Business Research Methods. Impact of the sharing economy on hotels in Edinburgh

Table of Contents

1. Introduction

2. Context

3. Methodology and Methods
3.1 Qualitative research design
3.2 Quantitative Research design
3.3 Qualitative Methods
3.4 Quantitative Methods

4. Sampling

5. Conclusion

References

1. Introduction

The sharing economy is on the rise in the past decade, especially in the sector of accommodation with its major actor being airbnb. This research paper will examine the impact the sharing economy has on the hotel industry in Edinburgh. To achieve this a quantitative methodology will be used in form of an analysis of secondary data gathered from public sources followed by a survey, which will be sent to a randomly selected sample of 400 people. To qualify for the survey, the person needs to have visited Edinburgh in the last twelve months, while staying in either a hotel room or an alternative accommodation.

2. Context

The sharing economy is said to have started in the international financial crisis between 2008 and 2010 (Böckmann 2013). The Cambridge dictionary (2017) defines the sharing economy as “an economic system that is based on people sharing their possessions or services, either for free or for a payment, usually using the Internet”. Oxford (2017) stipulates with Cambridge, defining the sharing economy as “an economic system in which assets or services are shared between private individuals either free or for a fee, typically by the means of the Internet”. When comparing these two definitions, it is clear that the focus of the sharing economy is on the peer-to-peer business model. Here a business would only provide a platform online, on which private sellers and buyers can agree on their own deals, share knowledge or even invite someone into their home. Darcy Allen (2015) took these definitions and explained that the internet, through which almost all of the sharing economy´s transactions are facilitated, acts as an intermediary to allow private buyers and sellers to avoid traditional ways of buying or booking.

Hamari et al (2015) explain some of the basic uses of the sharing economy.

While everyone knows about some of the uses of the sharing economy there are others ones that need to be mentioned when defining this developing sector. An example, for knowledge sharing amongst individuals, is Wikipedia, which is an open source encyclopaedia used to gather information and make it available to the public (Hamari et al 2015). Another example for the concept is Uber. This platform allows private drivers to use their car to offer rides from one place to another, comparable to taxi services, but at a much lower rate (Hamari et al 2015). For this essay the most important part of the sharing economy is the room or flat sharing. This is the concept of a person offering a spare room, an apartment or a house to a random person mostly against a fee comparable to a rent (Guttentag 2015a, Guttentag 2015b, Hamari et al 2015, HNN editorial staff 2015, Kagermeier et al 2015, Choi et al 2015).

The core idea behind airbnb is for buyers to be able to rent out their underused assets (Choi et al 2015) to earn some extra money and for tourists to be able to experience the visited city from a private flat rather than a hotel. The company found a niche market with this idea and because private sellers are able to rent out their rooms/apartments at a minimal cost, rooms offered on the website are lower in price than the traditional hotel accommodation (Choi et al 2015, HNN editorial staff 2015). This cheaper peer-to-peer rental leads to impacts this new concept can have on the traditional hospitality and tourism market. As a result of lower prices, hotels could lose a significant part of their occupancy due to their premium prices (Neeser 2015). Following this drop in occupancy, hotels might go through a loss in revenue, as the revenue per room declines.

Research in that direction has been done in several countries to assess the actual influence the sharing economy has on the traditional hotel industry. Starting with Guttentag (2015a and b) in Canada and America, the HNN editorial staff (2015) in San Francisco and New York City, Kagermeier et al (2015) in Germany, Neeser (2015) in the Nordic countries Norway, Finland and Sweden and Choi et al (2015) in Korea. In the different countries impacts were found to be very different. In Canada and the US impacts on revenue were found to be minimal (Guttentag 2015a and b), HNN editorial staff 2015). When looking at why people booked through airbnb rather than hotels the research found that 4% of the bookings were for groups larger than 5 people, which cannot be facilitated by most hotels with only one room (HNN editorial staff 2015). Adding to the bookings on airbnb was that 19% of the bookings were for 30 days and more, which is an unusual length of stay in a hotel. So while not taking away customers directly, the sharing economy was seen to be more flexible and attracted new customers. The minimal financial effect was also found in Germany (Kagermeier et al 2015) and Korea (Choi et al 2015). Berlin for example had an increase in hotel growth of 263% over the last 2 decades while profits and occupancy are growing each year. On the other hand Neeser (2015) identified in his research, that airbnb had a major influence on the price per available room in the Nordic countries. This caused hotels in this region to experience a significant drop of their revenues between 2008 and 2010 (Neeser 2015).

3. Methodology and Methods

After defining what the research question is about and exploring the content of earlier studies the paper will now discuss the two different methodologies in research and how they could be applied to the resolve question.

3.1 Qualitative research design

The qualitative research methodology is described as the non-numeric approach to a research problem (Saunders et al 2016, Creswell 2013, Sale et al 2002). This approach has the purpose to be exploratory and to give insight into the topic of interest. The research follows a non-numeric way of data collection and analysis, e.g. word, video or image data (Creswell 2013).

This flexible design is one of the main strengths of the qualitative approach to research. It catches people`s emotions, opinions and personal feelings about the topic (Saunders et al 2016, Creswell 2013, Sale et al 2002). Ontologically spoken, interviewers conduct this research with the idea in mind that there is more than just one truth (Sale et al 2002). This is the case when emotions, feelings and opinions are examined, as everyone feels different about the same topic. The epistemology of this approach is that the interviewer and the interviewee are actively linked (Sale et al 2002). They are influencing each other with the way questions are asked as well as the way they are answered. This influence is seen as one of the main weaknesses of this approach. There are different influences through cultures and ways of communication that can alter the results (Creswell 2013, Sale et al 2002, Saunders et al 2016). An example for this could be a white, Christian woman conducting research in a strict Muslim community. If she does not adapt to the ways people are dressing and communicating, her results might be false or her access might even be denied from the start making her research irrelevant.

