This just in…
Well my friends, this is a big day in history. The game has changed for the vacation rental industry.
I had a blog scheduled for today, but this pressing news took precedence.
If you’ve been following my blogs, you know that we suspected this day would come.
HomeAway has been acquired.
By who?
By Expedia!
Expedia purchased HomeAway for an equity value of approximately $3.9 billion. Yeah B as in billion!
But wait there’s a twist in the plot of this story.
In 2016, they, HomeAway now Expedia, is set to introduce a traveler service fee of 6 percent. Sound familiar?
With this new approach, it appears as though HomeAway has now become a follower of AirBnB’s business model. So is AirBnB really the leader here? Is their business model better? Do you think AirBnB will be bought out next?
Expedia, the travel giant with a gargantuan appetite consumed huge brands this year like Travelocity and Orbitz. What’s really interesting is Expedia paid double for HomeAway than it it did for both combined! The deal, still subject to regulatory approvals, is expected to close in the first quarter of 2016. What will 2016 look like for the vacation rental industry?
Things are changing!
Change of management, policy, procedures, requirements, features, fees…everything will be turned on it’s head, or will it?
Owners and managers may not be the only ones who have an issue with the HomeAway buy out. I’m pretty sure Booking.com is not so thrilled.
Booking.com once had the bragging rights of being the world’s largest lodging seller but not anymore. Expedia just knocked Booking.com off it’s high horse with 1.5 million properties vs. Booking.com’s 820,400. What will Booking.com’s next move be? Should we expect more buyouts in the industry from other agencies wanting to get in on this action?
Are hotels in danger now that Expedia has invested 3.9 billion in vacation rentals and may now be promoting rentals more aggressively?
What will the acquisition mean for competition, travelers, and your vacation rental business? Will more owners list? Will fewer or more travelers rent or is it business as usual?
The HomeAway buy-out shows us all that there is continued growth in the vacation rental sector. It’s amazing how much has changed in the last several years and it will be very interesting to see how this affects us all in the future.
My piece of advice for every single owner and management company is to start creating your brand today.
If you want to survive the giant takeover then you must become very good at something. Focus in on a niche and develop your brand around what you’re excellent at or around a specific travel niche.
Why develop your vacation rental brand? Expedia doesn’t mean much to travelers, in the sense that Expedia is like a warehouse for rentals. There is no real brand equity, messaging or level of expectation.
Where owners and managers will cut out their piece of the market is by developing brands that mean something to people. Invest in your business because it’s the only thing you have full control over. Create alternative booking sources through your brand now, not later!
Is your business ready for 2016?
This is history in the making, what do you think about this huge event that will undoubtedly affect all of our businesses? I’m all ears!
Jay William, You’re so right this will change our vacation rental business like we’ve never experienced it before. Big Shifts= Big Profits.
My mouth is on the floor!
I know it’s finally happened!
I say AirBnB is next. Great post Jay!
Cristina, if AirBnB is next to be bought out it will likley be bought out for more than HomeAway.
If they are bought out I think it would be Priceline (Booking.com) who buys AirBnB. But they might just be too expensive and could be “unacquirable” because of it. We’ll have to watch intently
Amen Sandra! We all need to be focused on making ourselves different than “off the shelf vacation rentals” and a unique brand and offering combined with above average service is key to creating additional value for guests and rising to the top.
What are the rates, what has changed?
Dale,
they’re changing the game on everything. We only know what they’ve shared with us. They say they’ll begin charging travelers a fee (6% of bookings) in adition to the fee managers and owners pay. They’ve also said they “may” reduce commissions for owners but this isn’t certain. My concern is… would it be reasonable to expect us to follow a similar path of hotels and how they operate? Expedia charges hotels substantial commissions (20 to 25%) to use their services. Would we eventually get there?
Will this be another situation where we’re bioled like Lobsters slowing raising the heat (price). I can only say with certainty, expect more changes on all fronts.
