those of technological advancements along with interior design trends tied to the core business and functions (King, 2017). This includes


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incorporating existing elements into the digital era, such as introducing self-check in/out services, robot concierges, and utilizing Big Data in hotel services for a more personalized guest experience (Brendan, 2017; Sisson, 2017; Leijonhufvud, 2017). This is however not expressed as a response to the growing accommodation sharing phenomenon. Apart from the technological advancements to increase customer experience, The Square Hotel Sofo, a company in Sweden advertising themselves as a hotel, has been offering to help people in lending their apartments (Hellekant, 2015b). This includes the hotel taking care of cleaning, running a check-in desk, and other hotel services while not actually owning the accommodation. In addition, the hotel chains of Marriott International and Hilton Hotels have recently invested to increase their mid-level pricing room supply in order to serve a broader range of customers (Overfelt, 2017). Other initiatives taken, mainly by international hotel chains, include forming partnerships with companies offering the network service of accommodation sharing (Sisson, 2017; Glusac, 2016). An example would be Hyatt Hotels’ partnership with accommodation sharing platform Oasis, in order to better serve the corporate travelers needs by offering more flexible options, usually for a longer stay (Hyatt Hotels Corporation, 2017; Sisson, 2017). This ties to Tushman and O’Reilly III’s (1996) statement that at times of industry transition, managers must be ready to cannibalize their own business in order to make it sustainable in the long run. In practice however, it has been shown to be rather difficult when transforming a business due to factors as inertia and lack of managerial support (Tushman & O’Reilly III, 1996). Either way, Al-Haddad and Kotnour (2015) emphasize the importance of continuously adapting to the ongoing change in today’s global business environment in order to stay sustainable, competitive and successful. This is of greater importance today as the rapid change of business environment has never been as high as it currently is (Fitzgerald et al., 2013; Todnem, 2005). Firms need to strive for continuous change. As mentioned by Sommer (2011) the frog analogy may be applied: If a frog gets thrown into a pot of boiling water it will get burned and jump out. However, if the frog is placed in the pot with cold water, which then is heated up to boil, the frog will stay there until it dies. This refers to the fact that organizations tend to be reactive, rather than proactive, in crisis situations (De Wit & Meyer, 2005). Thus, firms need to continuously evaluate their business and surrounding environment.

2.4 A Multi-Level Perspective in the sharing economy The pressure and demand for innovation is increasing and becoming keener to penetrate all kinds of industries due to the broadening concerns for sustainable development. Through this, a strive to understand the interplay and co-evolution of technology systems and society has emerged. This is referring to the socio-technical


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transition theory, where sustainable development plays a key role in what is considered an approach to understand how complex infrastructures and the individual’s behavior interact. This includes the interaction between individuals and technology as well. (Murphy, 2015) From the research and descriptions of previous historic cases of transitions, to new systems of a socio-technical nature, came the Multi-Level Perspective (MLP). It is introduced as a way to analyze, through multiple perspectives, the innovations influencing whole systems and their problem setting. The systems being those of production and consumption. The appeal of the MLP comes from the fact that it enables a simple way of structuring the analysis of extensive and complex transformations present in production and consumption contexts. Transformations driven by a growing concern for sustainable development, leading to a bigger and more thorough demand on innovation. (Smith et al., 2010) The model organizes the analysis of transformational change processes as socio-technical systems consisting of three levels of structuring processes; landscapes, regimes and niches, resulting in a multi-level perspective on technological transitions that not only takes changes in technology into consideration, but also changes in infrastructure, user practices, regulations and more. (Smith et al, 2010; Martin, 2016; Geels, 2002) Defining the three levels of the MLP Regimes are defined as a set of rules within a cluster of engineering practices, scientific knowledge, production methods, and everything else that makes up the entirety of a technology (Rip & Kemp, 1998; Markard & Truffer, 2008). Basically, the regime refers to established, or dominant, ways of carrying out different societal function (Rip & Kemp, 1998; Markard & Truffer, 2008). Representing the micro-level of the MLP framework are niches, where radical innovations (niche developments) can emerge outside of the confined pressures of regimes, or regular market practices (Kemp et al., 1998; Markand & Truffer, 2008; Smith et al., 2010). As explained by Smith et al. (2010), niche developments need to stretch out and connect with transformational processes in the wider sense to drive transitions in the regime. Landscapes make up the macro-level structural context of the MLP, for the regime and niches alike. It includes slow changing environmental and demographic structures such as shifts in societal ideologies and values, developments to wider economic or technological paradigms, changes in culture, and more (Geels & Shot, 2007; Martin, 2016). The landscape serves as a roof that stretches over a variety of regimes and niches, leaning the socio-technical transitions towards a path that serves common needs (Geels, 2002). Interplay between niche, regime and landscape The relationship between the three elements in the MLP can be described as a nested hierarchy. The regime resides within the landscape, and the niches within the regime. Innovations emerge in the niches, driven by problems, rules and capabilities nested in the regime or landscape. The niches and emerging developments are


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crucial for technological transitions as they can set the stage for a transformation. In a figure by Geels (2002) on the nested hierarchy of the MLP, illustrated in Figure 8, the interplay of niches, regimes and landscape developments in the context of a radical innovation being introduced, is explained. The regime section is represented by seven different dimension examples following long straight arrows that indicate the incremental nature of the processes. The landscape developments are drawn as long thick arrows, as changes occur slowly on this level, pressuring the regime. Below the regimes, niches and niche developments are illustrated. The small arrows indicate the work on potential radial innovations. Eventually a “window of opportunity” is created, often through a shift in the landscape putting pressure on a regime, and a dominant design emerges. This breaches through the regime, and potentially the landscape, leading to tensions and alterations in the established functions. The whole technological transition phenomenon is an effect of what the dotted lines represent; connections between the growth and progress at multiple levels (Geels, 2002).

Figure 8. A multi-level perspective on technological transitions. Source: Geels

(2002).

An article by Chris J. Martin (2016) discusses the framings of the sharing economy, where the MLP is applied to explain the effects of niche developments in the sector, and their ability to alter the established structures of the regime and landscape. However, the sharing economy can generally be described as being based on a common purpose technology; an online platform that enables P2P economic activities at a large scale (Martin et al., 2015). Moreover, the sector includes a variety of functions with different objectives and values. Because of this, when applying the MLP, Martin (2016) splits the sharing economy niche into sub-categories consisting of groups of innovations and corresponding regimes. The niches include accommodation sharing platforms, car and ride sharing platforms, and P2P


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platforms for sharing resources and goods, whereas the corresponding regimes are tourism, mobility and waste disposal. Martin (2016) continues to discuss the relationship between these niches and regimes. For example, the accommodations sharing platforms are described to be altering the tourism regime by introducing a different service model. The same thing is said about car sharing towards the mobility sector. As all three expressed groups of niches reside in a somewhat broad socio-digital spectrum, they affect different regimes as well, such as the entirety of information and communication technology (Martin, 2016). Because of this, it can be argued that Martin’s framing of, for example, the accommodation sharing niche is somewhat inadequate as it is hard to determine the actual effects in the regime. Tourism in particular is a large spectrum consisting of a variety of elements, such as traveling, housing, and different forms of entertainment. Common criticism of the MLP There are pitfalls to consider with the MLP. Because of the framework’s straightforward approach to seeing the bigger picture, there is a risk of the analysis becoming too simplistic, meaning important details and casualties might be overlooked (Sayer, 1992). If Martin’s (2016) framing of the sharing economy through the MLP is to be considered again, using regimes such as tourism and mobility might be counterproductive if effects of specific innovations, such as accommodation and car sharing platform, are to be considered. The niches will most likely not affect the whole specified regime, but rather only parts of it. For example, taxi services in the case of car sharing, which can be considered a regime of its own, or hotel services in particular being affected by accommodation sharing, instead of the entirety of the tourism sector. This delimitation is apparent in the analysis part of the thesis in chapter 6 when the MLP is applied to the study of the diffusion of accommodation sharing within the hotel industry transformation.

CHAPTER SUMMARY

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Chapter summary In this chapter, state of the art research is presented, along with a review of literature and theoretical concepts. The sharing economy is defined, along with its pronounced impact and criticism on the world. The impact is split into three segments, including environmental, social and economic aspects. As the user base have now reached the mainstream consumer, users and providers of accommodation sharing services in particular are motivating their participation largely from an economic standpoint, leading to the hotel industry mostly being pressured on an economic level. Research shows how an increasing percentage of Airbnb participants are replacing traditional hotels for the sharing. A common argument by hotel actors is that people who opt to use accommodation sharing platforms would not have traveled if that options did not exist. However, studies show how people would still have taken the specific trip without the service of Airbnb. What is happening is a shift in customer behavior as the growth of P2P sharing is becoming an all the more established form of transaction. This leads an investigation of whether a business transformation is necessary for hotel actors, motivated by pressures explained using Dahmén’s development block theory. This is referring to the occurrence of structural tensions during industrial and technical changes in a cognitive space, caused by imbalances in the development, leading to pressures for change. The state of the art shows how common reactions to the changing business environment includes a variety of efforts to mitigate or promote sharing practices in general, often through legislative attempts to regulate their usage. Hotel actors on the other hand have a seemingly heavy focus on current customer loyalty and improving the core business, as opposed to direct responses to the sharing phenomenon. For studying the occurring transition, the Multi-Level Perspective model is introduced in this chapter, as a way to analyze, through multiple perspectives, the innovations influencing whole systems and their problem setting.

METHOD

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3 Methodology In this chapter, the chosen method of research, including the collection of literature and empirical data, is presented. This refers to empirical data to answer the posed research question of whether the sharing economy is a threat or an opportunity. The conducted case study has an abductive approach supported by reviews of written material, and interviews with actors in the industry and experts on the subject. The empirical sources are of a qualitative nature, collected through semi-structured interviews, either through personal meetings or on a distance over the phone or through written personal communication. The quantitative data have been collected from previously conducted empirical studies and databases. Further, this chapter goes on to discuss the research quality in terms of reliability, validity and source criticism.

3.1 Research process and design This thesis embraces a case study methodology (Yin, 1981). Depending on the nature of the study, case studies could be illustrative, explorative or explanatory (Blomkvist & Hallin, 2015). Our case study is of an exploratory nature as we seek to explore and understand the sharing economy’s manifestation on the hotel industry, and how Swedish actors are perceiving and responding to it. A case study is fitting for this endeavor since it allows for a detailed and in-depth scrutiny of actors involved (Yin, 1981). The case’s focus on the Swedish hotel industry might limit the generalizability of the research in a broader geographical spectrum. However, the sharing economy is a worldwide concept that is affecting the hotel industry in similar ways all over world. Furthermore, the hotel industry is global, with common customer groups, and the Swedish major players are also operating outside the country, thus the study can still be generalized to some extent. The purpose of the study is exploratory in that it seeks to answer questions on what currently is happening in the hotel industry, along with what the underlying themes and patterns are behind the occurring transformation, and how it is being perceived (Yin, 1981; Blomkvist & Hallin, 2015). The case of the sharing economy's manifestation in Sweden is studied. The gathered empirical information from this real-life case, explanans, was used to understand the phenomenon, explanandum, and more easily grasp the complexity of reality. In performing the exploratory case study, an iterative abductive approach has been used. The purpose and research questions were adjusted successively as knowledge was gained on the subject. Hence, on the one hand the gathered data influenced the chosen theoretical framings and literature, and in other cases the other way around, with alterations to the empirical approach (Blomkvist & Hallin, 2015). The initial interviews were of an exploratory character as they subsequently followed a more deep and detailed inquiry.

