Showing posts with label vacation rentals. Show all posts
Showing posts with label vacation rentals. Show all posts

Monday, February 7, 2011

The Rise of Peer to Peer Sharing and Rentals

Whether we recognize it or not, the American culture of consumerism is profoundly changing. Innovative peer to peer (P2P) technologies are giving up-start companies a set of tools to disrupt traditional forms of Business-to-Consumer (B2C) commerce. New payment technologies such as PayPal's Adaptive Payments system allow website developers to create marketplaces where people can rent or share virtually anything with anybody.

The future impact of these technologies may be difficult to gauge now, but they epitomize the basic premise of the discipline of economics: the efficient allocation of resources.  After all, why should you own a step ladder if you only use it once a year when someone in your neighborhood or apartment building owns a ladder that your could borrow or rent?  Until recently, it would have been nearly impossible to efficiently discover who in your area owned a ladder for you to use or rent. Plus, the P2P technologies to facilitate such transactions didn't so much as exist beyond auction and classified sites such as eBay and Craigslist.

However, new sites such as www.getaround.com and www.relayrides.com allow you to rent someone's unused car in California, and it's perfectly legal to do so given the recent changes in insurance laws in the state. These sites could have as significant of an impact on the traditional rental car companies and auto manufacturers as Google had on the publishing and newspaper businesses. My own experience with the car sharing service www.zipcar.com is a great example of how people can sell their cars and use car sharing services to locate and rent a car by the hour in the neighborhood.  I owned a car that I used only 5-10 hours a month. That level of utilization is not only a huge waste of money ($275/month for a garage and $200/month for insurance), but it's a total waste of resources (metal, plastic, rubber, etc).  Zipcars are utilized up to 80% of their physical capacity. This is the efficient allocation of resources at play, and it's good for me, better for the environment, and good for commerce to boot.

Sites such as www.rentalic.com allow you to list and rent your unused tools, law mower, and other household items. Our site, Sherpa Travel Exchange, allows people to rent their unused living space to travelers through a secure P2P online booking system using the latest Adaptive Payments technologies. All of these sites enable people to more efficiently allocate resources; whether those resources by lodging space (as in the case of Sherpa), household goods or your under-utilized Honda Civic in your driveway. The people who own the stuff make money from their stuff and the people that don't own the good or service benefit by paying only for what the need.

Thirteen years ago many people thought selling your items to complete strangers over the Internet was a crazy idea. Today, eBay is a multi-billion dollar business. Underscoring the success of sites like eBay and many of the new generation of P2P start-ups is the fact that these website operators offer the mechanism that is most essential to their survival and grown: ratings and reviews systems. Such systems engender trust and reliability and remove risk and uncertainty from the transaction. Ratings and reviews sites such as Yelp and TripAdvisor now permeate much of retail, travel and hospitality services, respectively. At the same time, the Better Business Bureau and the Gallup Organization recently found that 47% of consumers stated that they had "some, very little, or no trust at all" in companies that they do business with in everyday life. (Source found here) As our trust in companies erodes, we are beginning to trust complete strangers more and more.


P2P Sharing Goes Mainstream

Environmentally speaking, the impact of the new crop of P2P sites may impact the natural resource constraints that are so often an inconvenient truth about our modern society. Rachel Botsman's excellent book entitled What's Mine Is Yours: The Rise of Collaborative Consumption cites an interesting and chilling anecdote; that is, if everyone in the world lived like an average middle-class American, we would need five times more resources that actually exist on our planet. Frightening indeed. Folks, the planet's population ain't shrinking! So, we must find ways to more efficiently allocate the existing resources, goods and services we have at our disposal or face a future driven by unnecessary scarcity as the people within places like China, Brazil and India ascend to ever higher standards of living.  Collaborative Consumption is not just a fad.  In fact, Collaborative Consumption was listed as one of Time Magazine's top 10 sustainable trends.

