Are you starting to dismiss the idea of disruption? Does it seem overused? Is that because it doesn’t seem possible in housing or in your business?
Chip Conley, author, strategic adviser for hospitality and leadership at Airbnb, and founder of Joie de Vivre Hospitality, would say that it’s a critical element of a successful enterprise. He was key to Airbnb’s disruption of the housing industry and continues to find ways to discover new opportunities that result in a new concept, remolding decades of conventional thinking and practices.
At the HIVE conference in December, he shared how spotting and catching the wave in surfing relates to the foreshadowing of a truly disruptive business. When Airbnb started by democratizing hospitality, Conley was a hotelier and admits he was one with blinders on. He couldn’t see the next wave coming. He was pulled along by his mentee, Brian Chesky, co-founder of Airbnb, to align resources and to disrupt. And, at the same time, to help consider how to protect the new idea and manage a willingness to fail.
In this video, he presents three rules of innovation:
- An innovation doesn’t typically arrive without some foreshadowing.
- Innovations usually address an underlying human need not being met.
- Over time, the establishment embraces innovations that represent a long-term trend.
Conley uses those three rules to run through the evolution of hospitality from the consumer’s demand for predictability and convenience that resulted in hotel chains. Then, the timeshare industry popped up recognizing that customers wanted to feel like they could afford a second home. Next, the hospitality industry recognized that a large portion of the population wanted to have an experience and not be forced into the predictability of hotel chains, so they started the boutique hotel business.
And, finally, it evolved into Airbnb, which was a response to the travelers who wanted to go somewhere and feel like a local. Conley points out that this took a large amount of trust, which was the underlying theme of the HIVE conference content. Airbnb had to create a trust platform for people to open the doors of their homes to strangers.
Other startups are leveraging hospitality to disrupt housing and also have a dependency on that element of trust, such as WhyHotel. This startup notices the challenges that developers face with rising costs and extended construction timelines. WhyHotel takes advantage of these challenges by offering a service that monetizes the not-yet-leased apartments by adding furniture to offer them out as hotel rooms.
Jason Fudin, CEO and co-founder, points out that Airbnb has changed the public’s perception of the value of alternative lodging, which makes it easier to introduce an idea like this to the developers and to renters.
“It’s simply a more efficient use of an asset,” says Fudin.
And here, the logic definitely pencils out. Imagine a 300-unit project that has a 15-month lease up and is able to lease out about 20 units per month. During that time period, there is the potential to rent out rooms adding up to 60,000 times.
If the room nights can generate between $25 to $50 in income, this added revenue stream could net between $1.5 million to $3 million in new income for the project, which is then split between the developer and the hotel operator. WhyHotel saw this revenue opportunity, which has a small window as units are leased out, but taps into a lot of Conley’s philosophies of disruption.
One of the company's first projects resulted in 4,000 hotel room nights booked with a 90% occupancy rate after a 60-day ramp up. Which not only brings the developers the additional income, but also is a great way for residents to “try out” the property and eventually become a tenant, which could become a very immersive marketing program.
As Conley would say, WhyHotel has caught a great wave.
This story appears as it was originally published on our sister site, www.hiveforhousing.com.
