News Friday, November 15, 2019 274 hits

Airbnb, innovation adoption and the market value of lodging firms

Two AIRTH members (Florian Zach & Juan Nicolau) together with their Virginia Tech colleague Abhinav Sharma have just published a new article in Annals of Tourism Research: "Disruptive innovation, innovation adoption and incumbent market value: The case of Airbnb".

According to AIRTH’s knowledge, this is the first study to assess the impact of Airbnb on incumbents' market value, and also the first to quantify the effects of incumbents' responses to disruptive innovation. More specifically, the authors are analyzing announcements of four incumbent lodging firms in their efforts to adopt peer-to-peer lodging introduced by Airbnb. Each of the four firms (Accor, Hyatt, Marriott and Wyndham) chose a different strategy at a different point in time. The purpose of this study is to learn if the stock market rewards incumbent firms in their efforts to adjust their business to “deal with” the increasing popularity of peer-to-peer trading.

The results show that benefits in terms of market value increase are only for the first incumbent entering the newly created market, whereas later adopters saw negative effects of their responses on market value. All responses by incumbents after the first one resulted in negative impacts on market value. Investors and other shareholders, thus, do not reward efforts by these later adopting incumbent lodging providers. provide strong evidence that lodging firms need to act fast in their efforts to adopt disruptive tourism innovations. The lack of reward for later movers suggests that the stock market did not value incumbents' investments at the time of investment, possibly due to concerns about returns on that investment or regulatory issues.

Image by Free-Photos from Pixabay

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