The difference with charging hotels a higher commission is volume–multiple rooms at lessor price can still generate money. Hotels (especially chains) also operate on bulk, so costs are not as high. 1 villa pays full price for services and products, doesn’t usually have other properties to distribute, so if prices have to increase they’re still not covering costs!
This is a very sad day for small business owners. Homeaway & VRBO fees were reasonable and provided a great deal of flexibility. I can see another Tripadvisor type scenario where they doubled my rates one year to $950 and I learned to live without them!
I know how you feel Dan, things can deteriorate after buy-outs. There are usually a ton of changes and a disconnect with the people who buy out the companies and their customers… but they say they may reduce commissions? What do you think about that?
In the press, the 6% traveler fees mentionned by Jay is confirmed but when it comes to the owners’ fees, it more the fees “should go down”… well how much is what we all want to know right? I have also read that the average owners’ fees on VRBO is 10%, mine are more 13% which is outrageous. What are your fees or customer acquisition costs in % if you pay an annual subscription? Airbnb is at 3% owner + 10% guest.
Stella it was also confirmed by the CEO of Expedia that they are going to ACCELARATE the transition from subscription model to commission model.
Looks like subsription models are going away… fast! Brent Belm who was the CFO of HomeAway told me that subscriptions were their flagship product that wouldnt be going away… can you say Game-changer!
I talk about your points with a hotel expert. I’ll be publishing the video interview ASAP! Stay tuned 🙂
I look forward to watching the interview, that will be great insight!
Are we being swallowed up by travel giants?
Or are we officially being welcomed into the travel industry?
I see it as Vacation rental is now mainstream. I hear that hotel chain like Marriot are looking to develop this segment too.
Airbnb released a figure of 50 million booking a year with 17 millions for the summer period only. Now I don’t know what’s included uf they are talking in transactions or overnight booked but the travel industry has taken noticed!
Stella we need to be prepared because there are many big players who are now going to get in the game starting in 2016. Lets buckle our seatbelts!
What do you think will happen in 2016?
Jay I think that in 2016, vacation rental will mature with more booking opportunities for the owners. With that will come higher expectations from guests, which in turn will lead to the emergence of standards.
I agree with you, the sucessfull vr owners will need to control their vr business meaning being able to take direct online bookings. I am guilty, my website is still not online!!
That said, we should also take advantage of the exposure that Airbnb, Expedia & Tripadvisor offer, after all this is free advertising 🙂 what you need is to reinforce your brand when you advertise on those platforms.
I don’t see Airbnb being acquired anytime soon, maybe an IPO once the legal issues have been settled.
What property management software can help me stay out of this mess?
I think many owners like yourself Maria are sorry to hear of the HomeAway purchase. It seems like everday there has been changes like you mentioned that we have had to adjust to. And truthfully its just the begining of a new chapter of changes coming! I hope it is profitable for owners and managers but I’m not so sure.
Thanks for this article Jay! Improve our website, work on our SEO, make a smart use of social media and improve our marketing skills seems the best way to go forward and a more urgent priority!
This is so sad, villa rental from an owner is not the same as booking a hotel room, will Exoedua realise thiis ? Interestly I hear that AIrbnb has appointed a special villa marketing manager, and according to my sources is actually listening to villa owners about what they need a site to do and trying to develop their business in our area. At least they know from their core business that renting a room in a persons home is a personal thing and they have tried to encourage dialogue between host and guest. Luckily in my crowded market of Florida there are smaller specialist companies that I can turn to, but others may not be so lucky. I am watching this space.
@Moorgatevilla I’m with you. We all need to be watching this space closley.
This should be the fire that sparks the motivation to safe gaurd our businesses. Ive warned about the day coming and well… its here now.
But lets not just watch anymore, let this be the time to take action for our businesses sake! Thanks for the great comment.
