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Research Article Open Access
Volume 7 • Issue 2 • 1000180J Hotel Bus Manage, an open access journal
ISSN: 2169-0286
Journal of
Hotel & Business Management
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ISSN: 2169-0286
Hong, J Hotel Bus Manage 2018, 7:2
DOI: 10.4172/2169-0286.1000180
Keywords: Sharing economy; Tourism; Global international
departures; GDP
Introduction
Sharing economy can be dened as an economic model based on
peer-to-peer (P2P) activity for acquiring, providing or sharing access to
goods and services facilitated by a community based on-line platform.
And the use of big data has made it easier to bring together the asset
owners and those that want to use those assets. is type of dynamic
is also referred to as shareconomy, collaborative consumption,
collaborative economy, or peer economy. Sharing economies creates
value by utilizing underused assets [1]. Physical assets are shared as
services. Car sharing services like Ly and Uber are a good example.
Private vehicles go unused for 95% of their lifetime according to
Brookings Institute [2]. Airbnb would be another good example.
Airbnb clearly has cost advantage over the hotels, which makes it
reportedly about 30-60% cheaper than hotel rates around the world.
And it now has become a very popular alternative form of lodging. e
sharing economy is growing rapidly as platforms permit users to gain
access to various assets. An estimated $23 billion in venture capital
funding has poured into the market since 2010. e total size of the
sharing economy, however, is hard to estimate as most of the platforms
are privately provided. Airbnb, for example, was valued at about $31
billion in its March 2017 funding round [3]. On the other hand, the
Uber eet is nearly three times larger than the number of yellow taxis
in New York City, but it still hasn’t gone public, and therefore, there
are few reliable sources for estimates of its market value. e sharing
economy has created new potential sources of revenue and prot in at
least last two ways [4].
Global travel industry is unmistakably the sector that naturally
lends itself to the sharing economy with gross revenue that reached
$1.6 trillion in 2017 based on bookings, making it one of the largest
and fastest growing sectors in the world. Factoring in both direct and
indirect economic contributions, travel and tourism now accounts for
10.2% of global GDP [5] (Figure 1).
e global tourism industry is further expected to grow 3.9%
annually and reach $11,382 billion (10.6% of GDP) by 2025. e
revenue from visitor exports is also projected to grow from $1,384
billion in 2014 to $2,141 billion in 2025 with a compounded annual
*Corresponding author: Hong J, Associate Professor, Department of Business
Management, Borough of Manhattan Community College, City University of New
York, USA, Tel: 212 220-8388; E-mail: shong@bmcc.cuny.edu
Received August 20, 2018; Accepted September 10, 2018; Published September
18, 2018
Citation: Hong J (2018) Rise of the Sharing Economy and the Future of Travel and
Tourism Industry. J Hotel Bus Manage 7: 180. doi: 10.4172/2169-0286.1000180
Copyright: © 2018 Hong J. This is an open-access article distributed under the
terms of the Creative Commons Attribution License, which permits unrestricted
use, distribution, and reproduction in any medium, provided the original author and
source are credited.
Abstract
The sharing economy is growing rapidly as platforms permit users to gain access to various assets. An estimated
$23 billion in venture capital funding has poured into the sector since 2010. The total size of the sharing economy,
however, is hard to estimate as most of the platforms are privately provided. Global travel industry is unmistakably the
sector that naturally lends itself to the sharing economy with gross revenue that reached $1.6 trillion in 2017, placing it
among the largest and fastest growing sectors in the world. With both direct and indirect economic contributions factored
in, travel and tourism industry accounts for 10.2% of global GDP.
Along with the rise of the sharing economy, the role of the OTA’s and booking platforms has also seen growth in
usage, and is now poised to become indispensable tools in travel planning and booking. As the industry is poised to
become a new norm in the global economy, we review the recent trends, and make a projection on the future of the
industry and the increasing weight of these online travel assistance platforms and their business models in the sharing
economy. As they represent the important future trend of the sharing economy, preliminary assessment is also made
about the market potentials for Airbnb and Uber.
Further research ideas are also presented after the nal thoughts, which involve the testing of the correlation
between the sharing economy and the travel and tourism industry, especially in terms of the causality between the
revenues in the two industries.
