Yesterday, Hyatt became the latest company to embrace UBER-nomics, joining the growing ranks of forward-thinking companies like Amazon, Expedia, LinkedIn, GM, and Ford. As Mark Hoplamazian, the President and CEO of Hyatt Hotels Corporation, stated in the company’s press release, “The Unbound Collection by Hyatt provides us with a myriad of opportunities to grow, not only in new markets, but also in places we know our guests want to go.” Instead of acting from a scarcity mindset of acquiring independent boutique hotels as it may have done in the past, Hyatt is embracing a mindset of abundance by accessing the new social value driver of collaboration.
The new Unbound Collection is a brilliant strategic move, as it will enable Hyatt to create a Corporate Asset Sharing marketplace that leverages its strong brand equity, customer capital, proprietary data, and the strength of its marketing/loyalty program. As Hyatt generated $4.3 billion of revenue last year, I am guessing this will not have a material impact on its top-line. However, it will enable it to start to defy traditional economic principles of scarcity in terms of both supply and demand:
- Long Tail of Supply – Hyatt’s inventory growth for its Unbound Collection is not limited by traditional time or capital constraints, as it is able to access a long tail of under-utilized rooms at independent boutique hotels
- Blue Ocean of Demand – Hyatt’s revenue growth is not constrained by existing demand, as it will be able to market these hotels to Millennials as well as customers that have switched or are looking to switch to Airbnb. This will enable it to access new blue ocean market demand, expanding its Total Addressable Market (TAM) beyond traditional hotel stays.
Hyatt is not new to the Sharing Economy as back in June it participated as a strategic investor in the $40 million Series D round of onefinestay, a London-based Personal Asset Sharing company for fine homes founded in 2009 with the mission of “handmade hospitality”. And back in early November during its 3Q15 analyst conference call, the President & CEO of Hyatt, Mark Hoplamazian foreshadowed the company’s entry into the Sharing Economy when he made these insightful remarks: “From our perspective, we’ve always – we’ve, for some time, looked at this whole sharing economy dynamic as a broad consumer issue and the consumer behavioral change and we’ve always been drawn towards it, not sort of away from it.”
I am guessing that through its experience in working with onefinestay, Hyatt discovered the convergence of structural shifts in technology, the economy, and society has led to the emergence of the UBER-ized Consumer. A lot of people, especially Millennials, are no longer content to stay at soulless and cookie-cutter hotels and are looking to Personal Asset Sharing marketplaces like Airbnb and onefinestay, which offer a wider variety of choice and more of an authentic and emotional travel experience. By curating a collection of independent boutique hotels, Hyatt is advancing its Consumer Value Proposition to meet these consumers’ higher order needs and desires.
It’s interesting to contrast Mr. Hoplamazian’s comments to those made last week by Christopher Nassetta, the President & CEO of Hilton, on the company’s 4Q15 conference call when he was asked about Airbnb: “I think we believe that these are different businesses. There is overlap in our customer base. We don’t see any material impact from it. I think testimonial to that is that the industry is at the highest levels of rates and occupancy that we’ve ever seen in history.” As the Sharing/On-Demand Economy is still in its infancy, I am guessing most corporate executives share the views of Mr. Nassetta and are still indifferent to it.
The encouraging news is that more and more companies over a wide range of industries are starting to see UBER-nomics as an opportunity. As I discussed in my February 23rd article “Ford No Longer Sees Its Future as Just an Auto Company”, Ford is launching a new digital and physical platform called FordPass in April. And last week, UPS participated as a strategic investor in the $28mm Series B round for Deliv, an On-Demand Goods Delivery company founded in Jan 2012 that is building a long tail in individuals delivering goods with the objective “to make online shopping simpler and more convenient“. As Rimas Kapeskas, the Managing Director of the UPS Strategic Enterprise Fund, stated in the Reuter’s article “With Deliv Investment, UPS hopes to study same-day delivery market”: “We don’t participate in the on-demand business as much, and the consumer side of this is still a bit of a mystery to us…This is a rapidly evolving marketplace and we thought we could learn more by being close to it.”
I am guessing that within a year we could see UPS act upon what it learns and capitalize on its brand equity, logistics infrastructure, proprietary data, and customer capital to either acquire Deliv or build its own marketplace in the Goods Delivery vertical. It would be a good defensive move against Amazon, which just launched its own Goods Delivery platform, Amazon Flex, at the end of September. Through this new On-Demand delivery service, Amazon is cost-effectively building a long tail of delivery drivers for its 1-hour Amazon Prime Now service.
I strongly believe that UBER-nomics represents the next generation of business strategy. For as Mr. Hoplamazian wisely remarks: “I just think that, as we evolve over time, this is going to be a part of how people travel and how people experience the world not just in lodging, but in transportation and travel more broadly. And I think that means we have to go towards it and understand it better and better.” It’s ironic, as I had just finished writing the final chapter of my book “UBER-nomics: The Blue Alpha” yesterday when my husband told me about Hyatt’s new strategy. I’m not sure how long it will take from first draft to published book, but I am excited to soon be able to share the insights I have gained in my analyst’s journey over the past six years so you can better understand UBER-nomics.