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Also, organizational factors in my theoretical model helped to interpret why hotel organizations in Helsinki had relatively few competitive responses. Decision-making especially among larger hotel organizations tends to be centralized and their interest to experiment were found to be very limited. Some executives explained that the industry was still very traditional, as customers expected somewhat standardized products and many continued to use call centers to make reservations instead of digital reservation channels. These findings complement the view presented in Varma et al. (2016) that large hotel organizations have limited ability to experiment with their existing business models.

Smaller hotel organizations were found to have more decentralized decision making and the agility to experiment more. However, this increased activity was mainly geared towards making enhancements to the existing business. For high-end organizations, the efforts were focused on creating more value added activities for customers, so that they could gain a larger price premium. Overall, the findings of this thesis indicate that hotel organizations have little motivation or ability to alter their value networks (Christensen, 1997), as their internal processes are geared to make more money from the existing business. Thus the operating model that works for hotels in stable times also causes inertia; this inflexibility explains why incumbents struggle with response against disruptive innovations (Hill and Rothaermel, 2003). This inertia was also seen among hotel organizations as delayed responses to digital trends.

5.3.2 Internal/external orientation

The findings of this thesis underline that due to the operational nature of the hotel business, most industry firms tend to be internally oriented. Especially small independent hotels relied primarily on tactical competitive responses in their external competitive orientation. Their market intelligence activities revolved mainly around tactical price responses and monitoring the market environment through media sources. Larger hotel organizations on the other hand had sufficient resources to add a strategic perspective on their external market environment; they conducted their own research and also utilized industry research more actively. The theoretical interpretation based on my theoretical framework is that the starting conditions for having sufficient resources to have relevant market information on Airbnb is low among hotel organization in Helsinki, especially among smaller organizations.

Airbnb supply was not included in the existing competitor monitoring systems of hotel organizations in Helsinki. One reason, according to theory on management cognition is that managers have tendency to create simplified representations of their competitors and see themselves as mainly competing with their most proximate competitors (Reger and Huff, 1993; Porac and Thomas, 1994). Given that most hotel organizations interviewed for this thesis only passively monitored the development of Airbnb (i.e. mainly through media), it is hardly surprising that they underestimated the scale of Airbnb supply in Helsinki. As noted by Christensen (1997) incumbents fail to perceive disruptive threats, as the initial opportunity size fails to draw their attention and they tend to underestimate the speed of disruption. Hotel organizations would be able to devise better revenue management strategies against Airbnb if they started monitoring Airbnb supply (Blal et al., 2018). Despite the very limited competitive attention towards Airbnb, some executives mentioned that they might start to monitor Airbnb more actively in the future.

Several market intelligence related practicalities also limit hotels’ ability to analyze Airbnb peer supply effectively. Some hotel executives interviewed for this thesis had observed Airbnb supply through the platform’s website (i.e. and some clearly had not). The first pitfall is that the search view is optimized for prospective customers and only shows a limited view of Airbnb listings (i.e. also booked properties are not shown if searching with specific dates). The second problem is that Airbnb supply is highly flexible and can scale up fast (Zervas et al., 2016), so an occasional hotel executive monitoring Airbnb supply in their district of interest

would only see a snapshot of supply in that point in time. Only one hotel executive was aware of a web scraping service called Airdna.co, which provides data on various Airbnb markets globally. Past research on Airbnb has also reported that hotel organizations find it challenging to measure Airbnb impact on their business (Henten and Windekilde, 2015) and the findings of this thesis support that view.

5.3.3 Managerial factors influencing response

The previous sub-section already indicated that managerial cognition plays an important role in explaining why incumbents mainly focus on their most proximate competitors. Furthermore, due to limited market information executives had on Airbnb, the role of their mental models and beliefs (i.e. management cognition) was even more central. Interviews with hotel industry executives clearly suggested that their thinking about Airbnb had been influenced by personal experiences, the media and industry sources. In general, exposure to personal experiences yielded positive opinions, while exposure to industry sources yielded negative and concerned opinions. After the emergence of such findings, I updated my literature review to include theory on management cognition. As theorized by Tripsas and Gavetti (2000), management cognition has a central role in influencing the development of organizational capabilities, thus leading to organizational inertia.