If you're interested in learning even more about how P2P sharing business models are changing commerce, you can also check out an excellent new book by Lisa Gansky entitled The Mesh: the Future of Business is Sharing.

Safe travels,

Russ



Monday, March 22, 2010

The "Social Rush": How Twitter and Facebook change social travel (Part 1 of 3)

By Russ Hearl, CEO and Co-Founder, Sherpa Travel Exchange, http://www.staysherpa.com/

This is the first post in a three part series on the intersection of travel and social networking.

Is it just me or does it seem like everyone and their brother is claiming to be a social media "expert"?  Just because one uses Facebook or Twitter doesn't make that person an expert.  Individuals and businesses are rapidly trying to figure out how to "leverage" the power of the social networks.  Candidly, this means they are trying to figure out how to market and sell you stuff now that they know a whole lot more about you than they could have ever known prior to you providing such wonderful information about your likes/dislikes and general whereabouts.  

Like the California Gold Rush, there's now what I call a "Social Rush" of enterprising intermediaries attempting to stake their claim in the social travel landscape. It's been said that very few of the gold crazed 49ers became rich from their prospecting efforts.  Rather, the entrepreneurs that provided the implements with which to search for gold (such as pix axes, shovels, hotels and food) were the ones to actually strike it rich and set the stage for a dramatically altered economic landscape.

A similar phenomena is playing out in the social travel space (By my definition, social travel is the intersection of community and travel).  Fortunately for us travelers there are dozens, if not hundreds, of businesses being started at this moment that seek to provide the foundation and value added services needed to increase the availability of supply while driving down prices. In the end, the real winners will be the travelers who benefit from a greater variety of travel accommodations and destination services at a far lower cost.  The burgeoning social travel movement will make travel generally more affordable around the world and will enable greater numbers of people to explore this amazing planet.

Let's first discuss the democratization of markets and how social travel will democratize established institutions:

The efficiency and productivity gains brought by the internet touched almost every corner of our post-industrial society. Unfettered and free access to information has proven to be the great equalizer that has broken down bureaucratic silos and even the most militaristic of institutional hierarchies.  It would be hard to argue against the fact that the internet has squashed outdated business models and reduced barriers to entry; thereby allowing enterprising people to reach huge audiences through the distribution power of the internet. 

YouTube offers the most visible example of the democratization of markets.  YouTube wasn't the first user-generated video site, but it quickly became the most widely used because it gave video content providers an open platform for distribution. Before long, anyone with a camera could broadcast their video and quickly build a massive audience.

"Deal of the day" sites also built massive audiences in unbelievably short periods of time.  Groupon, for example, started in late 2008 and is rumored to have more than 2 million members receiving deals of the day via email.  This $100 million business was built virtually overnight through crowdsourcing.  Zynga is another great example of a business that was built entirely on the backs of the social networks.  Their inescapable and addictive FarmVille and MafiaWars game are a ubiquitous reminder of just how rapidly a business can scale an audience when they leverage an open platform distribution technology like Facebook or Twitter. There's never been a point in history where the "little guy" had so much power to democratize markets and build a significant following.

Social travel has manifested itself in community-oriented sites like Couchsurfing, GlobalFreeloaders and Tripping.com to name a few.  These sites offer hosts and travelers an opportunity to engage in a cultural/hospitality exchange for little to no money.  I've used all three sites and think they're really great, but they risk falling victim to the same problems that beset computing giants such as DEC and Sun: Proprietary standards and walled-garden technologies lead people to search for ways to break down those walls. 

This is where the massive distribution power and reach of sites like Facebook and Twitter have the opportunity to transcend mere content syndication used by most social travel sites in the name of 'viral marketing.' Simply offering apps via the social networks to enable travelers to book a flight or find a couch to crash on is not enough and really only supports a quasi-walled garden approach to serving a massive market for travel services. Ultimately, I believe stand-alone social travel networks will be usurped by more organic, open communities that are accessible from all corners of the internet, rather than via a destination site.

