Blue Ocean Strategy
for Short term accommodation activities (ISIC 5510)
The short-term accommodation sector is highly mature and saturated (MD08), with a plethora of providers ranging from global hotel chains to individual Airbnb hosts, leading to intense price competition (MD03, MD07) and diminishing returns for incremental improvements. This 'red ocean' environment...
Strategic Overview
The short-term accommodation industry is a quintessential 'red ocean' – highly competitive, characterized by price wars (MD03), and featuring numerous players from traditional hotels to agile short-term rentals, leading to market saturation (MD08). Blue Ocean Strategy provides a compelling framework for operators to break away from this cut-throat competition by creating entirely new market spaces, or 'blue oceans,' where competition is irrelevant. This involves focusing on 'value innovation' – simultaneously pursuing differentiation and low cost by eliminating and reducing factors that competitors take for granted, while raising and creating elements that deliver unprecedented guest value.
For short-term accommodation, a Blue Ocean approach means challenging industry assumptions about what a 'stay' entails. Instead of merely offering a room, it encourages rethinking the entire guest experience, potentially combining elements from other industries (e.g., wellness, education, adventure travel) or targeting non-customers (MD08) who currently avoid traditional accommodations. This strategic shift can lead to the creation of novel concepts that redefine industry boundaries, attract new demand, and enable sustainable, profitable growth away from the pressures of existing market spaces.
By leveraging the ERRC (Eliminate, Reduce, Raise, Create) framework, short-term accommodation providers can overcome challenges such as market share erosion (MD01), the difficulty in differentiation (MD07), and the struggle to achieve organic growth in saturated markets. It requires a willingness to challenge conventions and invest in innovation (IN03, IN05) to unlock previously untapped guest value and cultivate a new demand curve.
4 strategic insights for this industry
Challenging Industry Conventions with the ERRC Grid
The short-term accommodation industry is laden with conventional practices (e.g., rigid check-in/out times, standard room service, specific amenity lists). Applying the ERRC (Eliminate, Reduce, Raise, Create) grid systematically challenges these, allowing operators to identify which factors add little value to guests (eliminate/reduce) and which new factors could create unprecedented value (raise/create), thereby reshaping the value curve. This directly addresses issues of differentiation (MD07) and market obsolescence (MD01).
Unlocking New Demand from Non-Customers
Instead of competing for existing guests, Blue Ocean Strategy encourages identifying and attracting 'non-customers' – individuals or groups who currently avoid short-term accommodation due to specific unmet needs or perceived downsides. For example, individuals seeking hyper-authentic local immersion often bypass hotels for unique local stays. Targeting these non-customers can create entirely new demand, mitigating structural market saturation (MD08) and revenue volatility (MD01).
Hybrid Models for Novel Value Propositions
Creating blue oceans often involves combining elements from seemingly disparate industries. In accommodation, this could mean hybridizing hospitality with co-working spaces, educational retreats, wellness clinics, or sustainable farming (agri-tourism). Such cross-industry integration offers unique value propositions that make traditional competitors irrelevant and taps into evolving guest expectations (IN03).
From 'Stay' to 'Transformative Experience'
The traditional 'product' in short-term accommodation is a room or dwelling. A Blue Ocean perspective shifts this to offering a 'transformative experience' – a journey, skill acquisition, or personal growth opportunity facilitated by the stay. This higher-level offering transcends mere functional comfort, allowing for premium pricing and strong brand loyalty, directly countering margin pressure (MD03) and enhancing differentiation (MD07).
Prioritized actions for this industry
Conduct an ERRC (Eliminate-Reduce-Raise-Create) analysis of the industry's existing value curve, identifying which factors of traditional accommodation can be challenged to create a novel guest experience.
This systematic approach forces innovation beyond incremental improvements, enabling the creation of unique value propositions that differentiate from existing competitors and alleviate margin pressure (MD03) and difficulty in differentiation (MD07).
Invest in 'non-customer' research to understand why certain segments currently avoid or rarely use short-term accommodation, and design concepts specifically tailored to their unmet 'jobs-to-be-done'.
Targeting non-customers opens up entirely new demand pools, effectively bypassing existing market saturation (MD08) and creating uncontested market space, leading to significant organic growth potential.
Develop and pilot 'value innovation' concepts that integrate services or features from other industries (e.g., 'Wellness & Digital Detox Retreats,' 'Creative Co-Living Hubs,' 'Adventure Skill-Building Stays').
These hybrid models create unique selling propositions that are difficult for traditional players to replicate, addressing market share erosion (MD01) and fostering new revenue streams by tapping into evolving guest expectations (IN03).
Forge strategic partnerships with local experience providers, specialized tour operators, or niche service providers to co-create bundled, unique experiences that are integral to the accommodation offering.
This enhances the 'create' aspect of the ERRC grid, delivering distinctive value that strengthens the value proposition, differentiates from standard offerings (MD07), and potentially reduces operational burden while expanding the value chain (MD05).
From quick wins to long-term transformation
- Organize an internal 'Blue Ocean' workshop using the ERRC framework to analyze current offerings and brainstorm new value curves.
- Identify and analyze 'non-customers' – groups who rarely or never use your services – through secondary research and preliminary surveys.
- Map the value curves of key competitors to visually identify opportunities for differentiation.
- Develop a prototype or pilot program for a new accommodation concept based on an ERRC analysis, targeting a specific non-customer segment.
- Conduct market testing and gather feedback on the new value proposition, iterating rapidly.
- Establish partnerships required to deliver the 'created' elements of the blue ocean offering.
- Scale successful blue ocean concepts across multiple properties or develop a new brand identity around the new value proposition.
- Integrate Blue Ocean principles into the organizational culture and product development lifecycle.
- Continuously monitor for emerging blue oceans and potential red ocean shifts in existing blue oceans.
- Creating 'red ocean' improvements instead of true 'blue ocean' value innovation.
- Underestimating the investment required for R&D and pilot programs (IN05).
- Failing to communicate the new value proposition effectively to the target audience.
- Ignoring potential regulatory hurdles or community friction (CS01, CS07) associated with novel concepts.
Measuring strategic progress
| Metric | Description | Target Benchmark |
|---|---|---|
| Market Share in New Segments | Percentage of market captured within the newly created (blue ocean) market space, demonstrating new demand. | Achieve 20% market share in new segment within 3 years. |
| Average Daily Rate (ADR) Premium | The difference in ADR for blue ocean offerings compared to traditional red ocean competitors, reflecting higher perceived value. | Maintain an ADR premium of 20-30% over industry averages. |
| Customer Acquisition Cost (CAC) for New Concepts | Cost to acquire a customer for a blue ocean offering, aiming for lower CAC due to less competition. | Achieve CAC 15% lower than red ocean benchmarks. |
| Innovation ROI | Return on investment for R&D and implementation of blue ocean concepts, measuring profitability of new ventures. | Achieve 2x ROI within 5 years of launch. |
Other strategy analyses for Short term accommodation activities
Also see: Blue Ocean Strategy Framework