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The case study has been conducted on the major actors in the hotel industry. Although, worth noting is that the study was done in close collaboration with one hotel group, hence a lot of the collected material is tied to their actions and initiatives, which in a sense limits the generalizability and external validity of the case study. Nonetheless, the group in question is a large hotel chain, consisting of several hotel brands across different segments and regions, and can therefore represent a general view of the Swedish market to a certain degree. Furthermore, apart from individual hotel brands and hotel chains, the empirical sources include non-biased experts and researchers on the different topics. The case study presented in chapter 4 is meant to investigate how the sharing economy is developing and how Swedish hotel actors are responding to it. This is why a qualitative research approach has been utilized as it allows for a more elaborate and deeper understanding of the phenomenon. The approach is apparent in the ten interviews conducted as they have been done with a more thorough means of bringing an individual’s or group’s thoughts and considerations to the surface. This is not to say the thesis is completely devoid of quantitative data, as that have been collected and presented as well, however this is secondary data from previously conducted research and studies. This secondary data is presented in our case study in parallel with the material collected through interviews since some of the interviewed experts, external to the hotel actors, are affiliated with the previous quantitative studies, as will be elaborated below. Furthermore, literature around the subject of the sharing economy, as well as the transforming hotel industry, was collected alongside the empirical material from actors in the field with the aim to explore and understand the problem. The abductive approach made it easier to understand all of the collected material as it allowed for updates to the applied theories for the study by adding new ones, as well as excluding previous ones that were ultimately deemed unnecessary. For example, the theoretical MLP model was brought in during the collection of the empirical material as a way to explain the diffusion of accommodation sharing, and effects on the hotel industry, in a changing financial state (see chapter 6.3). Further, at a later stage, to analyze and comprehend the gathered data from different hotel actors, Treacy and Wiersema’s (1993) theory on the three competitive strategic approaches was used to position the accommodation sharing services in relation to the hotel industry (see chapter 6.4). To assure that the problem formulation stressed an authentic industrial’s problem, a divergent and convergent approach has been used during the process (Blomkvist & Hallin, 2015). The research has been designed akin to a funnel in that in order to answer the main research question, the sub-questions need to be answered, as illustrated in Figure 9.

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Figure 9. The process and design of how to answer the main research question.

To make the problem, expressed in chapter 1.2, reachable Dahmén’s (1988) theory on transformational pressure, the MLP, and other theories applicable in cases of business transformation, have been used to analyze the empirical data in order to understand the phenomenon of the sharing economy’s effect on the hotel industry. Question that have guided the research include; How is the possible threat framed by Swedish actors today?; What differs in their opinions?; How do they choose to act on it?; What do external, unbiased, experts on the subject of the sharing economy, and hotel transformation have to say on the matter?; How has the phenomenon manifested itself outside of Sweden?.

3.2 Data gathering In this section, a description is presented of the material collected both written and orally. The written material has been gathered through peer reviewed journals, articles, annual reports and books. Furthermore, interviews were conducted with experts within the field of hospitality, experts on the sharing economy and hotel actors. Written material The written material can be separated into three segments, see Figure 10. Forming the base for this work are peer reviewed journals on the sharing economy and the disruptive concept of accommodation sharing platforms. Gathered theory on business transformation, along with the associated transformational pressure on incumbents, and innovation diffusion creates the starting point for the case study in order to describe how actors within the Swedish hotel industry react to the phenomenon. Further, annual reports as well as non-peer reviewed articles are used to describe the actions taken by hotels across regions.

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Figure 10. The different types of written materials used in the thesis.

Semi-structured interview Interviews with actors relevant for the study have been conducted to complement the gathered written material. A semi-structured approach was used in order to understand the perceived problem, as seen from the interviewees point of view. This method, which ensues a qualitative approach, leads to an open investigation were key issues were highlighted (Bryman, 2008). The aim was to reach a contextual understanding of how the sharing economy is manifesting itself on the Swedish hotel market. As this study intends to investigate a complex problem, a quantitative approach, such as surveys, was not used since it tends to reduce the complexity by utilizing a more structured framework for a more generalized viewpoint of the subject at hand (Blomkvist & Hallin, 2015). To better understand the problem and get a deeper understand of it, people from different areas of the industry were interviewed, as shown in Figure 11.

Figure 11. An illustration of the three different areas from where parties were

interviewed; hotel actors, industry experts and experts on the sharing economy.

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The subjectivity that comes with interviewing hotel actors in a transition might impede the reliability of the case study (section 4.3). Hence, additional interviews were conducted with Industry Experts. Furthermore, to understand the sharing economy’s diffusion in Sweden, Experts within the area were talked to. In Table 2 the interviewees are listed and for these sessions, open ended questions were prepared and structured as seen in Appendix A. Table 2. List of interviewees

Interviewee Organization Title Date of Interview

Client H2 Hotel organization A Vice President Distribution

2017-12-11*

Client H1 Hotel organization A Director of Future Business

2017-12-14 & 2018-01-25 & 2018-04-12

Niklas Gustafsson KTH,

Executive School Director Customized and Program Director at KTH Executive School

2018-02-23

Björn Arnek Visita Head of Department Business Economics

2018-03-07*

Airi Lampinen Stockholm University, Department of Computer and Systems Science

Deputy university lecturer

2018-03-09

Bjorn Hanson NYU, Preston Robert Tisch Center for Hospitality and Tourism

Clinical Professor and leading hospitality consultant, analyst and author

2018-03-19*

Client H3 Hotel organization B Chief Development Officer

2018-03-13**

Karin Bradley KTH, Urban and Regional Studies

Associate Professor at KTH and expert on the sharing economy

2018-03-22

Anonym Anonym Annordia Anonym Anonym 2018-04-04

Client H4 Hotel organization C Senior Vice President 2018-04-20**

Client H5 Hotel organization D Director of Operations Sweden

2018-04-16**

Lawyer Law firm in Stockholm Lawyer 2018-05-18*

*Telephone Interview ** E-mail correspondence

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As previously mentioned, some of the interviewed experts are affiliated with the previously conducted quantitative studies that are brought up in parallel with the interviews in the case study in chapter 4. To be more specific; Karin Bradley, expert on the sharing economy, is the one who was commissioned to conduct the government investigation on the users of the sharing economy in Sweden (SOU 2017:26). Björn Arnek, who is the head of business economics at Visita, from where some statistics were collected (Visita, 2018), was interviewed, as well as the people at Annordia who are behind the investment guide for hotel investors (Invest Stockholm, 2017). Speaking to the people behind such investigations allowed for a more up-to-date and in-depth understanding of the sectors, which could later be tied to the hotel actors’ perception and response to the sharing phenomenon. Each face-to-face interview lasted for approximately 45 minutes and the telephone interviews lasted for about 30 minutes each. In order to obtain more data and increase the reliability of the study, a few hotel executives were contacted via e-mail and asked to answer a number of questions, posted in Appendix A. Industry comparison In order to better understand the phenomenon of digital accommodation sharing, and be able to evaluate the situation in Sweden, an industry comparison against the U.S. industry was used to objectively evaluate the view of accommodation sharing and its impact on incumbents. One of the great benefits with such a comparison is the ability to understand a situation and become proactive instead of reactive (Wah Fong et al., 1998). Since the phenomenon emerged in the U.S., meaning the region has been subjected to it the longest, they were chosen as the industry to compare against. On the one hand, the study’s reliability may be impeded as it is difficult to compare different actors in an industry that is very protective of their thoughts and information. On the other hand, by triangulating semi-structured interviews with information from non-biased actors and written material on the subject, the reliability is increased as considerations and actions taken are evaluated using separate sources. This will now be further elaborated in section 3.3.

3.3 Research quality The research quality throughout the report can be described by critically discussing its validity and reliability to ensure a good scientific report. Furthermore, critique towards the source material will be expressed. Validity Validity entails studying what we set out to do (Blomkvist & Hallin, 2015). To ensure a high validity, a clear connection between the expressed purpose, research questions and the conducted research should exist and be formulated in the study. This is apparent as the area of investigation was developed in close relationship with the commissioner and guidance by a supervisor. The conducted research builds on a

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qualitative study, where the validity guarantees the findings’ accuracy (Creswell, 2013). Considering the external validity, being that of having the empirical material generalized and applicable in a broader sense, the study focuses on the industrial perspective of an industry that exist worldwide. Meaning parallels to other regions, or industries, can be drawn from the specific case of the sharing economy’s manifestation on the Swedish hotel industry. Reliability The reliability of the study refers to its ability of ensuring a repeatable outcome (Blomkvist & Hallin, 2015). The level of reliability is determined by how well the finished research applies to the reality if reviewed. In the context of social science, as within this work, the complexity of the investigation is too high to make it truly repeatable. Hence, reliability in this case is about transparently presenting the subject of investigation and method of work to the reader. In our case, the chosen qualitative approach, with semi-structured interviews, has the risks of leading to bias results as the interviewee gets the possibility to speak freely (Bryman, 2008). To minimize this, a set of standardized questions were prepared and posed to the interviewees within their area of knowledge. Furthermore, non-biased actors were interviewed to make the empirical material more reliable. Source criticism The written material for the theoretical framing is obtained through peer reviewed sources, such as journals and books. Since the client company for this study is an actor in the industry we are investigating, there is a risk of falling into a bias pitfall. To mitigate this risk, a critical and objective view on the subject was ensured by using sources from varying standpoints and organizations. In general, when stating facts, the aim has been to use more than one source to confirm its reliability. Different hotel actors were therefore interviewed. As multiple standpoints increase the work’s reliability, one can argue for it to decrease, as some of the empirical material was collected through e-mail correspondence, which may not be as open-ended as a real-life, or telephone, interview. Nevertheless, by using a somewhat structured interview-question-sheet, containing questions seen in Appendix A, the information was still deemed necessary, mainly to strengthen the reliability and validity of the other material. In the end, all of the gathered empirics proved very useful, no matter the method of collection. Since the subject is a currently a hot topic, the possibility that hotel actors might be holding back on information regarding actions taken towards the problem, is a fact. Hence, the gathered information and conducted interviews from these areas are in one way or another biased and should therefore be treated as such. This goes for the collected statements and information from annual reports of hotels in the conducted case study, since such reports are often angled to promote the own organization’s practices. Nonetheless, to avoid bias results, comparisons have made with the gathered written material from different sectors and interviews conducted with

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people from different areas of the industry. This includes trade organizations and expert consultants focused on the general hotel industry for instance. Furthermore, since some of the written information is gathered from non-peer-reviewed channels, the reliability of the research is decreased. However, as multiple sources are stating the same facts and information, along with having the empirical sources noting and confirming the same information, the reliability is increased. There is also the question of how information from other regions could have benefitted the study's external validity and reliability. The sources used are only written in the Swedish or English language, and even though some of them are focused on a variety of places other than Sweden or the U.S. for example, it is safe to assume that a lot of useful material goes untouched as it is written in the native language. Airbnb, for instance, operates in over 190 countries, and the sharing economy exists in even more.

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Chapter summary This chapter has described the chosen method of research for the study. An explorative case study is conducted on the Swedish hotel market, built on qualitative material collected through the review of written sources, and semi-structured interviews with actors of relevance to the study. Since the empirical focus has been on the Swedish industry, the generalizability of the study is arguably limited. However, the study’s focus on the industrial perspective of a worldwide industry leads to plausible parallels being drawn from to the rest of the world. The reliability is justified through transparently presenting the subject of investigation and method of work to the reader, along with the broad range of empirical sources, to avoid biased data. The validity is ensured through a clear connection between the expressed purpose, research questions and the conducted research, along with a close relationship to the commissioner of the study, and the guidance by a supervisor.

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4 A case study on the Swedish hotel industry This chapter includes the collected empirical material from the semi-structured interviews, and is complemented by previous research on the subject. It brings up the occurring manifestation of the sharing economy in Sweden, along with the national diffusion on the phenomenon, as well as transformational pressures towards sharing services. The chapter moves on to present the material gathered from talking to various hotel actors, as well as experts on the industry. It goes into the Swedish hotel industry’s development in recent years, in terms of trends and focus, before lastly presenting a comparison between the Swedish and American framing of and behavior towards the accommodation sharing phenomenon.

