Has the Unicorns Bubble reached the Hospitality Industry?

EHL Editorial Team | 2 May, 2016

In the world of finance, a “Unicorn” refers to a startup company with a value of at least $1 billion, mostly because of investor funds and not necessarily because of intrinsic value. It's the value of the technology or the new ideas that these companies offer that makes them attractive to investors. When the term was first coined, these high-value startups were so rare that they were referred to as being as uncommon as Unicorns.

Today, Unicorn startups are no longer so rare. As of 2016, according to this list from CrunchBase, there are 162 companies that are considered Unicorns for a total value close to $550 billion and an amount of money raised of just about $85 billion.

Even though the term first referred to tech companies, it has spread to other industries and hospitality is no exception. No matter which industry these companies belong to, technology still tends to drive the boom. As the Wall Street Journal so dramatically put it, “software is eating the world”. Cloud computing, mobile technology, and cheaper components introduce disruptive technologies into industries not normally associated with high tech.

“In the past, hoteliers were mastering the entire customer lifecycle, from marketing programs, sales & reservations management, to on-premises experience and loyalty programs. Today, the value chain is split among many market players. The major opportunity for hospitality unicorns hence lays in distribution management, namely helping acquire customers and bring them to the target hospitality offer. While being a successful start-up in distribution management most often requires talent in engineering and data management, becoming a unicorn demands another giant step: getting massive funding.” explains Rémi Walbaum, EHL's Chief Innovation and Infrastructure Officer.

We have all heard about Uber and Airbnb, whom both made the list of top Unicorns and we can easily imagine online platforms that let consumers book a weekend in a New York apartment or borrow a neighborhood car for a couple of hours. But which Hospitality start-ups will be next to reach the Unicorn level?

Well, following on the footsteps of HelloFresh and the food-delivery services trend, a list of highly valued startups throughout the globe is expected to grow rapidly according to the New York Times:

These include food delivery startups Deliveroo in London, Ele.me in Shanghai, Munchery in San Francisco and DoorDash in Palo Alto, California; Even though they  are operating in a very crowded space where the partnership competition is fierce, these startups have managed to stand out from the crowd by hitting critical milestones through gaining new important partners like food chains Kentucky Fried Chicken, and expanding into other delivery services like with non-restaurants like 7-Eleven. Big-name investors have already gotten on board: Arnaud Bertrand, EHL Alumni and founder of Housetrip is a Deliveroo investor. 

It is only the beginning. It is clear that new companies will continually emerge in the hospitality industry to disrupt the way companies connect with customers, enhance their experiences, and conduct business in general.

Not all will be “Unicorns” of course but these definitely set trends and produce both threats and opportunities to existing or new companies.

“The good news is that the hospitality industry has an attractive characteristic for investors: its strong organic market growth. Sources of profitable investments are therefore not limited to finding a super innovation and accelerating its development with capital injection; traditional hospitality companies with tried and tested business models are also good candidates for investing into.” continues Rémi Walbaum.

Unicorns are building new business models thanks to their access to tools, capital, and a Go-to-Market reach. Like never before, new Internet-connected businesses are forcing companies to turn around and respond to these changes to enjoy this new boom.

“One final advice for hospitality entrepreneurs wanting to become unicorns: Becoming a unicorn shouldn’t be an end in itself. Your company should focus on providing real value for the customer. Only then will you have the opportunity to become a successful start-up and then, if you happen to be in the right place at the right time, your company might be in the lucky few future unicorns.” concludes Rémi Walbaum.

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