Uber for Hotel Rooms - Can you build sustainable value?
My Harvard Business School professor came to visit me a few weeks ago. At the end of the meeting, he asked me what I thought of a business that is into an Uber for hotel rooms in India. My immediate reaction was "I don't understand it", and his response was somewhat similar. We both laughed.
There has been a lot of hoopla around trying to create standardised hotel experiences in India akin to an Uber, partly driven by large investor funding news. I have met many talented entrepreneurs trying to execute in this space for a few years now. While I have a very high regard for entrepreneurs being one myself, I scratch my head when I see businesses like this that is stretching the Uber for X analogy a bit too far.
Let me be more specific on this business. If someone told you can get a clean table with a good table cloth and new silverware and plates at a cheap food restaurant that is generally filthy , would your experience be any different in that restaurant? Marginally at best.
Similar is the story of branded hotel experiences. Customers I speak to swear they would never take their spouse to some of these "branded" hotel properties, the only reason they are staying there because it is cheap and they know they would get a clean bed, etc but really didn't have a great experience. The reason they are not thrilled with the experience is because the room is "just one part" of the whole hotel experience. The hotel lobby, the corridor, the food, the location, rest of the infrastructure, the other guests, are all part of the experience. Building a long term sustainable business of partially branding somebody else's sub-par property without controlling the entire property is a challenge.
Another problem with partially controlling somebody's business is that there is no full alignment with the hotel owner and customer. If a hotel owner gets a walk in customer, the room may go to that guest as he is a guaranteed customer. Again, if you are branding the experience, this hurts the brand.
The real long term value of branded hotel or restaurant experiences is if you own/control the entire property or restaurant not part of it. That is what branded or restaurant chains do. Hard to scale these businesses fast given the challenges of real estate, labor, etc and they may not merit venture capital returns, but that is indeed a real business with real value.
My advice to entrepreneurs in the quest to launch "Uber of X" businesses and specifically the Uber for Hotel Rooms is to really understand if they can deliver the service levels that an Uber is known for. They control the entire experience. In this case of Uber of Hotel Rooms, it is not feasible to provide that experience.
There has been a lot of hoopla around trying to create standardised hotel experiences in India akin to an Uber, partly driven by large investor funding news. I have met many talented entrepreneurs trying to execute in this space for a few years now. While I have a very high regard for entrepreneurs being one myself, I scratch my head when I see businesses like this that is stretching the Uber for X analogy a bit too far.
Let me be more specific on this business. If someone told you can get a clean table with a good table cloth and new silverware and plates at a cheap food restaurant that is generally filthy , would your experience be any different in that restaurant? Marginally at best.
Similar is the story of branded hotel experiences. Customers I speak to swear they would never take their spouse to some of these "branded" hotel properties, the only reason they are staying there because it is cheap and they know they would get a clean bed, etc but really didn't have a great experience. The reason they are not thrilled with the experience is because the room is "just one part" of the whole hotel experience. The hotel lobby, the corridor, the food, the location, rest of the infrastructure, the other guests, are all part of the experience. Building a long term sustainable business of partially branding somebody else's sub-par property without controlling the entire property is a challenge.
Another problem with partially controlling somebody's business is that there is no full alignment with the hotel owner and customer. If a hotel owner gets a walk in customer, the room may go to that guest as he is a guaranteed customer. Again, if you are branding the experience, this hurts the brand.
The real long term value of branded hotel or restaurant experiences is if you own/control the entire property or restaurant not part of it. That is what branded or restaurant chains do. Hard to scale these businesses fast given the challenges of real estate, labor, etc and they may not merit venture capital returns, but that is indeed a real business with real value.
My advice to entrepreneurs in the quest to launch "Uber of X" businesses and specifically the Uber for Hotel Rooms is to really understand if they can deliver the service levels that an Uber is known for. They control the entire experience. In this case of Uber of Hotel Rooms, it is not feasible to provide that experience.
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