4.1 The sharing economy in Sweden The sharing economy’s growth is not a discrete one, being a trending topic on vibrant diffusions in the digital age, with a seemingly unanimous universal understanding that it is a lasting concept. The reactions towards the phenomenon however have been found to be differing across geographical locations, examples being the mentioned actions to mitigate its growth in France, along with promoting the sharing economy in Great Britain, mentioned in chapter 2.3. General societal and governmental opinions in Sweden on the other hand are neither positive nor negative towards sharing practices (Bradley, pers. comm., 2018). If anything, political opinions are mildly positive as suggestions are being brought up to promote sharing practices, but these are fairly recent and have yet to take effect (Bradley, pers. comm., 2018). When observing Swedish governmental reports and political statements on the sharing economy, much like in other parts of the world, the growth of the phenomenon is discussed in terms of economic, environmental and social effects. Further there is a more apparent focus on the user perspective in Sweden. This entails discussing questions tied to consumer law, user safety, and more, when analyzing the sharing economy. (SOU 2017:26; Rosencrantz & Stenergard, 2017; Miljöpartiet de gröna, 2017; Bradley, pers. comm., 2018) In a study on what it would take for individuals in Sweden to begin using, or continue using, sharing services in the future, the responses showed a large need for laws and regulations to protect the individual participant (SOU 2017:26). This, since an uncertainty is tied to sharing transactions, for instance the fear of arriving to a deviant apartment than was advertised by the lender on Airbnb (Bradley, pers. comm., 2018). Hence, the major focus on user safety and security in political discussions on the subject in Sweden. Important to have in mind when reading governmental reports and forming an opinion on the matter is to understand the risks and actual effects of the phenomenon, especially when it is being promoted. Looking at the two biggest

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sectors of the sharing economy, car sharing and accommodation sharing, some interesting and rather logical observations can be made. Starting with car sharing, it has been shown that an individual who sells their car and starts using sharing services instead will reduce their individual carbon footprint (see chapter 2.1). However, this is not always the case when looking at the bigger societal picture. On the one hand, car owners are starting to adopt sharing practices, but on the other hand, users who rely on public transportation have increased their utilization of cars. Car sharing services have rather made cars available for people who have not had such vehicular access before. Further, younger generations, who previously lacked the funds required for personal vehicles, are suddenly being trained into such usage. This was observed in the user base of Car2go in Sweden as the average user was about 25 years old. (Bradley, pers. comm., 2018) Moreover, in the case of accommodation sharing, few to no studies have shown positive environmental effects from the service. It is quite the contrary. Cheaper lodgings along with increased earnings means a heightened ability to travel, which increases emissions (SOU 2017:26; Bradley, pers. comm., 2018). National diffusion of the sharing economy In Sweden so far, the sharing economy is considered still to be quite small. A conducted quantitative study ordered by the government (SOU 2017:26, p. 17) concluded;

“Results show that only about 10 percent of the population have used sharing economy services in the last two years. Most of them have only used the services on rare occasions.” Of the 10 percent, very few have experienced any problems in their participation, that is they did not experience something going wrong, such as being cheated by another party (SOU 2017:26). This partly goes to answer why there are no legislations for or against the sharing economy in Sweden (Bradley, pers. comm., 2018; Lampinen, pers. comm., 2018). Further mentioned by Bradley (pers. comm., 2018) is that the dominant requirement for increased adoption among peers is most likely laws that protect the individual user, as well as a desire of a form of official quality branding. This was also shown in a study, where Bradley was involved, on what it would take for Swedish consumers to start using, or increase their usage of, sharing services, see Figure 12 (SOU 2017:26).

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Figure 12. Results from a multiple option survey on what it would take for individuals to start using, or increase the usage of, sharing economy services.

Source: SOU (2017:26, p.130) and translated. To answer the consumers’ needs for safety and security, Bradley (pers. comm., 2018) also believes insurance companies need to be brought into the picture. The insurance policies as of today, in terms of accommodation sharing, cover only private ownership, meaning if one were to lend out their apartment through Airbnb, the regular householder’s comprehensive insurance does not apply (Bradley, pers. comm., 2018). Furthermore, the results from the government investigation shows that those who have participated in any form of the sharing economy are characterized by a curiosity and an openness towards new societal phenomena, as well as being socially engaged and risk-inclined to some degree. In other words “early adopters”. It was therefore concluded that if the sharing economy, as a whole, is to gain momentum in Sweden, additional safety promoting services and functions need to be implemented for it to go beyond the so called early adopters. (SOU 2017:26) What should not be overseen however, is that such security and safety concerns, along early adopters making up most of the user base, applies to a general view of the sharing economy. Studies on the sharing of housing and accommodations in particular show that those types of services are perceived as the safest forms sharing practice, meaning the diffusion of Airbnb is not affected by such concerns as much as other services, and is being utilized by the mainstream customer as well. (Bradley, pers. comm., 2018). An additional note; from the perspective of the sharing platform providers, or potential new entrants, the problems tied to the platforms’ diffusion in Sweden are perceived to be that of legislative ones (Client H1, pers. comm., 2018; Bradley, pers. comm., 2018). For a firm like Airbnb for example, there is the issue of tenants, or the housing community of a building (in Swedish: bostadsrättsförening), having full

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control over whether an individual can lend their housing or not (Lampinen, pers. comm., 2018; Bradley, pers. comm., 2018; SOU 2017:26; Lawyer, pers. comm., 2018). Transformational pressure towards the future of sharing practices in Sweden From the perspective of the individual being pressured to use sharing services, a negative pressure has been distinguished during the financial crisis of 2008, as people were in a weakened economic state (Bradley, pers. comm., 2018; Arnek, pers. comm., 2018). New ways of living were explored since many were forced to alter their traditional consumption practices (Lampinen, pers. comm., 2018). Hence, the emergence and rise in popularity of renting and sharing services such as Airbnb, which was introduced in 2008. At the same time, a positive pressure to utilize services within the sharing economy, can be distinguished as it provides opportunities of alternative consumption practices. (Bradley, pers. comm., 2018) The environmental pressure towards the sharing economy is more apparent in the automotive industry. There are cases of both positive and negative pressure; the positive being the common benefits of reduced emission, and the negative being, for instance, legislations forbidding environmentally hazardous practices. Such environmental pressure is not as apparent in the accommodation sharing sector however, as there is no clear connection between carbon footprints and services such as Airbnb. (Bradley, pers. comm., 2018) Closely linked to the environmental discourse are social aspects such as changing societal trends and opinions. An example of this can be observed in the transformational pressure coming from accommodation sharing providing the opportunity for travelers to experience living as local. This opportunity has put a positive pressure towards services within the sharing economy. This in turn puts pressure on the traditional hotel industry to make their services more personalized through design and technology, which is further discussed in chapter 5. (Client H1, pers. comm., 2018) Moving on from the pressure towards sharing practices being put on the individual, the general technological and digital development of the consumer’s everyday life naturally puts pressure on incumbent industries to adapt and streamline their offerings with technology. For instance, the hotel industry being pressured by Airbnb’s digital distribution channels, and flexibility towards a broad range of customers. (Client H3 pers. comm., 2018; Client H1, pers. comm., 2018; Hanson, pers. comm., 2018) Further, there are claims that the pressure from technology advancements is a positive one on the actors, a basic example being the internet introducing the possibility to easily find, book and review a residence (Nordic Choice Hotels Editorial Team, 2016, Gustafsson, pers. comm., 2018).

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Although no present legislative actions have been taken in Sweden, as have been the case elsewhere, the matter is being discussed politically, as stated above. For example, tax deductions across all sharing economy services have been suggested, such as the user’s ability to earn up to 40,000 SEK a year through sharing platforms before taxes have to be paid (SOU 2017:26; Rosencrantz & Stenergard, 2017; Miljöpartiet de gröna, 2017; Bradley, pers. comm., 2018). This can be seen as a positive pressure to enable a greater diffusion of sharing services. Negative economic pressure is, however, not purposely used as a means to control societal functions in Sweden towards a broader utilization of the sharing economy. (Bradley, pers. comm., 2018) For instance, the political party “Swedish Green Party” (in Swedish: Miljöpartiet) emphasize the potential of reduced resource consumption, whereas the “Moderate Party” (in Swedish: Moderaterna) underlines the sharing economy’s ability to generate jobs through the introduction of new services (Rosencrantz & Stenergard, 2017; Miljöpartiet de gröna, 2017). The general sharing economy has been somewhat of a mildly increasing trend in Sweden, compared to a faster diffusion in the U.S. for example. Again, important to understand however is that this applies to an overview of the sharing economy. With some sharing platforms not really having taken off in Sweden, one must not neglect the promising growth of the few successful ones. Airbnb is a prime example, going from mostly being utilized by sharing-enthusiasts to a regular use among the mainstream consumer. (Bradley, pers. comm., 2018) The transformational pressure from the single platform is a force to be reckoned with by industries operating in a traditional manner (Hanson, pers. comm., 2018). Already, most notably the vehicular sector and its incumbent actors have been positively pressured to realize the opportunities with the digital sharing economy (Bradley, pers. comm., 2018). This with, for instance, BMW’s introduction of the car sharing platform DriveNow, and Volvo forming Sunfleet. Similar actions can be observed within hospitality as well, albeit not as extensive as with other sectors. An example would be the hospitality company Marriott International incorporating a more asset-lite approach to their operations, or other big hotel companies offering housing more akin to private apartments (Bradley, pers. comm., 2018; Hanson, pers. comm., 2018; Client H1, pers. comm., 2018). Either way, with an increased political and societal discourse, the sharing economy’s growth is believed to continue in Sweden (Bradley, pers. comm., 2018). Even if many of the emerging platforms are not adopted by the Swedish consumer, sole diffusing companies such as Airbnb evokes questions on whether the transformational pressure coming from such digital P2P platforms is negative or positive to traditional hotels, along with if such services are to be considered a threat or an opportunity (Gustafsson, pers. comm., 2018).

4.2 Trends within the Swedish hotel industry In Sweden, the hotel industry is said to be expanding as an effect of a state of boom and increased tourism, among other reasons (Invest Stockholm, 2017; Arnek, pers.

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comm., 2018; Annordia, pers. comm., 2018). Even though mostly international guests stand for the growing segment, roughly 75 percent of all hotel guest nights in Sweden are booked by national guests (Nordlöf, 2017; Arnek, pers. comm., 2018). Furthermore, the hotel customer segments differ across the world, with the U.S. market being characterized by leisure travelers, and the Swedish market’s visitors being mostly corporate travelers (U.S. Travel Association, 2017; Hanson, pers. comm., 2018; The Swedish Statistical Office, 2018). The development of hotel customers from 2008-2016 in Sweden is illustrated as a staple diagram in Figure 13, formed by data extracted from the Swedish Statistical Office (2018).

Figure 13. An annual segmentation of the hotel customers within the Swedish

market. The orange and grey bars (two to the left) represent business travelers, whereas the green and blue bars represent leisure travelers (two to the right).

Source: The Swedish Statistical Office (2018) and translated. In recent years, leisure travelers have risen from about 30 percent to 45 percent of all rooms booked in Sweden 2017 (The Swedish Statistical Office, 2018). However, as stated by Arnek (pers. comm., 2018), it can be difficult to differentiate the two segments since the line between a business and leisure trip can be blurred, but either way this number is said to keep growing. Nevertheless, in 2017, Scandic, who has the biggest share of the hotel market in Sweden, obtained approximately 70 percent of revenues from business travelers (Scandic Hotels Group AB, 2018). Still, it is perceived that business travelers have become a less reliable source of income because of technical developments, such as more effective online conferences, and the recession following the financial crisis in 2007-2008 (Goldhammer, 2017). This ties to the fact that business travelers are strongly connected to the economic state, and are thus more sensitive to it than leisure travelers (Arnek, pers. comm., 2018). Meaning that if the global financial state is declining, there will be less business visitors traveling. Leisure travelers’ correlation to the financial state is a bit more

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complicated on the other hand (Arnek, pers. comm., 2018). Stated by Goldhammer (2017), when referring to leisure travelers, multiple studies show that people would rather not cut down on traveling even in bad times. However, when the great recession hit in 2007-2008, people began adopting new ways of consumption instead, such as accommodation sharing through Airbnb, leading to the hotel industry being affected anyway (Bradley pers. comm., 2018).