Rise of the Sharing Economy and the Future of Travel and Tourism
Industry
Jeff Hong*
Department of Business Management, Borough of Manhattan Community College, City University of New York, USA
Figure 1: Direct and Total Contribution of T&T to the Global Economy (Source:
WTTC).
Citation: Hong J (2018) Rise of the Sharing Economy and the Future of Travel and Tourism Industry. J Hotel Bus Manage 7: 180. doi: 10.4172/2169-
0286.1000180
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Volume 7 • Issue 2 • 1000180J Hotel Bus Manage, an open access journal
ISSN: 2169-0286
growth (CAGR) of 4.0%. Total investment on global travel and tourism
sector is anticipated to grow as well from $814 Billion in 2014 at an
annual growth rate of 4.7% to $1,336 billion in 2025 [6].
e role of the OTA’s and booking platforms such as Hotels.com,
Airbnb, Travelocity and Tripadvisor has also seen growth in usage, and
is now poised to become indispensable tools in travel planning and
booking. Being an avid traveler our self, we have traveled extensively
around the world, and used the whole gamut of ight booking
services and accommodations extensively as well over the years. And
as the industry is on the verge of becoming a new norm in the global
economy, we would like to add our two cents to the projection of the
future of the industry and the increasing weight of these online travel
assistance platforms and their business models in the sharing economy.
is paper is intended mainly as a review purely from an actual travel
industry consumer’s perspective, not from an industry-insider’s.
Overview of the Travel and Tourism Industry
e travel and tourism industry is generally viewed as consisting of
largely six segments including airlines, lodging, car rental, cruise, rail,
and travel packaging. is gives rise to a sizeable industry sector that
would potentially account for a huge proportion of the global GDP. As
a matter of fact, the number of international travel departures cross the
globe has more than doubled to 1.3 billion from roughly 600 million
over the past two decades (Figure 2) [7], stimulating new growth of the
travel economy to outpace global GDP growth [8]. In 2016, 76.8% of all
travel spending resulted from leisure travel, while 23.2% from business
travel. Domestic travel contributed 72% to GDP, a signicantly larger
contribution than international travel with foreign visitor spending at
28% [5].
Travel and tourism is an export sector, as international visitors
entail foreign spending. In 2016 alone, global visitor spending as
exports accounted for 6.6% of the total world exports (a total of U$1.4
trillion) and almost 30% of total global services exports (Figure 3).
e direct contribution of travel and tourism industry to GDP grew
3.1% in 2016, which was higher than the 2.5% growth rate of the global
economy as a whole. For six consecutive years the travel and tourism
sector has outperformed the growth of the global economy. e direct
contribution of travel and tourism to employment showed 1.8%
growth in 2016, directly generating almost 2 million net additional jobs
in the sector, and creating a total of around 6 million new jobs through
total direct, indirect and induced activities. Overall, it can be concluded
that almost 1 in 5 of all new jobs created in 2016 was either directly or
indirectly related to travel and tourism.
e Travel and Tourism sector also outperformed several other
major global economic sectors in 2016. Specically, direct Travel and
Tourism GDP growth was stronger than the growth in the nancial
and business services, manufacturing, public services, retail and
distribution, and transport sectors, with the exception of marginally
slower growth than in the communications sector (Figure 4).
Continued growth at global level is anticipated through GDP
contribution, job creation, investment and visitor exports, while visitor
exports are especially making a strong contribution although a general
slowdown in consumer spending is a major concern. Higher ination
from rising oil prices, rising interest rates, and a slowdown in job
growth across the world all curbed global spending in 2017.
Yet, direct contribution to GDP by travel and tourism industry is
projected to grow at 3.9% average per year over the next decade. e
industry will also support globally more than 380 million jobs, while
the sector contributing approximately 23% of total global net job gains
by 2027 according to WTTC. Simultaneously, total travel and tourism
revenue is projected to account for 11.4% of global GDP with global
visitor exports accounting for 7.1% of total global exports.
e travel and tourism industry is projected to even outpace the
global economy through the next decade, while at the same time
increase its share in the global economic output. In addition, the
industry is also projected to outperform other major sectors such as
communications, nancial and business services, manufacturing and
retail and distribution over the forecast period [9].
Figure 2: Global International Departures (Source: World Bank).
Figure 3: Annual growth rates of Global GDP vs. Direct T&T GDP (Source:
WTTC).
Figure 4: World Industry GDP growth (Source: WTTC).