Cognitive models tend to be similar inside organizations and industries (Walsh, 1995). The findings of this thesis suggest that this is the case with the hotel industry in Helsinki, where factors like geographical proximity, mature industry lifecycle, institutional environment and similar task environment (Daniels et al., 2003) have possibly caused mental models to converge. In particular, participation to the decision making at the national industry association (i.e. MaRa) may have caused managerial beliefs about Airbnb to converge, given that responses from hotel majors were so similar. For instance, they used similar metaphors in explaining the regulatory inequality between hotels and Airbnb.

Past research on competitive dynamics has shown that top management team (TMT) demographics can influence awareness and decision-making at firms (Smith et al., 2001). In the context of this thesis, TMT demographics emerged as one possible factor in explaining differences in perception against Airbnb. While a full exploration was not done on the participating firms, TMTs consisting of mainly experienced hotel executives seemed to be the

most skeptical about the success of Airbnb. This supports the finding presented by Osievksyy and Dewalt (2015) that industry experience can cause indecisiveness to adjust the existing business model in response to change (i.e. similar to what Tripsas and Gavetti (2000) observed at Polaroid). Furthermore, another explanation is that seasoned executives in the traditional hotel industry lack ‘risk experience’, which may reduce their willingness to make business model adjustments (Osievskyy and Dewalt, 2015). Finally, younger hotel industry executives had also positive personal opinions about Airbnb, as they knew people who used the service or had used it themselves.

5.3.4 Market dependence

Past research on Airbnb has documented that hotel executives, especially from larger chains, do not see Airbnb as a direct competitor, as they perceive it as operating in a separate market segment similar to a low cost option (Varma et al., 2016). The findings of this thesis indicated that hotel executives in Helsinki had more diverse views about Airbnb, but generally concluded that they did not see Airbnb as a direct competitor, partly because many of them perceived the market overlap as low. Hotel executives mainly seemed to arrive to this conclusion, because unlike firms in their competitive sets, the ‘resource similarity’ (Chen, 1996) with Airbnb was so different. With respect to ‘market commonality’ (Chen, 1996), many executives seemed to be convinced that their product had more threatening substitutes, even if they saw moderate overlap in target customers. One interpretation of this could be hotel executives preferred to rely on simplified and more familiar representations of their competitive environment, as suggested by literature on management cognition.

Low-end organizations perceived moderate market commonality with Airbnb, while hotel majors observed overlap in narrower niche segments and limited verifiability of the overlap in the core business. Upscale organizations saw customer overlap as marginal. These findings were mostly aligned with findings from the U.S presented in Varma et al. (2016), except that executives from large hotel organizations in Finland communicated that they had some evidence that Airbnb was nibbling at their business. Comments from industry executives clearly indicated that Airbnb was not a competitive threat at the moment, because they felt its scale is small and they expected market demand to grow significantly in the subsequent years. Many executives also highlighted that Airbnb supply in Helsinki was mainly seasonal (i.e. summer time) and that the use cases for Airbnb were distinct from hotels.

Past research on Airbnb has noted that there is a clear difference in the extent that hotel executives see a market overlap with Airbnb (Varma et al., 2016) and what the market data supports (Zervas et al., 2016; Nowak et al., 2015). The findings of this thesis partly support the notion that hotel executives have inaccurate perceptions of Airbnb customers (Varma et al., 2016; Guttentag, 2017). One explanation for this is that hotel executives have a narrower view than consumers on what products are substitutes to their own. This is based on the idea from Desarbo et al. (2006) that firm executives sometimes fail to understand that consumers can see two distinct products as close substitutes, even if their market commonality and resource similarity would suggest otherwise. This implies that the role of management cognition has an important role in determining to what extent hotel executives perceive a market overlap with Airbnb. At such, it also explains why incumbent firms fail to respond to market driven business model innovation.