“Looking back 10-12 years there is a frightening correlation between the hotel industry and mood of economy” (Arnek, pers. comm., 2018). Presently, there is a boom since 2016 in Sweden (Konjunkturinstitutet, 2018) and the hotel market is flourishing (Arnek, pers. comm., 2018). What is somewhat contradictory is that in early 2018 a risk for oversupply was brought to the surface by Scandic as numbers showed a decreased occupancy rate of their hotel rooms in Stockholm (Jerdén, 2018). This decrease proceeded into the beginning of 2018 (Arnek, pers. comm., 2018). This, as an effect of which the capacity has been growing faster than the demand (Jerdén, 2018, Annordia, pers. comm., 2018; Arnek, pers. comm., 2018). Nonetheless, the occupancy rate in Stockholm is on a historically high level (Arnek, pers. comm., 2018), see Figure 14 below (Visita, 2018). Moreover, an interviewee from Annordia (pers. comm., 2018), states that the occurred minimal decline in occupancy rate is expected to level out within a couple of years as a result of an increasing tourism catching up with sudden large hotel expansions.

Figure 14. The occupancy rate of hotel rooms, calculated as hotel rooms on record

divided by disposable hotel rooms. 12-months average numbers illustrated. Source: Visita (2018).

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Nevertheless, in Scandic´s annual report (2018), the decline of short-term occupancy rates, as an effect of increased hotel room capacity, is framed under market risk, while also stating that it provides them with the opportunity to obtain more customers however. Moreover, although leisure travelers account for most of the growth since 2012 (Invest Stockholm, 2017), a hotel brand still needs to attract both customer segments in order to have a successful business (Annordia, pers. comm., 2018). The intention should be to fill the so called white spaces, explained by Hanson (pers. comm., 2018) as segments on the market with great potential that are not being targeted to the extent they should. Hanson (pers. comm., 2018) states that the successful hotels of today will continue being successful in the future, but they need to change the way they do business in order to address the needs of as many travelers as possible. Today, the majority of the hotels in Sweden are within the mid-scale zone, whereas great potential lies in investments within the more economical and premium segments which should not be ignored (Annordia, pers. comm., 2018). Another area of interest for hoteliers is the growing trend of long stay hotel apartments, which can be seen as a potential white space on the market (Client H3, pers. comm., 2018; Client H1, pers. comm., 2018). The hotel market is today often divided into two main segments, short- and long stay guests, depending on the amount of nights stayed (Client H1, pers. comm., 2018), see Figure 15.

Figure 15. One way of dividing the customer segments within the hotel industry.

There is no common definition of exactly how long the periods are for each segment (Client H1, pers. comm., 2018) but in general long-stay living entails a period longer than a few days and up to months or even a year (Strawberry Living AB/AS, 2018). One of the first hotel actors in Sweden to fully enter they long stay market is the hotel magnate Petter Stordalen, who invested heavily in long stay residences in the end of 2017 (Strawberry Living AB/AS, 2018). Forenom Aparthotel is another company that is investing in this opportunity (Client H3, pers. comm., 2018), while at the same time utilizing Airbnb’s distribution channels with their launch of apartment hotels on Airbnb’s platform (Grossman, 2017). Observing the Swedish hotel actors’ framing of accommodation sharing platforms, such as Airbnb who are seemingly covering a white space (Hanson, pers. comm., 2018), different actors are divided between whether or not Airbnb is affecting their

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business. For example, actors within the long stay segment, who are mainly targeting the business traveler segment, state that they prefer to see Airbnb, who has entered the business traveler market as well, as an opportunity rather than a threat (Client H3, pers. comm., 2018). This, since they can potentially use their distribution channels to become more global (Client H3, pers. comm., 2018). This is not an uncommon way of framing the phenomenon by hotel actors in general (Client H1, pers. comm., 2018; Annordia, pers. comm., 2018; Arnek, pers. comm., 2018; Client H5, pers. comm., 2018). A reason for the current positive framing of the phenomenon can be that the hotel industry is flourishing at the moment, as stated by Arnek (pers. comm., 2018);

“The hotel actors in Sweden would probably have showed a greater interest in reacting to the sharing of accommodations if not for a period of high growth and prosperity” (Arnek, pers. comm., 2018). Further, as mentioned by Client H2 (pers. comm., 2017), during peak seasons and times of events, Airbnb can be seen as a complement, again, as the demand for lodgings increases. Similar arguments are presented in the annual report of Scandic (2018);

“Services like Airbnb, however, do not have a significant influence on Scandic, which has a high share of corporate customers and an average overnight stay of less than two nights. Airbnb has probably contributed to increasing the total market for overnight stays in recent years.” Arnek (pers. comm., 2018) has however expressed beliefs that accommodation sharing may affect the hotel industry in the coming future. Interesting observations can be made when looking at the U.S. market in particular and going back 36 months to see the reaction of many CEO:s of traditional lodging companies. Back then, the consensus was that accommodation sharing platforms were targeting a different market and were therefore not considered a threat. However, with the vibrant diffusion of the sharing economy, and occurrences such as Airbnb entering the corporate traveler market, the view on the service has shifted somewhat from being a complement to the hotel market, to more of a threat and brings with it a necessity to react. Economists in the sector might still call it a substitute good, or an increase in lodging supply. (Hanson, pers. comm., 2018) Either way, Hanson (pers. comm., 2018) states;

“... it can be very unusual for someone to answer in either version of that as being good news for traditional lodging.”

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As Airbnb penetrates the business customer segment, along with factors such as their accelerating growth and investments on apartment complexes dedicated solely to the platform, actors around the world are starting to acknowledge it as a possible threat rather than a complement to the hotel industry (Hanson, pers. comm., 2018; Client H1, pers. comm., 2018; Spjuth, pers. comm., 2018). A business that generally possesses around 5 percent of the market supply can and shall not be ignored (King, 2017; Hanson, pers. comm., 2018). This is somewhat the case in Stockholm, seen in Figure 16 that shows Airbnb’s share of the hotel market to be around 4 percent.

Figure 16. January-May 2017. Source: Invest Stockholm (2017)

To further illustrate the differing views and perspectives of the industry, and gain a deeper understanding of the phenomenon, a comparison between the Swedish and U.S. market will be presented in the next chapter.

4.3 Comparing the Swedish and American Framing of Accommodation Sharing As presented in section 4.1, the accommodation sharing concept had its breakthrough in 2008 during the financial crisis, as Airbnb was introduced to the world. Since then, the U.S. established firm has gone from targeting a niche group of customers to becoming a global sensation, and today targeting both leisure and business travelers (Guttentag, 2013; Oskam & Boswijk, 2016). Zervas et al. (2013) wrote in 2013 about how Airbnb was affecting the traditional hotel market. They stated that, during that time, the hotels affected were mainly low- to mid-price hotels, and those not targeting business travelers. Although, as mentioned in chapter 1.1, a lot has changed since then, with Airbnb’s recently established focus on business travelers, along with increased premium offerings (Zaleski, 2018; Airbnb, 2018). Hence, the apparent shift in framing the phenomenon by hotel executives in the U.S., from being largely neglected, to being considered a potential threat that necessitates change (Hanson, pers. comm., 2018). As mentioned, limited attention has been directed towards the sharing services in Sweden.

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Over the years, traditional hotel players have acted in different ways in response to the growing trend of accommodation sharing. From an increased focus on the core business in order to gain a competitive advantage, to legislative attempts of regulating the market of shared services, as illustrated in Table 3. What follows is a table that highlights some differences between the views and actions of the Swedish and the U.S. hotel industry. Table 3. An industry comparison between the Sweden and U.S. hotel market.

Parameters to compare

Sweden U.S.

Current general framing of the accommodation sharing phenomenon

Generally seen as a complement rather than a threat, as negative effects on the industry are currently minor. At the same time, some actors start to realize the coming need for transformation. *I3 & I4 & I6 & I8

The common view within the hotel industry is that accommodation sharing should be treated as competition. *I2 This opinion has been most apparent among the low- to mid-price players (Zervas et al. 2013; Varma et al., 2016).

National and industry legislative actions

towards the sharing of accommodations

None. Sweden has not formed any legal regulations towards the use of Airbnb, other than the tenants of a facility having the option to decline third party lending. Other than that, political considerations are seemingly leaning towards promoting the phenomenon. * I7 & I9

Selected regions have formed regulations to the activity such as the acceptable number of short-term rentals per host or acceptable amount of letting days. * I2 & I7

Business strategies to handle the

accommodation sharing phenomenon

Incumbents focus strongly on improving the core business through personalization and customization. No real strategic focus on utilizing or mitigating P2P accommodation sharing as of yet, other than occurrences of hotels advertising rooms on Airbnb. *I1& I6 & I8

Investments have been made in joint ventures with companies based on the accommodation sharing, as well as the common personalization of offerings by traditional business. Others have also adopted a lite-asset approach. *I2 & I7

Transformational pressure coming from

accommodation sharing, opportunity or

necessity?

The general perspective is that accommodation sharing platforms bring opportunities rather than forcing the industry to change. Few concerns that it might pose a threat are expressed. * I3 & I4 & I5 & I6 & I8

Expressed as pressuring for necessities, the consensus being that it is a real threat that has to be acted upon. *I2 & written material presented in chapter 2.2.

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* Interviewee 1 (I1): Client H1 (2018) Interviewee 2 (I2): Bjorn Hanson (2018) Interviewee 3 (I3): Björn Arnek (2018) Interviewee 4 (I4): Annordia (2018) Interviewee 5 (I5): Client H3 (2018) Interviewee 6 (I6): Client H5 (2018) Interviewee 7 (I7): Karin Bradley (2018) Interviewee 8 (I8): Client H4 (2018) Interviewee 9 (I9): Lawyer operating in Stockholm (2018)

The comparison of the transformative situation through the lens of Sweden and the U.S. was done in order to put the Swedish framing of the phenomenon in contrast to a market where it has been acknowledged as a threat. It also serves as a base for the analysis in chapter 5 since the U.S. hotel industry, as stated by Hanson (pers. comm., 2018), are a number of steps ahead in terms of Airbnb’s adoption on the market. The current consensus of the actors within the Swedish hotel industry is that Airbnb does not affect their business negatively (Invest Stockholm, 2017; Arnek, pers. comm., 2018; Scandic Hotels Group AB, 2018; Client H5, pers. comm., 2018; Client H3, pers. comm., 2018). The phenomenon is generally considered to increase the lodging supply, rather than taking customers from the hotels, as well as assisting in highlighting the distinctive aspects of a hotel (Scandic Hotels Group AB, 2018; Client H5, pers. comm., 2018; Client H3, pers. comm., 2018). Hanson (pers. comm., 2018) however, states that it does not matter whether the actors see it as a substitute good or an increase in supply, as the effects on traditional hotels will be negative for future revenues either way. He further points out that it will not mean the end for traditional hotels as a need for such services will always remain, but perhaps not to the extent of today. Hotels will in the future add a more diverse hotel portfolio including pricing models and new types of services (Hanson, pers. comm., 2018). In Sweden, minor actions have been taken in response to the growth of Airbnb (Client H4, pers. comm., 2018). For instance, some hotels offer their rooms on the sharing platform, meaning using it as a distribution channel (Client H3, pers. comm., 2018; Client H1, pers. comm., 2018), however Client H4 (pers. comm., 2018) states that more should be done. Nonetheless, the major hotel brands have decided to mainly focus on improving the core business through technology advancements such as self check-in/out via smartphones or make the visit more personalized by utilizing the obtained data from the customers (Client H1, pers. comm., 2018; Scandic Hotels Group AB, 2018). There is also the fact that hotel actors are trying to design their facilities to be more akin to the guest’s home, while the housing market is styling houses to be more like hotels (Client H1, pers. comm., 2018). Hanson (pers. comm., 2018) states that such a focus on the core business can be seen as purely a reaction to the current customer trends. In the U.S. however, hotels have recently shown a greater attention to the current situation of transformative pressure (Hanson, pers. comm., 2018). There, as

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presented in chapter 2.3, legal actions have been taken in order to regulate the utilization of the sharing platforms. There is also the investment by Hyatt Hotels Corporation in a private accommodation sharing platform, which is considered an upscaled version of Airbnb (Hyatt Hotels Corporation annual report, 2017), and Marriott International, Inc. introducing a more asset-lite approach (Hanson, pers. comm., 2018). Meaning, not being in the ownership business but rather in management and branding. In the future, Hanson (pers. comm., 2018) states that he does not see traditional hotels copying the business model of Airbnb as it builds on a completely different economic model. It is rather more likely that Airbnb adds services more akin to a hotel company.

