Disruption Reconsidered

Gabrielle Lurie / Reuters

Derek Thompson, writing in the Atlantic recently, has a very readable consideration of the fashionable obsession with disruptors, a topic we give too little attention to in these pages. So, a small step forward:

Airbnb and the Unintended Consequences of ‘Disruption’

Tech analysts are prone to predicting utopia or dystopia. They’re worse at imagining the side effects of a firm’s success.

The U.S economy is in the midst of a wrenching technological transformation that is fundamentally changing the way people sleep, work, eat, shop, love, read, and interact.

At least, that’s one interpretation.

A second story of this age of technological transformation says that it’s mostly a facade—that the last 30 years have been a productivity bust and little has changed in everyday life, aside from the way everyone reads and watches videos. People wanted flying cars and got Netflix binges instead.

Let’s call these the Disrupt Story and the Dud Story of technology. When a new company, app, or platform emerges, it’s common for analysts to divide into camps—Disrupt vs. Dud—with some yelping that the new thing will change everything and others yawning with the expectation that traditionalism will win out.

But both stories often fail to capture the way that new tech actually works—and the unexpected ways it can change not only its competitors but also its entire marketplace.

Consider Airbnb. Like some of the most exciting start-ups of this century, Airbnb is a new kind of “aggregation” platform. It’s a portal that connects producers and consumers in the marketplace for accommodations—like Facebook does for content, or Amazon for commerce, or Uber for driving.

Five years ago, the Disrupt Story went that Airbnb was going to challenge hoteliers and maybe even make their business obsolete, as young people ditched Marriotts and Hiltons for the empty beds of strangers. Since then, Airbnb has enjoyed one of the more magical runs of any company founded in the 21st century. With a $31 billion private valuation, it’s the second-biggest “start-up” (if that label even still applies) in the country, after Uber. Its annual revenues are doubling by the year.

So, naturally, the hotel business is in a state of wretched suffering—yes? Quite the opposite. Last year was the best year ever for hotel occupancy in the United States. The stock prices for the major hoteliers Marriott and Hilton are both up more than 40 percent in the last 12 months.

Airbnb is a transformative travel business. But most people failed to predict the thing it would transform—for good and bad.

Let’s review what the market for accommodations looked like before Airbnb came along. Most vacation rentals were in empty second homes, often in beach, resort, and ski towns; renting them meant knowing an owner personally or working through a local agency. Meanwhile, most brand-name hotels in major U.S. cities were (and still are) near business centers, where locals might work, but rarely sleep, wake, and wander around…