Citation: Hong J (2018) Rise of the Sharing Economy and the Future of Travel and Tourism Industry. J Hotel Bus Manage 7: 180. doi: 10.4172/2169-
0286.1000180
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ISSN: 2169-0286
Global Growth Factors and reats
Increasing income in most of the emerging world is believed to be a
prime mover in global tourism industry, together with the promotional
eorts by supranational bodies such as UNWTO (United Nations World
Tourism Organization). However, the inuence of Brexit and recent
terrorist acts in Western Europe are stark reminders of the downside
of this interdependence. Natural calamities, terrorism, political unrest,
outbreaks of some fatal diseases, epidemics and pandemics such as the
Zika virus… etc. can possibly dampen the growth of tourism industry
in some regions of the world (Figure 5).
Healthy growth in this industry is driven by rising number of trips,
a big chunk of which can be attributed to the online market sales. In
2015, online revenue accounted for 21.6% of global sales, and that
number is expected to grow to 27.7% in 2017 [10].
e customer base in the Travel and Tourism industry that is very
demanding in terms of brand experience, but it can also be brand-loyal
as well if the experience is positive. Moreover, the industry also faces
a constant threat from the intermediaries with bargaining powers by
providing cost eective solutions to its customers.
All of the above elements in connection with shis in the global
economy, innovation, rising consumer demands, geo-political
turmoil, natural disasters, and pandemics reshaped the travel industry
landscape in 2016. A similar climate is also expected in 2018 and
beyond. Additional changes in the industry such as evolving consumer
mindsets, technologies, new platforms may all transform travel in the
future (Figure 6).
Cybersecurity concerns
In 2018 and beyond, travel and hospitality industry is more likely
to become more vulnerable to cyber-attacks and food safety than ever.
Preventing and mitigating cyber-risks including data breaches will only
be increasingly challenging as travel and tourism industry continues
to incorporate and adapt to new hi-tech applications and third-party
service vendors. Also, restaurants and hotels will become more prone
to food safety incidents as they strive to satisfy the demand for locally-
sourced, organic food options. Travel and hospitality industry is
in urgent need to beef up investing in Enterprise Risk Management
(ERM).
Market size and revenue forecast
Europe accounted for 51% of tourism industry in 2015. Tourism
industry in Europe was boosted by increase in international tourists
in France, Germany, Italy, Spain and the U.K. e tourism industry
revenue from the U.K. alone accounted for $142.0 billion in 2015.
North America accounted for $ 1,412 billion in 2015. e U.S. was
the largest market in North America with $ 1,218 billion of revenues in
2015, followed by Canada with $ 98.2 billion. e U.S. tourism market
is projected to grow at compounded annual growth rate of 4.5% and
reach $ 1,515 billion in 2020 (Figure 7).
Asia-Pacic accounts for roughly 9.4% of GDP of the region and
is expected to growth at the highest rate over the 2015-2021 period.
e Asia-Pacic market is likely to get a boost from strengthening
economy, rise in income and increasing infrastructural developments
in countries such as India, China, Japan and Singapore with over 502
million visitors projected in 2020.
According to the research, the industry was both directly and
indirectly responsible for creating 7 million new jobs around the world.
e global travel and tourism sector as a whole grew 4.6% in 2017, or
50% faster than the overall global economy, which saw a growth rate of
3% in 2017 [11].
Travel and tourism sector was the fastest growing broad economic
sector worldwide in 2017, with stronger growth than all other sectors
across manufacturing (4.2%), retail and wholesale (3.4%), agriculture,
forestry and sheries (2.6%) as well as nancial services (2.5%). Among
other sectors, the airlines industry was the only sector that grew
signicantly. European airlines registered passenger growth of 8.1%
with more than 1 billion passengers in 2017. With an average annual
growth of 3.8% over the next decade the long-term outlook through
2028 remains solid. It is forecast that the travel and tourism industry
will be responsible globally for more than 400 million jobs directly and
indirectly by 2028 [12].
Key industry players
Although some of the conventional top players are still TCS
World Travel, DuVine, Gray and Co, Air BnB, Aban Oshore Ltd,
Crown Ltd., Accor Group, Balkan Holidays Ltd, G Adventures, Fred
Harvey Company, Adris Group [6], the travel and tourism industry
has undergone a signicant change since the advent of the internet.