“I think it is less a question of whether the hotel industry will look like Airbnb, but rather will Airbnb look more like the traditional hotel industry over time.” (Hanson, pers. comm., 2018)

CHAPTER SUMMARY

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Chapter Summary What has been dealt with in this chapter is the Swedish framing of the sharing economy, and how hotels in the country are perceiving the phenomenon. Shown throughout the case study is the likely growth to the adoption of sharing practices because of the positive perception by governmental authorities, and Swedish users in general. Hence why no legislative actions to mitigate it have emerged, as have been the case elsewhere. The low percentage of active users today, being around 10 percent, is likely due to issues related to safety and security that comes with P2P transactions. Moreover, taking a step back and looking at the sharing economy’s adoption in general, there is an apparent acceleration to its diffusion during worsened financial periods, such as during a recession. Either way, the sharing economy has been somewhat of a mildly increasing trend in Sweden, excluding the explosive growth of the accommodation sharing platform Airbnb, that is believed to accelerate with an increased societal and political discourse. In Sweden, the hotel industry is expanding as an effect of a state of boom and increased tourism, among other things. The customer segmentation in Sweden are seeing some changes as well, with business and leisure travelers going towards equal shares of the customer base, from business travelers previously being the bigger part. This goes to show that hotels need to increase the focus on both segments. Furthermore, there should be an intention to fill the so called white spaces, explained as segments on the market with great potential that are not being targeted to the extent they should. A potential white space being long stay apartments which some hotels are approaching. This ties to the common division of hotel stays into short- and long stay guests, which hotel actors are claiming differ from the area accommodation sharing is operating in. The general consensus by hotel actors in Sweden is that accommodation sharing is more of a complement rather than a threat. It is implied, among other things, that the phenomenon answers to an increased demand which hotels cannot fulfill, as well as making opportunities available to utilize the digital sharing platforms’ own global distribution channels to reach more customers. The developments in the industry are mainly focused on driving the core business forward through technological advancements to traditional functions, and answering to current customer needs, rather than responding directly to the growth of accommodation sharing. The positive perception in Sweden is shown to differ from how sharing practices are perceived in the U.S. where it is commonly treated as competition. There has been a realization among actors in the American industry that the accelerating growth of accommodation sharing services is bad news for traditional lodging of they remain idle. It is however pointed out that it might not mean the end for traditional hotels as a need for such services will always remain, but perhaps not to the extent of today.

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5 Analysis and discussion In this chapter, the analysis of the collected material is presented, along with being discussed more thoroughly. The chapter starts off with a brief analysis of the importance to adapt to the ongoing transformation, before moving on to delve deeper into the adoption of accommodation sharing in Sweden and using the MLP in the context of the transformative change. The next part of the chapter analyses the competitive position of Airbnb, and the customers shifting behavior, along with a discussion on the problematic perception of the phenomenon by the Swedish hotel industry. Lastly, this chapter concludes with an analysis of the transformative pressures that the hotel industry is exposed to, as well as presenting a new customer segment that has emerged.

5.1 The importance of adapting to the transformation Much like many other industries, if not all, the hotel industry is undergoing a transformation driven by the digital age. If the words of Muzyka et al. (1995) are to be considered, the cause for change is simply a shift in behaviors. This fits well with the three dimensions of Spector’s (1995) holistic model of considerations in business transformation, being ‘customer alignment’, ‘sequencing’ and ‘learning’, as mentioned in chapter 2.2. This general framing of the subject can be applied to most cases of transformation, but they are far from sufficient to remain, or become, successful in almost any industry. In the hotel industry, it is no secret that customer alignment and sequencing in particular are important for a favorable business. The customers’ needs and requirements are often what triggers a transformation and sets a direction for it, whereas sequencing helps to pinpoint what exactly needs to be altered or implemented for instance. What appears to be the case for hotels is that they are in somewhat of a pattern of incremental changes. This does not necessarily mean that the changes brought to the table are not radical or disruptive in any way. It is quite the contrary. Innovative technology is being introduced and incorporated into different functions, greatly changing how things operate, usually for the better. There is the mentioned introduction of a digital check-in desk that basically removes the required human interaction during a stay, the suggested use of Big Data in order to personalize the customers experience even further, as well as talk of incorporating blockchain technology for security and stability benefits among other things. These, along with many other changes and introductions in the industry, are by no means incremental innovations as they arguably greatly alter traditional functions in accordance to the emerging digital age. However, they are incremental changes in that they are highly focused on the customers’ current needs for the core business. Meaning hotel functions are evolving naturally and somewhat linearly together with the current customers’ behavior becoming more technology based, while partly neglecting potential new segments, or deviations from the core offer, tying in to Hanson’s (pers. comm., 2018) statement in chapter 4.3 on reactions to trends.


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Other important points to take into account, for any industry, when moving towards the digital era are ethical issues. The question of whether digital services and automatization will eliminate jobs will most likely always remain. For example, implementing a digital check in desk might eventually remove the need for a receptionist or concierge. Further, there is the ethical issue of the gathering personal customer data, and how it is utilized. In accordance with the hotel guest, the data could be used to personalize offers, such as entertainment, cultural or food suggestions, and it is crucial that it follows the fair and good use requirement (Blomkvist & Hallin, 2015). Total transparency towards the customer in how the data is being used is important in this regard. Interesting synergies can be observed when looking at Kodak’s descent from a dominant position in photographic film (Tripsas & Gavetti, 2000), mentioned in chapter 1. The simplest and most common explanation to it is Kodak, being blinded by prosperity and success, missed the change towards digital technology. Although hotel actors are adapting diligently to the digital revolution, ongoing fundamental changes in the business environment have seemingly been put in the backseat. This is problematic since it is an essential aspect to consider in order to remain a sustainable, successful and competitive business (Al-Haddad & Kotnour, 2015). A change being referred to is the rise of accommodation sharing platforms, and how the phenomenon is being framed. For the majority of Swedish hotel actors in particular, accommodation sharing services are not being considered an immediate threat whatsoever, as shown in chapter 4.3. Neither are any actions being taken for the long run in direct response to platforms such as Airbnb. Much like in the case of Kodak, hotel actors are neglecting the possible negative outcomes from the growth of accommodation sharing platforms as hotels are in a period of prosperity. The occupancy rates are in some regions on a historical high level (Arnek, pers. comm., 2018). This leads to the worrisome thought of the aforementioned frog analogy in chapter 2.3, which basically reads that if you throw a frog in boiling water, it will instantly hop out, whereas if you put it in cold water which is then slowly heated to boil, the frog will eventually die. Put in the context of hotels, if one were to imagine a scenario where, for example, Airbnb were to suddenly be thrown into the mix of temporary lodging supply, instantly taking the approximate 4 percent of the Swedish hotel market that it has today, it is likely that hoteliers would more actively and strongly react to the sudden change. In reality, Airbnb has grown gradually, slowly taking a share of the market, with the hotels not fully responding to the ongoing change since the hypothetical water is slowly been heated, making some frightening similarities to the case of OTAs, mentioned in chapter 2.1, apparent. The information gathered on the framing of the general sharing economy in Sweden all points towards a continued national adoption and growth. The phenomenon is largely positively received by the users, however only about 10 percent of the Swedish population have used sharing services in the two years up until the governmental


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study (SOU 2017:26), whereas Airbnb stands as one of the most common services heightening the average percentage. The arguably low percentage seems to tie in to the insecurity that comes with P2P transactions, such as the safety of an official quality brand being missing. Although the security issues can be somewhat hindering the adoption of the general sharing economy, the accommodation sharing platform Airbnb in particular is still growing and is showing no signs of stopping. The sharing economy, as described in chapter 2.1, partly builds on the foundation of utilizing underutilized assets. The concept truly emerged during and after the financial crisis of 2007-2008, and the following recession, as people had less money to spend and cheaper alternatives were introduced in the form of sharing practices of goods and assets (Goree, 2016; Lampinen, pers. comm., 2018). Since then, the use of sharing services like accommodations sharing have increased enormously (PwC, 2014; Martin, 2016). The rise to power came from social motivations for participation as well. Meaning, the service’s diffusion in its initial years seems to have been due to social aspects alongside the economical ones of the service (Frenken & Schor, 2017; Böcker & Meelen, 2016). This ties to what is mentioned in the governmental report (SOU 2017:26) on the sharing economy being most popular among early adopters. A negative aspect of P2P sharing is the issue of safety and security, however, early adopters, being the social risk takers that they are, are unaffected by such issues. Being positively affected by social and economic reason alike, Airbnb saw a vibrant diffusion and discourse across a broad audience, eventually becoming a service for the mainstream customer beyond the early adopters (Böcker & Meelen, 2016), which is likely the reason for the financial motivations being more important than the social ones nowadays.

5.2 A Multi-Level Perspective and the hotel industry In chapter 2.4. the MLP model is explained along with Martin’s (2016) discussion on the sharing economy as a whole and how the socio-technical regimes of the sector, such as tourism and mobility, are affected as new technological niches appear in a changing landscape. Moreover, as briefly mentioned in the chapter, Martin’s (2016) framing of the accommodation sharing niche and the effect on the tourism sector is arguably insufficient as tourism consists of a variety of functions and activities. When applying the MLP framework in this study on the hotel industry, we believe the regime needs to be scaled down to functions where accommodation sharing has a clear impact. This goes for the landscape as well. As of 2016, there has been a boom in Sweden (Konjunkturinstitutet, 2018), which historically usually stretches over a period of 6-7 years before a shift to a recession. With the hotel market being closely linked to the general financial state, the financial pattern speaks for a positive future the coming 4 years but a possible decline in the years after as the industry will accordingly decline during the recession (Arnek, pers. comm., 2018). Figure 17 illustrates a simplified version of Geels’ (2002) figure of the


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MLP on technological transition, but specified for the case of transformative change in the hotel industry.

Figure 17. A MLP on how the technological niche of accommodation sharing alters

regimes within the hotel industry in a changing national financial state.

Figure 17 shows how a coming recession might lead to a technological niche putting transformational pressure on traditional hotel functions to change. In terms of the MLP model, the landscape in question refers to the financial state of a nation, the regimes are the traditional functions of hotel lodgings, and the technological niches refer to accommodation sharing platforms. When a recession hits and alters the financial landscape, the niche of accommodation sharing platforms, being a disruptive innovation (Guttentag, 2013), suddenly becomes a more viable option. This, because of its flexibility in offerings both in price and location, effectively sets the stage for a transformation in the hotel industry (regime). The expected outcome is that the niche development eventually becomes a widely preferred form of temporary housing, leading to many consumers switching from the mainstream hotel room to this new niche idea. This would cause it to break through the regime of traditional hotel functions, forcing changes in order for hotels to not lose their footing in the inevitable rise of accommodation sharing platforms. Important to understand is that Figure 17 depicts a future scenario, where the sharing economy is already an established form of business transaction. This is opposed to considering the Figure’s application in the past scenario of the 2007-2008 financial crisis, when Airbnb took off, as it would be faulty since the hotel industry was more or less unaffected back when the platform was a small start-up. Figure 17 illustrates how already established accommodation sharing platforms might disrupt the traditional hotel business in a digital age, where it has been found


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that the bigger part of motivations for accommodation sharing participation are economical ones. An important assumption can be made in this framing of the coming recession’s impact; looking at the Swedish hotel market in particular, few hoteliers in Sweden will have acknowledged the negative effects of the accelerating growth of accommodation sharing. What seems to be the case today is that hotel actors understand fluctuating revenues as a pure effect of the financial state, which is not an incorrect understanding in any way. However, we believe hotel actors will, after this particular period of recession, truly realize the effects of the accommodation sharing phenomenon on the traditional industry. This is referring to the fact that consumers who start using accommodation sharing services are less likely to go back to staying at a hotel, which will be discussed further in chapter 5.3. The use of the MLP in this case can be argued against because of the common criticism of leading to somewhat simplistic analyses, as expressed in chapter 2.4. Much like with Martin’s (2016) analysis of the sharing economy using the MLP, there is a risk of overlooking important casualties because of the broad nature of the hotel industry. On the one hand Martin’s use of tourism as a regime in his analysis is far broader than the hotel industry, and its traditional functions. However, that does not necessarily mean the hotel industry is narrow enough for a simple on-point analysis. Much like with tourism, the hotel industry on its own consists of a great variety of activities and services, other than hotel rooms. There are restaurants, event facilities, different forms of entertainment, and other sources of revenues for hotels, much of which are difficult to consider being directly affected by the rise of accommodation sharing services. This leads us to believe that hotels will likely never die out as an effect of accommodation sharing breaking through the regime, much like stated by Hanson (pers. comm., 2018). At least not the bigger hotels, who are often the ones providing such services to a larger extent. Either way, revenues from rooms is still the prime source of income for most, if not all, hotels. The framing using the MLP in this study serves the purpose of structuring the coming transformation in a simple way, only focusing on the hotel’s lodging services, specified as a delimitation in chapter 1.4. Much like with the rise of OTAs, acting passively for too long towards sharing services will eventually lead to lessening revenue streams, even though the traditional hotel may never disappear.