Part two of this three part series on social travel will discuss how innovative entrepreneurs are building organic social networks as a way to dramatically increase the size of the social travel distribution pipe.


Russ Hearl
CEO & Co-Founder
Sherpa Travel Exchange, LLC
601 Van Ness Ave, Suite E-208
San Francisco, CA 94102
Stay Smart. Stay Sherpa.

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Monday, March 1, 2010

Travel Review Sites: Moral Hazard Ahead

By Russ Hearl, CEO and Co-Founder, Sherpa Travel Exchange, LLC

"Trust me." "To be honest with you."

Have you ever noticed that these prefacing statements are often precursors to a tall-tale? Well, when it comes to endorsements (or indictments, for that matter) of travel experiences it becomes equally difficult to separate fact from fiction.

User generated and social travel review sites such as TripAdvisor and HotelChatter have become mainstream options for travelers seeking a third-party review of airlines, car rental companies, tour operators, hotels, and vacation rentals, to name a few. Millions of people use these sites to obtain a less biased review than they would get by looking at a travel services supplier website or brochure.

But, how un-biased are these sites in reality?

It's a question that we should all ask ourselves. After all, many of these sites are supported by advertising revenues. This applies a not-so-insignificant amount of pressure on the site operators/businesspeople to make sure the people paying the bills are happy. I know this may sound cynical, but as a former advertising executive myself, I can tell you that there is a significant moral hazard present in advertising supported businesses. Lest we think that the big, colorful real estate section in our local newspaper is there because the editor just couldn't wait to tell you about the new sub-division opening up on the other side of town.  I have friends in the newspaper business that tell me a meaningful portion of the content is written to garner paid advertisements. So ask yourself - Is it real news or bait to lure-in advertisers?

When it comes to review sites, how trustworthy is the 5-star aggregate score for the service provider in question? Case in point, Yelp was hit with a class action lawsuit alledging that they are really running an extortion scheme. The lawsuit was filed on behalf of a collection of local businesses that alledge Yelp promises to remove negative comments about their businesses only if they agree to pay a monthly advertising fee. Whoa. If that's true it really makes you wonder whether you're actually getting reviews of real exerpeinces or just the positive ones. Anyone that has used Yelp knows that there's no shortage of inflammatory reviews of service providers.  Many of the negative reviews are actually really funny, but most are plain outrageous and could be considered libelous in some jurisdictions.

Forrester Research examined the motivations of travelers that read and wrote reviews of travel experiences. The research found that 21% of travelers had read reviews on travel review sites like TripAdvisor in the previous 12 months in order to make travel purchase decsisions. The research also found that:
  • 19% of the travelers who responded said that they left a review because they were told they would be entered into a drawing for a prize or would receive some form of compensation for submitting a review.
  • 27% said they wanted to warn others about a bad experience.
  • 48% said they wanted to share a good experience with others.
Overall, more than 6 in 10 U.S. leisure travelers were found to regularly participate in travel-focused social media activities like rating a hotel. Clearly, travelers like to tell almost anyone about our experiences (witness the 50,000+ travel blogs).

Indeed, many marketers would argue that the revolutionary impact of the social networks and user generated content sites (like travel review sites) is embodied in the ability to inspire, monitor and, (cough, ahem!) control word of mouth marketing.  Of course, the transparency offered by social networks can cut both ways.  As travelers, we ought to question the credibility and integrity of some of the advertising supported review sites. Perhaps a more faithful representation of travel experiences could be gained by polling your own social networks using a Facebook poll or some sort of survey. But even then it would be difficult to gain a large enough sample size or let alone locate anyone within your network that has purchased or consumed services from a provider in your intended destination.

Despite the moral hazard, review sites might still over the best solution in the market for obtaining fast background checks on potential service providers. 

How about you?  Do you trust these review sites?

Russ

Russ Hearl
CEO & Co-Founder
Sherpa Travel Exchange, LLC
601 Van Ness Ave., Suite E208
San Francisco, CA 94012
http://www.staysherpa.com/

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