Travelocity.com probably was the rst agship that introduced and
initiated the rst move back in the 90’s (Figure 8).
OTA’s and internet booking platforms such as Hotels.com oer
mileage bonus. Online lodging and accommodation intermediaries
such as Airbnb use extensive two-way reviews to vet the mutual
satisfaction between hosts and guests. Similarly, User uses two-way
rating system, so the driver and the passenger can vet each other out
even before using the service. However, the downside is that reviews
can be subjective, biased or inated, inaccurate, and not reliable at
times. Although number of reviews cannot always do justice, at least
Figure 5: T&T Global Growth 2017 (Source: WTTC).
Figure 6: Global T&T Revenue (Source: Deloitte PWC, EUI)..
Citation: Hong J (2018) Rise of the Sharing Economy and the Future of Travel and Tourism Industry. J Hotel Bus Manage 7: 180. doi: 10.4172/2169-
0286.1000180
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ISSN: 2169-0286
half of which, generate annually less than $250,000 in revenue [14]
running on outdated low-tech business infrastructure with more than
80% of bookings made oine. e sector faces urgent need for digital
transformation to centralize inventory and make online distribution
on a global scale.
Lately, digital tours and activity aggregators have started to take
on the problem. A select few are making some progress. Airbnb is a
pioneer in this front. It collaborates with third-party service vendors
for culinary, cultural, historical, or artistic experience tours all arranged
through Airbnb, which adds to the competitive advantage and strengths
of the company.
Online or oine booking?
Online travel agencies (OTAs) revenue grew at almost ve times as
fast as the rate of the US hotel market revenue in 2016 [15]. According
to some recent studies, hotel bookings through OTAs now exceed
total hotel website bookings [16]. e OTA market has now eectively
turned into a rivalry between just two brands controlling above 90% of
the market aer a period of intense consolidation [17].
OTAs have also made aggressive investment in their technology
capabilities, creating unique and sophisticated digital trip-planning
experiences. e most popular travel apps downloaded by US
consumers are those of the OTAs, while hotels hardly make it to the
upper tier of the list [17].
OTAs are expanding their ecosystem as well such as private
accommodations, tours and activities, restaurant reservations, and
more. OTAs are leveraging on this width of diverse product-mix
including shopping and booking data, along with massive investment
in new technology to open new doors for around personalization in
travel (Figure 9).
Overall, OTAs and hotels still have room for harmonious
coexistence. e deal-hunters who are brand agnostic will continue to
shop on OTAs representing a large portion of the travel pool, while
OTAs play a critical role in marketing to these customers and delivering
them to band name hotels. Also, the commission these hotels for
searches through OTA’s would be less expensive than what the search
engines now cost them for advertisement. Brand hotels can focus on
digital and experiential enhancements to more loyal, higher-spending
target segments like business travelers and frequent leisure guests while
OTAs focus on delivering volumes of price-sensitive travelers to these
hotels.
it is a fair measure of one thing – that the object of the review is clearly
a popular thing. One should always use caution, and some extreme
reviews can be brushed o as statistical outliers.
Bigger Ecosystems: Tours and Activities
Tours and activities are another avenue for leveraging the local
resources. e travel industry is oen focused mainly on the big
sectors such as hotel and air), and the local in-destination activities are
oen overlooked. e aggregate of in-destination spending, activities,
attractions, and events, is the third-largest segment in travel industry,
which accounts for 10% of global travel revenue [13]. is sector is
forecast to reach $183 billion by 2020. Clearly, there exists a decent
opportunity to integrate tours and activities into the digital ecosystems.
So far, this sector has been largely neglected and dismissed due to
severe fragmentation, lack of standardization, and digital ineptitude.
e market is comprised of a long chain of small suppliers, more than
Figure 7: Global T&T Contributions (Source: WTTC).
Figure 8: Global Direct Employment by Industry 2014 (Source: WTTC).
Figure 9: Who Did Hotel and Air Booking for Business Trip? (Source: WTTC).
Citation: Hong J (2018) Rise of the Sharing Economy and the Future of Travel and Tourism Industry. J Hotel Bus Manage 7: 180. doi: 10.4172/2169-
0286.1000180
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Ground transportation: Implications far beyond travel
e ground transportation is a sector that involves not just actual
transportation, but also customer acquisition, demand creation, price
and promotion management, eet operations management, customer
service, vehicle purchasing, and vehicle remarketing and recycling.
e players also include ride-hailing, car-sharing companies, pure
technology players, rental car companies, eet management providers,
OEMs, and dealers specialized at dierent points in the value chain.
e human element of the travel experience
It goes without saying that technology plays a crucial role in Travel
and Tourism, but one shouldn’t lose sight of the human connection.