Jay I have taken as many steps as possible to distance myself from relying on the listings sites. The ones that I do use tend to be specialists to my area or offer me added extras. A case in point is the one that does my VR 360 and professional photos , small and determined to keep it that way. One other only asks for a referral fee if you get a booking but comes very high on search engines. They have a waiting list to be able to list as they chose to limit the number of homes on the site to make it much more user friendly. Interestingly both sites are run by people who also have homes in Florida so totally understand the needs of owners and the area.
I am lucky that I do not pay any of the big guys to list on their sites but that is because I can, due to the area my home is located. Others may not be so fortunate especially when starting off.
I understand how hotels, that have multiple rooms (100s?) can get paid at checkout and have more relaxed cancelations. Most villas are only 1, and some of us already pay 10-25% to PMs, not including many other costs. How will “mom and pop” villas survive? As a small business, you can’t expect most to keep things running smoothly if allowing a 2 week cancel (most wouldn’t rerent, unlike multiple hotel rooms) and paying out after vacationers stay–how will we survive?
Yeah there will have to be some give for property owners for this to really work because as you said the operating costs for a villa already absorbs a good percent of rental income. But we can’t count on it to work itself out, we need to focus more on getting direct bookings!
Im going to talk more about this in our next update. Thanks for sharing your thoughts on this Blamona!
EXACTLY!
As a vacation rental owner and property manager that manages multiple units, we have avoided Airbnb for this specific reason. It is not reasonable for these companies to charge upwards of 15 ~ 18%. They may want to consider how this price increase to travelers will reduce their overall number of nights rented. Our average rental is 10~40k, that means an extra 1500 ~ $6000 per booking. That is more than what we charge to manage the property and rent it. At some point it will no longer be lucrative for owners to rent their properties as well besides dealing with all of the regulations in every different city.
Put on your big girl pants and hang on cause Kansas is going bye bye. Technology is growing faster everyday. Airbnb is big and Expedia buying Homeaway.com is even bigger. Kick off the dinosaur costume and adapt to the 21st century or be buried.
Very uneducated reply. When they dig deep enough into owners and brokers pockets, a new venue will evolve. Technology IS evolving and that is where I see opportunity. So maybe try on your Big Girl brain.
Wow who will be next?? There is nothing wrong in sites like HomeAway, Airbnb etc until the big greedy corporate suits get their dirty little hands on them and change the face of what they were designed for. Most people who advertise on these sites are individual owners or property management companies who are try to be competitive in a sometimes very saturated rental market. Hiking up their rental prices so as to absorb ridiculously high commissions is about as farcical as Donald Trump making president!!
Get your brand going and research other places to list your properties. Let’s all get together and flip these money grabbing big guys the bird!!
It’s all about our Branding- could not agree more! I specifically like what you said: Why develop your vacation rental brand? Expedia doesn’t mean much to travelers, in the sense that Expedia is like a warehouse for rentals. There is no real brand equity, messaging or level of expectation.
Where owners and managers will cut out their piece of the market is by developing brands that mean something to people. Invest in your business because it’s the only thing you have full control over. Create alternative booking sources through your brand now, not later!
Some PM companies never got into bed with VRBO/Homeaway/Flipkey et al…they are already ahead of the game as these PMs are accustomed to maintaining a brand independent of Homeaway and the like. They are very acclimated to driving traffic to their booking site…using dollars most spend on listing fees… to run their own advertising programs.
What happens to persons that just renewed subscriptions (at $1300 I might add) We pay both?
I see some license law violations actually – as a NJ licensed REALTOR and specialist (4th generation in family vacation rental business here at NJ Shore) I have obvious concerns as a Brokerage but also for both property owners and consumers put in harms way by this. Anyone putting rentals on VRBO and Homeaway (can’t beat em join em) knows a good 60%+ of “inquiries” are either not qualified to rent, or not matching available dates (like we have 1 week minimum) – the thought of these being “bookings” even if they can be canceled, is horrifying – especially with credit card payments involved as well. What will make history is the fight back, and its already started in NJ. Stay tuned.