5.3 Understanding the competitive threat of accommodation sharing The Swedish hotel actors’ current general view is that Airbnb increases the lodging supply and can be seen as a complement bringing opportunities some actors are beginning to realize the potential threat, shown in the comparison made in chapter 4.3. The U.S. actors have changed their perception during the last three years and become more hostile towards the sharing of accommodations (Hanson, pers. comm., 2018). For example, actions to regulate the services are introduced, while others try to invest in the sharing platforms.


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As Zervas et al. (2013) states, budget hotels, and the ones not targeting business travelers, will be the most affected by the growth of accommodation sharing. However, as Airbnb recently entered the market of business travelers, along with reaching a bigger critical mass (Bradley, pers. comm., 2018), we believe that even the midscale and premium hotel segments, midscale being the biggest in Sweden, will be affected in the coming future. This since on the sharing platform of Airbnb, a diverse portfolio including residents of premium, midscale and budget offerings exist, along with a newly introduced customer loyalty program (Zaleski, 2018). The competitive strategies described by Engwall et al. (2017), mentioned in chapter 2.3, are somewhat of conflicting logics. For instance, if one aims for a high customer proximity approach, it is difficult to standardize the offers while trying to respond to the broader mass, and at the same time attempting to differentiate through premier features. Additionally, the pricing model might be incompatible when combining the different approaches. However, as companies are becoming more digitized and asset-lite, we believe a combination between all three strategies is more plausible. This is the position in which Airbnb has moved into, balancing between product leadership, operational excellence and customer proximity, offering tailored offerings, luxurious residences and at the same time budget alternatives. This leads to the conclusion that the posing threat of Airbnb is made greater to all hotel actors as they attract customers from all areas, as illustrated in Figure 18.

Figure 18. The competitive position of Airbnb and the customers they attract.

In order to understand how hotel actors should perceive the competitive position of Airbnb, it is important to realize that there has been a recent shift in customers on the Swedish market, mentioned in chapter 4.2. Shown in the research done by Morgan Stanley Research (2017) and presented by Verhage (2016a), guests tend to substitute hotels for Airbnb, as seen in Figure 18, and rent residences for a longer period on average, and the majority of these people are more likely to continue using


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the sharing service in the future. There is the aforementioned argument by hotel actors that the accommodation sharing customer, who usually stays a longer period than the average hotel visitor, belongs to a different customer group, hence not negatively affecting hotels. However, we are of the belief that as the accommodation sharing prices are lower on average, people can afford to stay longer and therefore opt to do so. A change in behavior is established, which will flourish during a recession, and seemingly the substitution of hotels will become greater as the usage of sharing services increases. This since leisure travelers have grown stronger in Sweden the last years, now accounting for almost 50 percent of the market, and who presumably still travel during weaker financial times. This entails that the full effect of accommodation sharing will be seen and understood after a recession as have been discussed in chapter 5.2. Previously, the Swedish industry mainly consisted of business travelers, a market which Airbnb had not entered. Hence, no major negative effects on the Swedish hotel market were previously distinguished. As Hanson (per. comm., 2018) stated, whether an actor sees it as a substitute good or an increased supply of lodging, it will still affect hotels negatively. In the comparison between the Swedish and the U.S. hotel industry different perspectives on the phenomenon, similarities and differences could be distinguished. Actors within both countries are focusing on strengthening the core business by introducing technological improvements, such as the utilization of Big Data in order to offer a more personalized service. The strategy to make the hotel experience more personalized in order to enhance customer loyalty, rather than competing in price, was also described by Kandampully & Suhartanto (2000) as the potential path for hotel’s future success. However, as mentioned by Hanson (pers. comm., 2018) utilizing technological advancements to enhance customer experience and such, can be argued to be just a pure reaction to trends, and not a reaction towards accommodation sharing and the ongoing transformation. Furthermore, as mentioned in chapter 4.3, as the hotel actors are trying to design the hotels to be more akin to the guest’s home, the housing market is styling houses to be more like hotels (Client H1, pers. comm., 2018). What seems to be the case is that the demand for a traditional hotel experience will remain, while the separate home-like experience will grow to a segment alongside hotels. Meaning, the rise of one will not necessarily mean the end of the other. Both will most likely remain, although in order for an actor to stay successful and sustainable, benefits from both areas need to be drawn. In Sweden, as described in chapter 4.3, actors are generally claiming that accommodation sharing will not affect their business negatively. On the contrary, it is rather considered to be a positive phenomenon. As Oskam and Boswijk (2016) stated, there are occurrences of traditional hotels using Airbnb’s network platform as a sales channel. On the one hand, this can be seen as a positive financial benefit for hotel companies as Airbnb takes a smaller margin than the OTAs (Olsson, 2016; Airbnb, 2017; Client H1, pers. comm., 2018, Zaleski, 2018), while at the same time


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making the distribution channels more global (Client H3, pers. comm., 2018). Further, it may also be an opportunity to minimize the OTAs bargaining power. On the other hand, as travelers currently replace hotels with accommodation sharing (Morgan Stanley Research, 2017), we believe that hotel actors should be careful when directing customers to Airbnb’s platform, or any accommodation sharing platform for that matter. A naivety of the full impact and potential threat of these network platforms may lead to lost opportunity revenues. Using the platform as a sales channel becomes somewhat of a double-edged sword. The critical mass reached by Airbnb, including a millennial base, can be taken advantage of, however, by introducing hotel customers to accommodation sharing platforms one risks cannibalizing on the traditional business. The key and challenge is understanding both the threats and opportunities emerging from the growth of the sharing economy and accommodation sharing platforms.

5.4 Transformational pressure on the Swedish hotel industry and the necessity to act Even though the opinions and framings of the accommodation sharing phenomenon by Swedish hotel actors can be considered alarmingly positive or ignorant, since possible future threats are being ignored more or less, the development of the phenomenon does indeed bring some opportunities with it. Using Dahmen’s (1988) definition of transformational pressure, the growth of accommodation sharing platforms is putting both a negative and a positive transformative pressure on the hotel industry. The negative pressure, or the necessity to change, comes from the fact that accommodation sharing platforms are growing at an alarming rate while adopting common hotel functions, such as amenities important for business travelers and the newly introduced loyalty programs. This, underpinned by a coming recession which in itself pressures the hotel industry as explained using the MLP in chapter 5.2, leads us to assume that many traditional hotel customers will switch to the emerging sharing platforms. P2P renting is going towards becoming more of a standard form of temporary living, making the hotel industry’s necessity to change more apparent. The importance to adapt to ongoing changes in today's global business environment cannot be stressed enough, especially since changes in that environment are as rapid as they are in the current digital era. When applying Johnson et al.’s (2008) five strategic cases that necessitate transformational changes to a business model to the case of the hotel industry, some interesting observations can be made. The fourth and fifth points entail fending off disruptors of a low-end nature, and responding to shifts in the competitive forces on the market. This ties into the Airbnb phenomenon, being an economic and disruptive alternative that is growing, as the customer behavior is shifting, going towards embracing P2P transactions on a larger scale. This is a real threat that is slowly surfacing, leading to the necessity for hotel actors to respond to the growing P2P market in order to not take too much of a hit in the future.


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Further, as mentioned, a common belief is that accommodation sharing participants are part of a new different customer group. Adapting to that market could tie in to Johnson el al.’s (2008) first and third cases for transformational change that refer to transforming in accordance to the opportunity of serving previously untouched markets, or markets neglected by other actors. However, as explained earlier, that customer group is not solely made up of new customers but also people who substitute hotels for accommodation sharing platforms, making this supposed opportunity partly a necessity for hotel actors. Lastly, looking at Johnson et al.’s (2008) remaining case of introducing new technology to an already established market, it can be concluded that this is already being done naturally by actors worldwide through the aforementioned introduction of technology in traditional hotel functions. In short, the growth of accommodation sharing platforms have led to drawing in previously unserved customers who prefer a longer and often cheaper period of stay, while also creeping into the customer base of traditional hotels. This, by holding a position of equal balance between product leadership, operational excellence and customer loyalty, as well as altering the behavior of current hotel customers by providing a simple and cheap method of extending the period of stay during a trip. Again, this is all underpinned by the growth of sharing platforms during a recession. The result of these elements in particular have led to what we believe is the emergence of a new customer segment, “Mid Stay“ customers. As illustrated in Figure 19, the segment refers to customers wanting to stay longer than the short average of traditional hotel guests but a shorter period than what is referred to as Long Stay.

Figure 19. A simple illustration of the segment that has emerged from the changing

customer behavior. The Mid Stay segment serves the purpose of sorting what hotel actors believe to be a different customer group than what hotels are targeting, meaning partly the common Airbnb guest who stays approximately 4.5 nights on average (Guttentag & Smith, 2017; Morgan Stanley Research, 2017). But as stated, this particular group is drawing in customers from other segments as well. To make the ongoing situation easier to understand, it can be put in a hypothetical scenario; Before the emergence and growth of accommodation sharing platforms, the


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traveler segment consisted of 100 people, with the assumption that 85 of them stay at hotels, while the rest book alternative residencies such as hostels, or opt to camp outside. As accommodation sharing evolved and grew, the general amount of travelers increased to 120 travelers. Seemingly, the amount of hotel guests increased to 95 people, whereas alternative lodging stood for a share of 25 people. Here, it is important to recognize the hotel executives’ standpoint of being unaffected by accommodation sharing as their business is still flourishing, while also not considering accommodation sharing as a threat but rather as an opportunity. However, as illustrated earlier, the service poses a threat for all actors as the business environment transforms and customers change their behavior. In the future, if hotel executives do not react and continue to ignore the ongoing transformation, the market consisting of 120 people traveling, might decrease to 70 hotel guests while the rest use other lodging alternatives, such as accommodation sharing. The gist of it is that actors could be deluded by a general prosperous increase in customers and income. Hence, why the focus should be on reacting to the sharing economy by approaching the Mid Stay segment, necessary for hotels in order to keep current customers, but which also brings with it an opportunity to reach into an emerging market of new customers. Although the financial aspects weigh heavily on the pressure being put on the hotel industry, along with the social aspects of customers behavioral shifts and such, there are other pressuring factors that should not be forgotten. Political pressure in Sweden is, as explained in chapter 4.1, nothing that is presently affecting the hotel industry or the sharing economy, however the fact that the sharing economy has emerged as a point of discussion within the government cannot be ignored. Already different ways to promote sharing practices are being brought up by different political parties, which in time can add to the threat of the growing accommodation sharing phenomenon, but also heighten the opportunities that come with exploiting the customer segment tied to it. Depending on how much one wishes to read into the subject of transformational pressure, the analysis might be deemed unnecessarily thorough or too shallow. For instance, interesting findings can be made when looking beyond what is directly pressuring the hotel industry, such as the general technological development. With the emerging digital age, the consumer’s perception of, and comfort towards, new technology has improved. Meaning, services such as digital accommodation sharing platforms are no longer completely uncharted territory, even for the new customer. Safety and security is still an issue, but it is not as hindering as it might have been in the internet’s early days for example. Further, one can delve deeper and discuss phenomena typically taken for granted by the average person nowadays, such as the easy access to photography technology and rating and comparison systems. Recession or not, if not for technological advancements allowing for opportunities such as the ability to upload photographs of an accommodation, and receive ratings and recommendations from other users, an online platform like Airbnb would have


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never risen to what it is today. In a sense, with this particular study’s heavy focus on financial aspects leading to pressuring the hotel industry, the analysis of the transformational pressure can be considered insufficient. However, much like with the environmental aspects, technological development is not directly pressuring hotel actors to change in response to accommodation sharing. They are definitely underlying factors to the development of the sharing economy and the hotels, but the pressure being put on the industry today has more to do with alterations in the consumers financial state and behavior.