For brand hotels, experiences from interaction with the people in the
travel ecosystem can certainly be a competitive advantage. Travel and
tourism industry employs around 300 million people globally— or
about 1 in 10 jobs in the global economy [18] (Figure 10).
Despite technological changes, human interaction will remain
the core of the travel experience, and the future of the travel need to
produce a seamlessly smooth blend of talent and technology, with
technology doing more of the technical work—freeing up humans to
focus on better service experiences and meaningful connections.
Corporate hotel dollars should be directed more towards investing
in HR development for better employee experience, which typically
ends up in underinvestment in favor of customer experience and digital
investments. It is critical that investments in employee engagement be
viewed from a new light. e commitment to employee experience can
have strategic value as a driver of workplace satisfaction as well as a
prot-enhancing initiative (Figures 11 and 12).
of the Sharing Economy - Airbnb and Uber
AirBnB was founded in Silicon Valley in 2008 as airbedandbreakfast.
com. A business model based on other peoples’ assets and service has an
advantage of a sort of multiplier network eect. e more people stay
at Airbnb or use the service to rent out their excess property, the more
valuable the service platform becomes. Besides, there’s an inherent
added advantage that the company’s xed costs are bound to be very
low. It also lends itself to cheap and easy cross-pollination, since the
Figure 10: Direct Contribution of T&T to Global Employment (Source: WTTC).
Figure 11: Total Contribution of T&T to Global Employment (Source: WTTC).
Citation: Hong J (2018) Rise of the Sharing Economy and the Future of Travel and Tourism Industry. J Hotel Bus Manage 7: 180. doi: 10.4172/2169-
0286.1000180
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ISSN: 2169-0286
use of its product involves travel. It’s not just that Airbnb doesn’t have
to build the rooms itself, it doesn’t require a physical presence such
as oces, employees, etc… to launch its business in new markets [8]
(Figure 13).
e net eect is that Airbnb has spent just $300 million of the
roughly $3 billion in capital it has raised since its inception. Prot
was above $100 million on $1.7 billion in revenues in 2016. Airbnb’s
projected EBITDA was $450 million on $2.8 billion in revenue for
2017. Airbnb is forecasting its revenue to be as much as $8.5 billion
by 2020.
Airbnb’s projected EBITD is $3.5 billion a year by 2020, which will
set Airbnb as the model case to prove that sharing economy can turn
into sustainable success. However, Airbnb’s internal numbers could
still be a cause for some concerns for investors [19].
In 2016, the annual guest arrivals grew from 40 million in 2015
to almost 80 million, bringing the cumulative gure to close to 160
million since the company’s founding [20]. ey’re also broadening
their revenue sources by expanding into Trips platform, a new menu of
experiences, and other features such as restaurant reservations, events,
and meetups. More travel services are planned to be added to this
menu—such as ground transportation, grocery delivery, and a service
involving ights (Figure 14).
Revenue from accommodations only will eventually reduce to
less than half of Airbnb’s overall revenue. However, the company
also is faced with challenges, from legal battles to competition from
HomeAway to safety incidents.
Business Model at a Glance
Airbnb operates an accommodation exchange that allows
prospective service providers to list their excess living spaces available
to be leased or rented by prospective users searching for short-
term lodging. Although the company also allows users to book for
experiences and make restaurant reservations, these services are
currently a negligible part of its business model.
Airbnb has properties listed in more than 81,000 cities over 191
Figure 12: Estimates and Forecasts (Source: WTTC).
Figure 13: Reasons for Using Airbnb (Source: WTTC).
Figure 14: Airbnb vs. Hotel Industry (Source: Statista).
Citation: Hong J (2018) Rise of the Sharing Economy and the Future of Travel and Tourism Industry. J Hotel Bus Manage 7: 180. doi: 10.4172/2169-
0286.1000180
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ISSN: 2169-0286
countries – a scale achieved over just a few years because of its role
as just an intermediary. As the business does not require investment
in any real estate, its growth depends solely on the number of hosts
and guests on its platform. Airbnb’s revenue comes from the fee they
charge the host as well as the guest. Currently, the company charges
a service fee of 3% of the booking amount to hosts and 0-20% of the
booking amount to guests.
