Startups Uber and Airbnb Court Business Travelers
Jul 29, 2014 | By The Wall Street Journal
Airbnb Inc. and Uber Technologies Inc. popularized the concept of a “sharing economy,” where regular consumers share things like car rides and apartments. Now they are sprucing up their services to appeal to the buttoned-up business traveler.
The fast-growing technology startups this week each announced new versions of their apps geared toward booking business trips. Both companies also struck deals with Concur Technologies Inc., CNQR +1.42% the expense-reporting software used by more than 20,000 companies.
Appealing to corporate clients would give the young technology companies a toehold in the business travel industry, which is expected to generate $1.21 trillion in revenue world-wide this year, according to the Global Business Travel Association.
Business customers could also help legitimize taxi-hailing service Uber and home-rental site Airbnb as the companies square off with dozens of local regulators questioning their legality.
But corporate hospitality is a highly competitive field with entrenched rivals. Large companies tend to establish relationships with specific hotel brands, where they can negotiate better rates and control blocks of rooms for large parties. For these customers, predictability trumps novelty and a reliable Wi-Fi connection is worth more than a cool location.
“Airbnb is not going to compete for the road warriors,” says Sean Hennessey, chief executive of Lodging Advisors LLC, a New York-based consulting firm.
Airbnb and Uber may also need to improve their level of service and safety to compete internationally, said Stewart Harvey, group commercial director for corporate travel agency Hogg Robinson Group PLC.
“A lot of clients who send their people to travel to Latin America, Africa, Middle East and Asia—they don’t just want a taxi booked,” he said. “They want us to work with partners that vet their drivers. When they go to these places, they will stay in five-star hotels because they want more security.”
The drivers on Uber and apartment owners on Airbnb lack the same standards of vetting and legal protections that would be required for full-time employees. Both companies have been criticized by regulators who say their services lack stringent safety controls to weed out bad actors. Airbnb and Uber say they take safety seriously and have added necessary verification features.
On Saturday, an Uber driver was arrested in Washington, D.C., for allegedly sexually assaulting a passenger. Uber says safety is its top priority and it is assisting with the investigation.
Business customers also pose a new level of complexity to the already thorny legal questions facing the sharing economy, said Jeremiah Owyang, founder of corporate advisory firm Crowd Companies. “When you involve corporate employees, it raises significant questions about who is liable if something goes awry,” Mr. Owyang said.
To the discerning corporate travel managers, services in the sharing economy have at least two big selling points: They are cheaper, and many workers are already dedicated users.
For Vindicia Inc., a business software developer based in Redwood Shores, Calif., Airbnb has replaced hotel bookings and Uber has replaced car rentals for many of the company’s 80 employees. The main reason is cost, says CEO Gene Hoffman.
“There’s no reason to rent a car anymore,” Mr. Hoffman said. “Between the car rental, the gas and the overnight parking at your hotel, Uber is tremendously less expensive.”
Uber on Tuesday added new tools for businesses, including the ability for employees to charge their rides to one corporate account. A new dashboard lets managers decide which workers are approved for travel and when. The company also tied up with Concur to make it easier to put Uber trips into expense reports.
That move followed Airbnb’s unveiling earlier this week of a new business travel site to help users search through room-rentals that are most likely to appeal to professionals— “tree homes and houseboats aren’t there,” said Lex Bayer, the company’s head of business development. The apartment-rental site aims to boost revenue from corporate travel, which accounted for just 8% of the site’s bookings last year, he said.
The corporate segment is the backbone of the hospitality industry, where hotels in major cities rely on business travel for two-thirds or more of their revenue, consultants say. These travelers are also the most lucrative part of the business: They tend to be more repeat users of a brand than leisure visitors, they spend more money and offer more referral business.
Some hotel owners say they are already seeing some impact at the margins, where Airbnb has been able to attract professionals like traveling salesmen or freelance workers that may have to pay their own expenses. But so far, few seem to be sounding alarms that Airbnb will greatly affect their business.
The corporate ambitions of Uber and Airbnb were on display at a conference hosted by the GBTA this week at the Los Angeles Convention Center. For the first time, both companies had booths at the event, which hosted nearly 7,000 attendees, said Mike McCormick, GBTA’s executive director and chief operating officer.
And around them, the influence of the sharing economy was evident. According to Mr. McCormick, chauffeur company BostonCoach was showing off its latest product: A car-hailing app that looked a lot like Uber.