CHAPTER SUMMARY

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Chapter summary This chapter has gone through our analysis and discussion of the subject at hand. Undeniably, the hotel industry is undergoing a transformation driven by the digital age. We argue for that the reactions towards it are insufficient. On the one hand, hotel actors are adapting their functions and services in accordance to emerging technological advancements. This is referring to the digitalization of the industry, such as utilizing Big Data and Blockchain technology. On the other hand, no advancements directed towards the sharing economy in particular. The positive and somewhat neglecting attitude towards the sharing economy, especially in Sweden, can be compared to the downfall of Kodak in the transition to digital photography. The information gathered on the framing of the sharing economy in Sweden all points towards a continued national diffusion and growth. Using the MLP in the context of the hotel industry, it describes how the changing financial landscape, going towards a recession in the near future, will lead to the niche of accommodation sharing breaking through the regime of traditional functions. The MLP shows how hotel actors, who are currently in a prosperous financial state, likely will truly realize the effect of accommodation sharing after the recession, effectively intensifying the transformational pressure being put on the hotel industry. Considering the competitive position of accommodation sharing platforms, namely Airbnb, it can seemingly be placed in a white space, balancing between product leadership, operational excellence and customer proximity. The ability to offer tailored or luxurious residences, and at the same time budget alternatives leads to the conclusion that the posing threat of Airbnb is made greater to all hotel actors as they attract customers from all areas. The result of all these elements have led to what we believe is the emergence of a new customer segment, “Mid Stay” customers. The Mid Stay segment serves the purpose of sorting what hotel actors believe to be a different customer group, which Airbnb is targeting, but which we argue for being partly new untouched customers, as well as people replacing the hotel lodging services for accommodation sharing. In the end, even though the opinions and framing of the accommodation sharing phenomenon can be considered alarmingly positive or ignorant, since possible future threats are being ignored more or less. The development of it does indeed bring opportunities to the surface. It is a phenomenon that leads to pressuring the hotel industry negatively with its fast growth rate, but also positively as it has made sharing practices more of a mainstream activity, enabling opportunities to exploit the sharing economy. Hence, why the focus should be on reacting to the sharing economy by approaching the Mid Stay segment, necessary for hotels in order to keep current customers, but which also brings with it an opportunity to reach into an emerging market of new customers.

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6 Conclusions, implications and future research To answer the posed research questions the findings and conclusions are summarized and presented in this chapter. The results from the conducted empirical study are intertwined with the findings from previous research. Finally, recommendations and prospective ideas are suggested for a future research.

6.1 Summary of findings The study has been conducted in order to give answer to the posed main question and two associated sub questions, which are presented individually in the following section. As described in chapter 4, the sub questions were developed to facilitate a conclusion to the main research question, as presented hereinafter. RQ1: How is the sharing economy manifesting itself in the Swedish

hotel industry?

The answer to this question, which is delimited to the accommodation sharing phenomenon, can be divided in two. The first part covers how the phenomenon is being perceived by the large hotel actors in Sweden. Through the conducted case study on the Swedish hotel market, accommodation sharing is generally perceived as a positive phenomenon to the industry, mainly as the sharing service is said to increase the amount of travelers as well as being considered a complement to the traditional hotels, answering to an increased demand and assisting to highlight the distinctive aspects of a hotel, rather than acting as a competing force. It is also sometimes considered as an additional global distribution channel of lodging. Few current negative effects are distinguished or uttered by the major traditional hotels in Sweden, other than the few who state that more initiatives against it should be taken. This is what has led to the idle behavior of Swedish actors towards services such as Airbnb. The second part refers to the accommodation sharing phenomenon’s actual development in the business environment. Although it presently only takes up a single digit share of the hotel market, it can be concluded that such services increase in times of recessions. As of today, Sweden is experiencing a boom and we assume that the full negative impact on the traditional hotel industry will not be realized until after the next recession, when consumers have replaced hotels with accommodation sharing services. Furthermore, with Airbnb’s enormous distribution channel and flexibility, along with them entering the corporate traveler market and the introduction of loyalty programs, they have positioned their competitive strategic

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approach in between product leadership, operational excellence and customer loyalty as shown in Figure 18. This leads to them naturally affecting and taking customers from hotels of all kinds. Furthermore, as previous studies have shown, only 10 percent of the Swedish population had used services linked to the sharing economy in the past two years. A number we assume will increase as Sweden enters a recession. To conclude, the accelerating growth of accommodation sharing, and the sharing economy in general, will creep into the hotel industry and begin taking market shares, as long as they remain ignorant of the coming development and its negative impact. RQ2: What are the implications for actors in the Swedish hotel industry

to meet the rise of the sharing economy?

Mentioned throughout the report is how the hotel industry is not facing its end in any way, but rather risks being disrupted and lose its momentum in the hospitality sector. The demand for traditional hotel lodgings and other services, such as restaurants and event facilities, will likely remain. This is why a complete business model overhaul might not be the right approach when responding to the growth of accommodation sharing. As of today, hotel actors are mainly focusing on personalizing their services and evolving traditional functions through the introduction of new technology. These actions can be seen as a pure reaction to an ongoing digital trend, which is not wrong in any way. If anything, it is a necessary and natural development of the industry that ties to our argument for hotel brands to not change their core logic of doing business, but rather aim for a Renewal Model, mentioned in our implication for handling the phenomenon below. The development of traditional functions should continue, while at the same time new services and opportunities, made possible by the diffusing sharing sector, should be introduced. This in order to diversify the portfolio with different product models, and to identify new types of services that might be essential to stay successful and sustainable in the future. This goes for all types of hotel actors. As previously shown, the low- to mid-price hotels, as well as the ones not targeting business travelers are currently being affected the most but we argue for that even the larger hotel brands will in the coming future be negatively affected. In chapter 6.2 below, a concept is brought forward which suggests a method of utilizing the accommodation sharing phenomenon in a joint venture with real estate developers. The implication is a separate operation from the traditional hotel lodging offering, but which utilizes its current assets such as the brand, resources and facilities. It is a way for hotel actors to enter the accommodation sharing sector and reach out to what we call the Mid Stay segment. This is what hotel actors commonly refer to as a different target group than that of hotels’, but which we deem to be a hybrid of a different customer group and current hotel customers who are replacing the traditional hotel. The former being customers who prefer a longer stay than the traditional hotel visit but less than a long stay living, and the latter being hotel guests


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who have extended their preferred amount of nights with the introduction of the accommodation sharing alternative. Our recommendation to hotel actors, no matter what competitive strategy they apply, is to become more versatile in their lodging offerings. This by entering the Mid Stay segment while also minimizing the gap between their position and the one accommodation sharing platforms are operating in, being a flexible middle ground between operational excellence, product leadership and customer proximity. Main RQ: Is the sharing economy an opportunity or a threat to the

hotel industry? Industrial change comes with transformative pressure that contains both necessities and opportunities (Dahmén, 1988). The sharing economy’s impact on the traditional hotel industry across the world has differed, and there is no consensus of, whether or not the sharing of accommodation should be perceived as an opportunity or a necessity to transform among the Swedish hotel actors. As shown in the analysis, it can be assumed that with a changing landscape going towards a worsened national financial state, the traditional hotel functions, as a regime, will have to change with the emerging niche of accommodation sharing. In that sense, the sharing economy can be considered a definite threat, as it brings with it a negative pressure on the hotel industry to transform. However, important to remember is that the sharing economy sector covers a broad spectrum of functions and activities. While the rise of accommodation sharing in particular is a threat to hotel actors, there are aspects of the general sharing economy that introduces opportunities, or positive pressures. This includes the ability to become more versatile in ones’ offerings, with managerial and asset-lite ways of conducting business through the sharing of underutilized goods. Moreover, if not for the rise in popularity of all manner of sharing practices, applying elements of accommodation sharing and other sharing platforms, as further described in our presented implications below, might not have had an appeal to the mainstream consumer. The sharing of accommodations should, without a doubt, be perceived as a necessity to change. This, as lost opportunity otherwise follows, while sharing services of utilizing existing assets comes with revenue opportunities. Looking at the different framings of accommodation sharing across countries, actors within the U.S. perceive it as an immediate threat, while the major Swedish player show low to no concern. We believe the phenomenon should be realized as a threat, and see that Swedish actors should do the same, while at the same time taking the introduced opportunities into account. This way, a focus to mitigate and hinder the growth of accommodation sharing can be avoided, and instead the actors can attempt to prosper from its growth. This is what we believe is successful and sustainable in the long run as the sharing economy shows signs of continued diffusion and adoption. Although there are presently no current laws or regulations that hinder or promote sharing practices in Sweden, the slightly positive political attitude towards the sharing economy leads us to believe promoting regulations,


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beneficial for sharing services, might be on the horizon. Focusing on operating alongside the phenomenon is an approach we consider positive from an ethical standpoint as well. This, since the hindrance of P2P transactions, a function being considered to empower the individual consumer, is arguably a step backwards in terms of freedom of choice and sustainability. Even though only minor negative effects are currently distinguished by the Swedish hotel actors, and the larger hotel companies are predicted to survive, the risk of losing the opportunity of both attracting and retaining customers should be acknowledged as a necessity to transform, as tension is put on the hotel industry. In conclusion, the sharing of accommodations should be perceived as nothing less than a threat that needs to be acted upon soon to remain sustainable in the now thriving hotel industry. However, not necessarily a threat that needs to, or can, be eliminated.

6.2 Implications The key when answering to the emerging accommodation sharing platforms is knowing whether to combat the phenomenon by mitigating its growth, or draw from its success and operate alongside it. The general sharing economy is growing in popularity and is showing no signs of stopping anytime soon. This goes for the accommodation sharing platforms as well, leading us to assume the only way forward for hotels is to learn from the services and alter their own business models. As mentioned in the previous segment, there is a need to answers to the threat of losing customers to the sharing platforms while at the same time taking advantage of the opportunities that come with the emergence of P2P services. This can be done by directing attention to the potential white spot of Mid Stay. Our suggested conceptual approach, presented in the next segment, is similar to how the vehicular industry adopted sharing practices with the introduction of car sharing platforms, described in chapter 4.1. Our implication of our study is a concept that builds on the sharing economy’s principle of taking advantage of underutilized assets though an asset-lite approach in order to take a competitive position in the future by approaching the position of Airbnb as seen in Figure 18, and develop a better relationship with the customer in the long run. The concept entails hotels entering a joint venture project with a real estate developer, like Skanska or JM in Sweden. New properties built by the developers, and sold to individuals, should then include the opportunity to utilize nearby hotel facilities and services like the gym, pool and even cleaning assistance. Further, this could allow for the introduction of a type of loyalty program, creating a community. The formed joint venture agreement includes splitting the shares of profit, meaning hotels get a share of the purchase price of the apartment, or agree on a monthly fee paid by the individual, that would be less than paying for a gym card and such. Moreover, to adopt the sharing concept even further, if the owner of the apartment is going on a trip, services to handle the letting of apartment are offered