Probably the only deterrent to Airbnb’s growth is the restrictions
imposed by legislative bodies, municipalities as well as communities.
Over recent years, Airbnb has managed well to engage with a number
of stakeholders to push regulations and rules for making short-term
rental easier.
What separates Airbnb from a bulk of other multi-billion dollar
startups (unicorns) is that it currently shows positive cash ow, and has
also seen a positive EBITDA for the past couple of years. Positive cash
ow is an added advantage to the already strong competitive advantage
of the rst-runner with fairly low upfront investment and low barriers
to entry. is entails a long list of startups, as their business models can
be easily replicated by many start-ups ending in a erce competition
with the rst mover – forcing the companies to burn cash to capture a
larger share of the market quickly.
Key Drivers of Airbnb’s value
Number of listings: e total number of listings on Airbnb at the
end of 2016 stood at 3.5 million and 4.2 million at the end of 2017
respectively. With global expansion, attracting more hosts in existing
cities, this gure will cross 5.3 million by the end of 2018.
Average guest arrivals per listing: is metric is simply the total
number of guest arrivals during a given year divided by the number of
listings at the year end. e company recorded 80 million guest arrivals
in 2016, and the estimate for 2017 was 115 million. is is equivalent to
a growth in average guest arrivals per listing to 27 in 2017 from under
23 in 2016, which is further expected to grow to 31 per listing in 2018.
Taken together with a forecast for 5.3 million listings by the end of
2018, this comes to 164 million guest arrivals for this year alone.
Average rent per guest arrival: is gure grew from $157 in 2016
to roughly $174 in 2017, which is most likely explained by an increase
in average duration of stay and a growing share of more expensive
accommodations. is trend will continue in 2018, leading to an
average rent of $185 for the year. Using the projected 164 million guest
arrivals estimate from above, this will work out to gross rental income
of approximately $30.4 billion.
Airbnb’s share in rental income: Airbnb’s share of the gross rental
income was around 13.5% in 2016 and around 13% in 2017 according
to the estimates for the Gross Rental Income above [21]. e company
may eventually need to lower the service fees to expand to more host
aliation and guest patronage, which could lead to lower overall share
of the rental income to 12.5% down the road. Given the projection for
rental income of $30.4 billion for 2018, revenues are likely to be around
$3.8 billion (Figure 15).
Since established online travel agencies (OTAs) own many of
Airbnb’s biggest competitors, who have the added benet of cross-
selling services to their clients, this is likely to weigh on Airbnb’s
growth in the long run despite Airbnb’s considerably higher current
market share. However, the company is poised to expand its oerings
enabling it to compete more eectively with the more well-funded and
well-rounded OTAs.
Airbnb’s current valuation: According to PitchBook Airbnb is
currently the second most valuable venture capital-backed U.S. start-
up at about $31 billion exceeded only by Uber valued at $68 billion.
Curiously, Airbnb has raised over $4 billion and yet to go public.
Meanwhile, closest competitors such as Tripping.com, founded in
2010 and have raised a total of $52 million, and HomeAway, founded
in 2005, owner of vacation rental site VRBO and considered Airbnb’s
biggest competitor, had raised $510.3 million only before its IPO in
2011 at which point it was valued at $2 billion. e company was
acquired in 2015 for $3.9 billion by Expedia which has a current market
capitalization of $19.34 billion. In 2004, Priceline Group, which today
boasts a market cap of $86.27 billion, acquired Booking.com for $161
million.
Airbnb has solidied its position as a successful pioneer of the
sharing economy over the years, along with Uber, largely owing to
its leading role with eorts in technology, and currently estimated
to be worth at least $38 billion, doesn’t seem to need to raise more
money as a protable business with nearly 5 million lodging options
across 81,000 cities in the world [22]. However, considering the global
vacation rental market size forecast to reach $193.89 billion by 202,
there is still plenty of room for others in the niche [23].
Rise of Uber and its challenges
Uber Technologies Inc enables customers to book drivers using
their own cars through its transportation app Uber. It is essentially
as a sector disrupting company on a mission to replace taxi as a
conventional public transportation [23].