3.2 Quantitative Research design

On the other hand there is the quantitative research design. Here the researcher wants to identify causal relationships between variables in a large scale (Saunders et al 2016, Creswell 2013, Sale et al 2002, Swift and Piff 2014). Quantitative research follows mainly numerical data, with the purpose to be explanatory for the topic. It follows a deductive approach where theory and hypothesis come first and through observation the researcher achieves either confirmation or disconfirmation (Saunders et al 2016, Creswell 2013).

This kind of research, opposing to the qualitative approach, believes that there is only one truth to be found when the data is analysed (Sale et al 2002). The observer and the subject of study interact as little as possible, to ensure that no influence is taken towards answering the questions and then the final results (Saunders et al 2016). Therefore it is possible for the researcher to do the same research over and over again, to ensure that results can be used to mirror a large part of the population. Often this kind of research is anonymous or impersonal to protect the results from bias and to be able to generalize and replicate the same way of questioning as often as it is needed (Saunders et al 2016, Creswell 2013, Swift and Piff 2014, Sale et al 2002). While this is arguably one of the major strengths of the approach, the impersonal part can be a limitation as well (Saunders et al 2016). Although it allows replication and interviewer/interviewee bias are minimal, Swift and Piff (2014) identified a weakness connected. In this anonymous research subjects sometimes appear to answer what they think the researcher wants to hear rather than being open about what they truly believe.

3.3 Qualitative Methods

Pursuing a qualitative methodology, there would be two major methods to be considered. Because there are two sides to the research problem, the customers and the hotel managers, you would need to gather data from both parties. From earlier research (HNN editorial staff 2015) it was identified that managers are able to make time for an unstructured interview (Saunders et al 2016, Quinlan 2015) that would help to examine the problem. This would be face-to-face and would build a personal relationship between the researcher and the interviewee (Quinlan 2015). Because of the large amount of hotels in Edinburgh (150), satisfaction would probably be achieved within 5%-10% interviewed hotel managers (Guttentag 2015b).

Following up on the information received through the interviews, the researcher should think about arranging groups (consisting 50/50 of hotel visitors and airbnb customers) to identify reasons why alternative accommodation is chosen over hotels. This is called a focus group (Saunders et al 2016) consisting of 6-8 current tourists that visited in the last 12 months. The timeframe set will help to make sure that the experience and the reasoning are still clear to ensure valid results at the end (Creswell 2013, Quinlan et al 2015, Hackley 2003, Saunders et al 2016)

3.4 Quantitative Methods

If a quantitative research design would be chosen, information would be gathered in larger amounts to ensure reliability and validity of results (Saunders et al 2016, Creswell 2013, Qunilan et al 2015, Hackley 2003). To start of, general information would be gathered from official stations, websites and sources. These would include organisations like the ETAG (2015), government (Economy Committee 2015) and airbnb (2017) to find out the number of listings of alternative and traditional accommodation throughout the years and to see if any obvious impact occured. This basis would be used to make an outsized analysis of facts that would then lead to an informed way of building a large scaled survey. (Saunders et al 2016, Quinlan et al 2015, Creswell 2013, Sale et al 2002) The survey would be sent to users of alternative accommodation through airbnb. This kind of research would help to identify why tourists choose to live in personal places when visiting Edinburgh, rather than choosing to stay in a hotel. Because a large population would receive the same questions, the information gathered would be highly reliable and representable for the tourism market in Edinburgh (ETAG 2015, Saunders et al 2016). Since the quantitative approach has a higher reach than qualitative and the access to sources are fairly easy, this approach will be used to perform to answer the research question from the start.

4. Sampling

For the sampling of the target population, (Saunders et al 2016) this report will follow the probability sampling with the four stages suggested by Saunders et al (2016):

1. Identify suitable sampling frame
2. Decide on suitable sample size
3. Select Sampling technique
4. Check if sample is representative of target population

Firstly the target frame will be addressed (Saunders 2016, Quinlan 2011, Jankowicz 2005). Edinburgh currently has 150 hotels with 12.000 rooms and 23.690 beds (ETAG 2015) and around 4955 (statistically suggested: 2,3*4955=11.397 beds) listings on airbnb (Airdna 2017). These are only available 50% of the time according to Guttentag (2015a) and HNN editorial staff (2015). ETAG (2015) stated in their report that rooms are occupied on average 80% of the year. This means that a total number of tourists in the last year would reach a number of around four million, which is the target frame.

Saunders et al (2016) suggests that it is impractical to research the whole target population. Secondly, to find the appropriate sampling size, Saunders et al (2016) therefore advocate, using the law of large numbers, that to sample a large population, it is possible conducting research, when a margin of acceptable error is set. In this research the confidence in numbers would accept a Margin of error of 5% (Saunders et al 2016, Bryman and Bell 2011). Saunders at al (2016) thus state that if the number of the target population reaches one million the suggested sample size stays the same even if the target frame rises up to 10 million. Therefore the sample size for this research is going to be 400 individuals for the survey, including a 5% margin of surveys not being answered. To identify who will be sent the survey, thirdly the simple random technique (Saunders et al 2016, Quinlan 2011) will be used to find the 400 random people to be surveyed. This ensures that a diverse group (age, gender, religion, ethnicity, etc.) of people is found to provide more confidence in the numbers.

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