Messenger services used to thrive prior to the Internet. Manhattan streets were always dotted with messengers on bicycles or motorcycles delivering everything from letters to food. A Flatbush doctor recalls when he would routinely send X-Rays and other test results to other doctors by using a messenger service. Attorneys would use these services as a way of moving documents to clients and other attorneys. It was a major part of the budget of many service firms although they most often passed the bills on to clients. One messenger service specializing in the delivery of foods for most of the 2000’s saw its business decline in recent years after doing a banner business working for restaurants during COVID. Restaurants routinely used messenger services or car services to deliver food in past years. Others like pizza chains have their own delivery vehicles or bikes.
Uber, which revolutionized the taxi business by using technology is now using its enormous power and reach to transform the restaurant business. Known as Uber Eats, it has changed the way people relate to restaurants, perhaps due to COVID when dining in person was not an option. People simply learned that they could dine at home with the food coming from the restaurant of their choice. In 2022, Uber Eats helped facilitate billions of dollars in orders to local restaurants, grocery, alcohol, and convenience stores, resulting in deliveries to more than 50 million customers across the US and Canada. As a result, merchants earned more than $15 billion in sales through Uber Eats. The delivery of food became a major source of revenue for the restaurant and catering industry. Restaurants upgraded their websites, and many new sites came into being with menus and reservation options.
Not everyone in the restaurant business is happy about Uber Eats. Restaurants are particularly upset about the whopping 30% cut that Uber takes from every order. They are concerned that even if they added back the charge that the food would be so expensive as to make them less competitive. Perhaps that is why Uber Eats is no longer the leader in that category. DoorDash has become the US leader in online food delivery and the popularity of Grubhub has been growing. As of 2021, DoorDash boasted over 390,000 partner restaurants and 18 million users, with a market share of 45%. It accounts for 58 percent of all meal deliveries within the US. Grubhub made over $10 billion in gross transaction volume in 2022, a 4.1% increase on the previous year.
Truthfully, it was easier for Uber to expand to food delivery than the competition since they already had the technical infrastructure, street-routing software, and the drivers. They also had the ability to cross-market to their large taxi customer base, especially for the many who already have accounts with them. Some drivers keep small clipped on racks with brochures about the food delivery service. Despite their reservations about Uber Eats and their anger at the exorbitant cut, restaurant owners say they have no choice but to accede to customer wishes who have accounts with Uber. What was supposed to be a temporary measure during the pandemic is turning into a lasting consumer habit.
Yet another industry that is undergoing dramatic change due to technology is hospitality. Research showed that beginning in 2014, Airbnb reduced hotel profits by up to 3.7 percent and it has cut into hospitality by at least that margin every year since. Airbnb is considered public enemy number one by hoteliers all over the world. The alure of Airbnb is that it offers spacious quarters which are particularly attractive to families and are less expensive. The research also showed that in the ten US cities with the largest Airbnb market share, 1.3% fewer hotel nights were booked, resulting in a 1.5% loss in hotel revenue.
The emergence of Airbnb and its growing popularity is of deep concern to the hotel industry. Hotels have been struggling to return to pre COVID levels, especially with the vacation and leisure part of the industry. Although this type of travel has rebounded and appears to be on the rise, a significant portion have shifted to Airbnb. One Airbnb client put it this way: “I love the amenities at hotels, but Airbnb makes my family feel that it is a home away from home.” What is even more disconcerting for the hotel industry is that Airbnb has started to go after business travel, a primary target for the hotel industry. Experts say that the hotel industry must upgrade their facilities and increase the amenities to compete. “They let their guard down during the COVID and post COVID era, and now they will pay for it,” wrote one travel expert. He also noted that many hotels have diluted their services including not replacing towels very often and even cutting back on the frequency of housekeeping.
Technology has also affected another segment of the travel industry, the age-old travel agencies. Travel agencies have been going out of business in record numbers as they are becoming increasingly irrelevant. A recent survey showed that nearly 16 percent will go out of business in six weeks or less and more than 24 percent are in danger of closing within the next three months. It is certainly not a growth industry as very few new travel agencies have opened in the past two years. Most people now habitually book their travel on-line. The only travel agencies that still seem to be relevant are those that specialize in group travel, family itineraries and wholesale bookings.
It is no secret that technology has changed the world, especially when it comes to businesses like food delivery, hospitality, and travel agents. But most often the narrative has focused on jobs or how technology is replacing the need for human involvement. Most drivers have evidence of the change when they drive through the toll booth area and notice the automated electronic scanners above instead of the manned toll booths. Some Western countries are slowly converting checkout counters to self-checkouts in supermarkets and box stores.
While consumers are largely the beneficiaries of new technologies the change is an enormous challenge to business as they must adapt to the new world, particularly to their customer base.