Since its launch Uber has met protests in the major cities around
the globe such as Paris, Berlin and London from cab drivers. Berlin
has since banned it, and London has rejected the rm’s application
for a new license, pending an appeal by Uber. Over the years it has
been involved in intense controversies, and therefore, Uber statistics
alone can’t do justice of depicting its growth trajectory, and. Yet, Uber
raised about $11.5 billion in total from 14 rounds of venture capital and
private equity investors throughout 2009-2016.
Uber’s growth: Uber’s customer number recorded 40 million /
month in 2017, and Uber reached 77% of the United States ride hailing
Figure 15: Airbnb Growth Potential (Source: WSJ).
Citation: Hong J (2018) Rise of the Sharing Economy and the Future of Travel and Tourism Industry. J Hotel Bus Manage 7: 180. doi: 10.4172/2169-
0286.1000180
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ISSN: 2169-0286
market share by May 2018 [24]. Unfortunately for the taxi industry,
Uber’s fast rise directly correlates with the decrease in taxi usage
[25]. From May 2015 to September 2016 there was a steep decline in
Yellow Taxi calls in New York City from over 400k to 300k. In the
meantime calls for Uber grew from then 100k to over 200k while Ly
showed a modest growth from close to zero to about 40k calls. Uber’s
success doesn’t come as much of a surprise considering the fast rise in
smartphone adoption globally. However, there are many other reasons
that contributed to Uber’s success such as pricing overview prior to
booking, one-tap rides, driver follow on map, cashless convenience,
fare splitting as well as feedback options (Figure 16).
Uber’s revenue: In 2014, total revenue was $2.9 billion just one and
a half year aer the launch of UberX. In 2015 the total revenue more
than tripled to $10 billion, and Uber managed to double its annual
gross revenue to $20 billion with net revenue around $6.5 billion in
2016 [26] (Figures 17 and 18).
e net revenue growth looks similar to that of the gross revenue
with $500 million in 2014, which tripled to $1.5 billion in 2015, and
the company managed to gross over $6.5 billion in 2016. However,
Uber’s adjusted net loss was $2.8 billion at the end of 2016, which most
likely passed $3 billion aer factoring in the loss from selling its China
subsidiary [27].
In a side by side comparison with Ly, Uber’s closest competitor
and the second runner in the US market, Uber generated $0.5 billion
while Ly did only $130 million back in 2014, and Uber managed
to triple its net revenue and reached $1.5 billion mark, while Ly
generated only $300 million in 2015. Uber’s net revenue reached $6.5
billion, but Ly nished with only $700 in 2016 [28] (Figure 19).
Uber’s key data points: e following are Uber’s key data points as
well as its key growth drivers:
Service is available in 83 countries and over 674 cities worldwide
(Source: Uber).
On average Uber handles 40 million rides monthly and has over
77% of US ride-hailing market (Source: Wiki).
By 2016 Uber accumulated 2 billion rides in total (Source: Forbes).
Gross revenue reached $20 billion as of 2016 (Source: Business
Insider).
Net revenue reached $6.5 billion as of 2016 (Source: Business
Insider).
Venture capital raised was $11.5 billion as of 2016 (Source: Crunch
base).
Uber was valued at $69 billion in 2017 (Source: Bloomberg).
Compared to Uber ($6.5 billion) its largest competitor Ly
generated net revenue of $700 million as of 2106. (Source: Future
Advisor) (Figure 20).
Uber’s valuation: Stacking up Uber’s valuation over other Unicorn
startups will help get some perspective. In 2013 Uber was valued at $3.9
billion, while Palantir Technologies, a big data analysis startup, was
already valued at $9 billion and Snapchat’s valuation jumped from $2
billion to $7 billion by the end of 2013. Uber’s valuation got a huge
boost from venture capital to reach $19 billion in 2014, and Uber has
never let other Unicorn startups to pass it ever since. Uber’s valuation
stands at $68 billion as of 2017 [25].
Another analysis reports a more conservative version of the
company’s valuation at $48 billion using various revenue metrics
Figure 16: NYC Daily Trips: Yellow Taxi, Uber and Lyft (Source:
Toddwshnier.com).
Figure 17: Uber growth chart (gross revenue) 2014-2016, in billions (Source: Business Insider).