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by the hotel brand. This includes distribution, cleaning, key handling, and more, and much like with Airbnb, the lender is paid by the guest while the platform distributor takes a piece. The apartment available for rent will be posted on the hotel’s web page, or whatever platform they choose to use, having the hotel brand act as a form of safety guarantee for the offer. As have been found, safety and security of P2P-transactions is of great importance (SOU 2017:26), especially for non-users of accommodation sharing (Varma et al., 2016). The hotel brand would therefore function as a new type of quality check that ensures the safety of transactions, and further enables a potentially higher degree of sharing service utilization. Looking back at one of the reasons for why car manufacturers introduced car sharing services like DriveNow and Sunfleet, it was to make the users, who at that moment could not afford to buy a personal car, familiar with their brand. The idea was to influence the driver’s future decision when the day to purchase their own car eventually came (Bradley, pers. comm., 2018). Applying this trail of thought to the hotel industry scenario, the apartment owners, as well as guests using the provided sharing service, might have been positively influenced by the hotel companies’ offered services, and will therefore opt to book lodgings with that particular hotel brand when traveling. Further, assuming the apartment services are similar to those offered at the actual hotel, booking a room of the same brand as the apartment complex would somewhat ensure a personalized offer. The suggested joint venture project is a direct reaction to the subjected pressure put by accommodation sharing. It answers to the need of responding to the shifts on the market by entering the rising sharing economy and P2P segment in a unique way, by utilizing the opportunities made possible by the emerging phenomenon and applying hotel elements to it. This is referring to the possibility to reach a previously neglected customer segment that has emerged with the growth of accommodation sharing. This, while at the same time adopting a service with the purpose of serving current customers in a worsened financial state, and who might alter their behavior. Basically, an opportunity to react towards the sharing of accommodations by not remaining idle as they keep taking hotel market shares, while at the same time introducing a chance for additional revenues streams. The initiative follows the Renewal Model of Linder and Cantrell (2000) described by Sommer (2011), which is one of the four models that show whether incumbent businesses need to change their business model or not, described in chapter 2.2. The Renewal Model usually means no change in the core logic or the business model. Instead, it highlights the introduction of new service offerings as well as entering new markets and adopting disruptive products or service platforms. This is clearly apparent in our suggestion as it introduces an additional function, using somewhat disruptive services, alongside the traditional hotel offerings. This ties to what is concluded above, as well as stated by Hanson (pers. comm., 2018), that a demand for traditional hotel services will always remain, meaning a complete business model


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change is unnecessary. Current investments and developments of traditional hotel services, such as technological advancements and personalization efforts, will still be relevant and necessary, but there is definite room to reach out beyond the usual focus areas. To summarize, the suggested approach goes to cover several points brought up throughout the report. The security issues that have been expressed as a hindering factor for sharing practices on the Swedish market will be mitigated by the hotel brand serving as a form of quality assurance. Further, it allows hotels to enter the accommodation sharing sector in unique and natural way that is separate from their core offer, but is dependent on some of the functions of the traditional hotel while acting as a complement as well. Meaning if the initiative proves successful, it will answer to the threats of losing market shares to accommodation sharing, since the shares will go to the own hotel group. This while the complementary nature of the sharing phenomenon, emphasized by many hotel actors, will be fully exploited as hotels now control the service. The risk of cannibalization of the traditional business that comes with utilizing Airbnb's channels is lessened. The capital investment can also be assumed to not be too severe as the concept is underpinned by an asset-lite model, with the provided resources being shared with the actual hotel. Even if the effects of such an initiative are mostly positive in theory, it still requires a lot for it to be beneficial. For instance, when customers are switching to accommodation sharing services, there is the risk of too many hotel actors doing the same joint venture project. Such competition would not ensure customers going to one particular provider. It might however keep them in circulation within the hotel share of the hospitality industry. Furthermore, as this is only an early concept, many considerations have not been taken into account, such as security, taxation and legislative aspects. The building plan of a hotel follows strict regulation when it comes to fire safety for example, are those regulations to be applied in the building as well? There is also the question of the contract terms with the real estate developers being beneficial to both parties without compromising the customer’s appeal. Furthermore, there is the question of what the real estate developer has to gain on such a collaborative project. Other than the estate becoming arguably more attractive, residential market prices may rise in areas where accommodation sharing apartments are offered. It can however make it too expensive for the locals. There are instances of cities where lending through Airbnb sued to be common until new legislations that regulate the utilization of the platforms were introduced to avoid heightening the costs related to the real estate (Verhage, 2016b; Codagnone & Martens, 2016). All in all, it is an early concept that needs further work.

6.3 Limitations and future research For starters, as argued for in the study, the sharing economy’s adoption will increase during a recession, and therefore it would be interesting to investigate the effects on


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traditional hotels after such a period. Further, due to limitations, such as time and difficulties to contact all the major hotel actors in Sweden, this exploratory study can be used as a pre-study for a deeper, more quantitative study in the future. An extensive future study would require more empirical sources to further increase the reliability of the work. Qualitative ones such as low-tier hotels and hostels could be of value for example, as well as first-hand statements and responses from Airbnb, which this study is lacking. This, along with quantitative empirical observations and studies on the hotel- and accommodation sharing customers, conducted for the purpose of this particular study. The study would also benefit from a more extensive political analysis done after the Swedish general election of 2018, whereas the winning party sets somewhat of a tone for the development of the sharing economy in the country. This, along with an investigation on security aspects of consumer law, and insurance companies’ contribution to the sharing phenomenon would be a value adding inclusion. To further emphasize the posing threat that accommodation sharing puts on the traditional hotel industry, an analysis on the lost opportunity revenues could be conducted. This could be done by calculating the shifting rates, meaning the customers replacing hotels with accommodation sharing, and multiply it by the revenues per average room sold, as an additional action to not be blinded by the present prosperous state hotels are in. The study conducted also points out how the digital revolution has led to the emergence of sharing platforms and such, as well as how it is affecting the traditional hotel functions in their current offering and future endeavors. An analysis on how the technological propulsion will develop in the sharing economy, accommodation sharing included, would add to the study as well. Few studies exist in this regard, presumably since the sharing phenomenon is considered to be partly on a leading edge of technology. Furthermore, our research could be expanded beyond the delimitations of this study. More focus could be put on the sharing economy’s effect on the entire hospitality industry, including restaurants-, bars- and various forms of entertainment services. A geographically broader perspective would be interesting, investigating the adoption and manifestation of the sharing economy on hotel industries outside of Sweden.

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https://www.bloomberg.com/%20news/articles/2016-02-16/goldman-sachs-more-and-more-people-who-use-airbnb-don-t-want-to-go-back-to-hotels



https://protect-eu.mimecast.com/s/EJAMBcEbNqFV




https://www.reuters.com/article/us-france-airbnb/airbnb-targets-business-travelers-to-france-idUSKBN1CH2IN

https://www.reuters.com/article/us-france-airbnb/airbnb-targets-business-travelers-to-france-idUSKBN1CH2IN

http://www.visita.se/globalassets/mittforetag%20/dokument/branschekonomi/hotellmarknad/utveckling-svensk-hotellmarknad-feb-2018.pdf



https://doi.org/10.1108/00251749810223646

https://doi.org/10.1287/mnsc.2016.2531

https://doi.org/10.1287/mnsc.2016.2531

https://papers.ssrn.com/%20sol3/papers.cfm?abstract-id=2366898

https://papers.ssrn.com/%20sol3/papers.cfm?abstract-id=2366898

http://lawline.se/answers/ar-det-lagligt-med-airnbnb-i-sverige

APPENDIX

A

Appendix A. Interview structure and questions Introduction We present ourselves, describe the formulated problem along with the research we are conducting, and thank the interviewee for taking the time to answer all questions. All interviewees were told, and agreed to, us taking notes and/or recording the interview to ensure a correct transcription. After a presentation from both parties we moved on to the semi-structured interview questions. Questions in Focus Hotel actors General view of the hotels

1. What are the actor’s main customer segment?

2. How are the management responding to new ideas?

a) Positive or negative?

3. What types of investments are done today? a) Technological? Personalization? etc.

4. What strategic actions are taken for the future?

5. What were some of the main reasons behind the decision to invest in Long

Stay living? a) Could these reasons be ordered in level of importance? b) What market is Hotel organization X competing in?

I. Who are the main competitors? II. What separates you from your competitors?

c) What are the main threats and opportunities with the investment?

I. Is there a risk for cannibalizing your current hotel business or do you target a different customer segment?

6. What do You think the introduction and growth of the Long Stay living

concept will mean for the hotel industry?

7. How will the pricing be for Long Stay living vs hotels (ARR)?

APPENDIX

B

8. What is the expected occupancy rate for Long Stay accommodations?

a) If utilization is not maximized, is there a use for a Sharing Economy?

I. For example, peer - to - peer sharing of rooms if they are not used full time during the rented period.

Focus on the Sharing Economy and accommodation sharing services

9. What are your general thoughts on the sharing economy of accommodations and, for example, Airbnb’s entrance into the corporate traveler market?

a) Is it a threat, opportunity or perhaps a compliment? b) Is your brand being affected? How?

10. Are you reacting to the sharing of accommodations?

a) If yes, how? If no, why?

Expert on the Hotel Industry and market knowledge 1. What customer segments are the bigger hotel companies competing for in

Sweden?

2. Have there been any shift in percentages of customers in Sweden? a) What is your thought on the future? b) If yes, why has it shifted?

In articles presented in the thesis, and from the web page of Visita, it has been distinguished that occupancy rates are historically high but are now starting to decline. The reason given was that the supply increased more than the demand.

3. Are there any other reasons?

4. Are there any law that could regulate Airbnb and the sharing services?

5. Today there is a boom in Sweden, what are the projections for the future hotel market as a recession is on the horizon?

6. How do you think Airbnb and the sharing services affect the hotel market?

a) Is it a threat or an opportunity?

7. Are there any white segments for hotel actors to invest? a) What advice are given to hotel executives to follow? (budget/mid-

scale or luxurious segments) Further questions asked to Dr. Hanson:

APPENDIX

C

8. How would you frame the pressure coming from the growth of platforms such

as Airbnb? a) Is it negative, in that it forces the hotel industry to change, or is it

more of an opportunity?

9. What is the most common response by hotels to the discourse of accommodation sharing?

10. Read in an article that New York is going down the route of prohibiting

Airbnb. Is that true?

11. Do you believe that it would be an opportunity for hotels to copy the business model by Airbnb?

We read a report that referred to statement where you did not see hotels adding or copying the operational models of Airbnb and their ilk. Actors are more testing the water.

12. Can you elaborate on this?

13. What are these cases of testing the water, big or small hotels effects?

14. What do you think a successful hotel will look like in the future? To some of the interviewees our analysis was presented and asked if they had any objections or agreed on it. Finally, we summarized what have been said during the interview and thanked the interviewee for taking the time. Experts on the Sharing Economy Focus on the sharing economy in general

1. Can you give us a short summary of what you consider the sharing economy to be?

2. How does the Sharing Economy work in terms of parties involved and their interaction?

3. What are the most common motivations for people to participate in a “sharing

transaction” as opposed to regular consumption?

4. What is, if anything, hindering the sharing economy from flourishing in Sweden?

APPENDIX

D

5. Are there any regulations or laws, as seen in France or Great Britain, emerging in Sweden?

6. Do you have any examples of that the government subsidizes any type of

Sharing Service? a) We read that Great Britain have issued a tax reduction to encourage

sharing economy transactions.

7. How are politicians framing the phenomenon? a) Hindering or promoting the sharing services?

8. How do you see the Sharing Economy evolving in Sweden in the years to

come?

9. What are the benefits as well as risks and negative outcomes with the diffusion of the sharing economy?

10. Which country has been the most successful in applying the Sharing

Economy? a) Why?

11. Do you know of any traditionally operating company or business that have

adopted the sharing economy?

12. Do you have any comments on; the negative or positive pressure on stakeholders to transform towards a higher utilization of sharing services?

Sharing Economy within the hotel industry

13. How would you frame the pressure coming with Airbnb?

14. Is it negative, in that it forces the hotel industry, in this case, to change, or is it more of an opportunity?

15. If possible, would it be legal for a hotel to offer a platform similar to Airbnb

(the sharing of accommodation service)?

16. A somewhat extreme question but do you think the sharing of accommodations could lead to the end of hotels to some degree?

In the end, we summarized what have been said during the interview and thanked the interviewee for taking the time.

APPENDIX

E

Note: The ethical rules as stated by Blomkvist and Hallin (2015) were followed and the interviewees who asked for a copy of the thesis to ensure their response was used accurately got it in advance of the published material. Important to take note of is that the interviews were conducted on a semi-structured basis, as mentioned, and the questions were discussed in an open-ended nature.

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