Citation: Hong J (2018) Rise of the Sharing Economy and the Future of Travel and Tourism Industry. J Hotel Bus Manage 7: 180. doi: 10.4172/2169-
0286.1000180
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ISSN: 2169-0286
Figure 18: Uber’s Revenue Growth Rate (Source: Uber’s Revenue and Usage Statistics).
Figure 19: Uber vs. Lyft net revenue 2014-2016, in billions (Source: Future Advisor).
Figure 20: Uber’s Global Revenue Breakdown (Source: Uber’s Revenue and Usage Statistics).
Citation: Hong J (2018) Rise of the Sharing Economy and the Future of Travel and Tourism Industry. J Hotel Bus Manage 7: 180. doi: 10.4172/2169-
0286.1000180
Page 10 of 11
Volume 7 • Issue 2 • 1000180J Hotel Bus Manage, an open access journal
ISSN: 2169-0286
including monthly active riders, the number of rides per year, revenue
per ride, net revenues and revenue multiple as well as basing it on its
most recent fundraising in December 2017 [29,30].
Growth with expansion into new markets: With the number of
rides per rider trending higher Uber’s monthly active riders grew from
50 million in 2016 to 75 million in 2017. As Uber doubles down its
marketing eorts on emerging markets, monthly active rider growth is
forecast to remain strong in 2018, taking total rides delivered to around
5.5 billion.
Growth in total rides, revenue per ride to remain stable: As
the number of rides delivered soars, gross revenues expected to cross
$50 billion in 2018, although revenue per ride (ARPU) may stagnate,
where gross revenues are typically calculated as the total dollar value
of the rides billed to customers before Uber takes its fee. Although
Uber’s share of gross revenues has declined lately due to its aggressive
promotions and incentive payouts to partners, it is possible that its
share of revenues could stabilize in 2018 as the company has taken
steps to reduce incentive payouts (Figure 21).
Discussion and Conclusion
As we have set forth in the overview, the estimate for the global
travel and tourism market measured by its revenue stands at $1.6
trillion 2017 and is forecast to grow by about 3-4% per year on average.
erefore, it is crucial to assess the market potentials for Airbnb and
Uber as they represent the important future trend in the industry – the
sharing economy.
Airbnb reported prot just over $100 million on $1.7 billion in
revenue in 2016. e company is forecasting EBITDA of $450 million
on $2.8 billion in revenue for 2017. Airbnb’s revenue is further
projected to grow to as much as $8.5 billion by 2020.
Over the last seven years Uber went from a small startup to one of
the giant global tech pioneers. Along with Airbnb, it introduced the
world to a new type of economy. Its gross revenue reached $20 billion,
but it also lost $2.8 billion in 2016, which shows another facet of the
company – despite its successful track record, it’s inherently very
unstable. Although it grew multiple times the size its closest rival Ly,
it needs to make more eorts to boost its market share in the US. Uber’s
market share shrank to 77% from 84% in 2017, and most likely that 7%
went to Ly, the second largest hail-riding company in the US market.
One most obvious advantage of the sharing economy is that it
doesn’t require huge initial start-up capital or sunk cost. And since
the infrastructure already exists, and can easily be replicated, not built
from the scratch, it creates a whole new avenue of potential for almost
unbounded growth. Although Uber has yet to show positive prot
while Airbnb has shown consistent growth in revenue and prot, the
sharing economy seems to have found its foster bed and niche in the
travel and tourism industry for now. And it is unmistakable that the
global travel industry is the sector that naturally lends itself to the
sharing economy with gross revenue that reached $1.6 trillion in 2017,
making it one of the largest and fastest growing sectors in the world [4].
Further Research
e correlation between the sharing economy represented by
Airbnb and Uber, and the travel and tourism industry, especially in
terms of the causality between the revenues in the two industries, is
of particular interest, which couldn’t be dealt with in this paper due
to time constraint and insucient preparation. Further research is
certainly warranted with initial hypothesis being that there is a positive
correlation between the revenues of these two industries, and with
further causality testing about whether it, if ever, runs from the sharing
economy to the travel and tourism industry or vice versa. Our research
currently in pipeline will certainly look into these questions.
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Citation: Hong J (2018) Rise of the Sharing Economy and the Future of Travel and Tourism Industry. J Hotel Bus Manage 7: 180. doi: 10.4172/2169-
0286.1000180
Page 11 of 11
Volume 7 • Issue 2 • 1000180J Hotel Bus Manage, an open access journal
ISSN: 2169-0286
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