Do you remember this guy?
This is Brian Sharples, President and CEO of HomeAway Inc. If you remember, Brian told us in a video that HomeAway would not charge a traveler fee, but fast forward to 2016 and what do you know? Travelers are being charged a fee.
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Today we know what he told us was not true. What happened? What changed?
After a company says they won’t do something, then turns around and does exactly what they said they wouldn’t do, can the company be trusted to honor their word in the future, or is history bound to repeat itself? What do you think?
There is an increasing amount of turmoil happening in the travel industry. Could these new problems we’re facing with HomeAway be partly because there’s a new Sheriff in town?
Meet this guy… This is the CEO of Expedia.
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Dara Khosrowshahi is an Iranian American businessman and the CEO of Expedia, Inc.
Is Dara now the puppet master pulling the strings?
Not too long ago Dara’s company Expedia acquired HomeAway. When they took control of the company overnight, things changed so fast that people’s heads are still spinning.
Some have become disoriented with the marketplace. They’re trying to make sense of what has happened and understand what they should do next to protect their investment’s financial stability.
It was only a few months after the HomeAway/Expedia acquisition that HomeAway began charging travelers fees for booking through their website (exactly what Brian Sharples said would not happen with HomeAway.)
One of the problems advertisers on the site experience due to the new fee is that the fee significantly changes the pricing of a vacation rental for travelers.
That’s why I recently wrote this post to help you offset the fees. You can check it out here- https://villamarketers.com/marketing-tool-offset-new-homeaway-vrbo-fees/
The added costs for the traveler to book is “changing the plans of travelers”, says Melony, a vacation rental owner in San Francisco.
Melony told me her property is losing interest and bookings because the fee can be as much as an extra $500 for her guests. She further explained that the increase in the price for booking her vacation home is forcing travelers to find cheaper accommodations elsewhere.
Melony offers an upscale vacation home and has noticed travelers are now looking for larger houses they can fit more people into. They’re doing this to split the expenses of the vacation rental with more friends and family to make the rental more affordable for each person paying.
The booking fees are based on the percentage of each booking. The fee can add up to hundreds of dollars in an extra HomeAway booking fee.
HomeAway started charging these new booking fees to travelers in middle of their agreement with its existing customers who listed their properties for rent on the HomeAway website for an already agreed amount prior to the acquisition. Is that a fair business practice?
People are venting on the blogs, social networks and forums about this, screaming “breach of contract.” According to Tnooz, there may be a class-action lawsuit between advertisers on the site and HomeAway Inc. You can read about that here https://www.tnooz.com/article/homeaway-class-action/
Travelers aren’t happy either. You can read about their complaints about paying these new traveler fees in many complaint forums. Many have used the VRBO family of websites for years and are disappointed with HomeAway’s decision to charge their loyal customers a new traveler fee.
This situation has similarities to the events that happened with this guy…You know him?
Martin Shkreli is an American entrepreneur and pharmaceutical executive. Former chief executive officer (CEO) of the biotechnology firm Retrophin. (Wikipedia)
Shkreli was able to obtain the manufacturing license for Daraprim, a drug used to treat aids patients. Before Shkreli obtained that license the price of the pill was $13.50 per pill. Immediately after Shkreli obtained the license he raised the price to $750 per pill overnight.
Shkreli has defended his price-gauging methods for the drugs, saying he wished he had raised it higher because “my investors expect me to maximize profits.”
Martin Shkreli is definitely very open about his intentions to make as much money as he possibly can for himself and his investors.
Looking at these situations there are many similarities that gets one thinking. Do the travel giants and their CEO’s feel a similar way – but just won’t come out and say it? Is it all about the money? Is it all about their investors?
Let’s have a look closer at the situation.
How does this happen? In both incidents, the two companies possess something of value that people needed, not wanted. In Shkreli’s case, customers needed the product to survive. For owners and managers, the need is a financial one, which can affect one’s way of life.
Why do companies like these feel they can instantly shoot-up the price of their product? Because YOU NEED THEM!
Needs are way stronger than wants. Products that fill “needs” are much more susceptible to drastic price hikes than “wanted” products or services.
The big problem is rooted in the NEEDINESS. When someone needs something people will do desperate things out of that need.
There are very large groups of owners and management companies who want to leave their HomeAway dependence behind them but they can’t- they’re stuck between a rock and a hardplace and can’t move. And when you can’t leave, they don’t have to worry about satisfying their customers with great service.
I’m happy to see that there has been much push back from managers and owners against the big companies trying to control our businesses.
We need to do more and be even more vocal. Do not fall asleep again at the wheel. Remember they are going to push their agenda regardless, but we cannot let the industry run us over.
Expedia’s CEO is running HomeAway in the ground. Brian lied to us. Changing the agreement in the middle of our contracts was 100% unethical. They should know better than to have done that to their existing customers. Greedy SOB’s hope the lawsuit hits them hard in the wallet, since that is the only thing they care about.
From 50,000 feet I think what we are seeing is striking evidence the FTC has been asleep at the switch. There is been so much consolidation in the vacation rental market I’ve lost track, and with that, HomeAway (Expedia) has used its acquired muscle to substantially widen its wedge in the value equation.
HomeAway tells its “advertisers” (vacation property owners and managers) that the well accepted economic theory of price elasticity has somehow been repealed, and that adding a service fee to the equation won’t affect demand. Of course, as many advertisers will attest, that is simply not true; demand has fallen off sharply.
HomeAway has also tried to sell the myth that the new service fee actually provides value to travelers via the accompanying “Book with Confidence” guarantee. If the horror stories about its failure to come through on this guarantee don’t dispel this myth, taking a few minutes to read the terms and conditions will.
However, there is another problem with this new fee that is being ignored. Not only did HomeAway CEO, Brian Sharples assure his customers that HomeAway would never institute a traveler fee, when he reversed course, he designed a deceitful implementation, and to make matters worse, does not apply the fee evenly across all advertised properties. I have personally evaluated some condo developments and noted cases where 40% or more of the properties don’t show the fee. Let’s evaluate how that happened.
In 2015 HomeAway and its sister company, VRBO, introduced a new program called “Book it Now” (BIN) that it touted as a way for advertisers to increase bookings. Since HomeAway had developed trust through the years with its advertisers, there was no reason to doubt this claim.
BIN has in fact been a good program for many advertisers, but what wasn’t disclosed was the fact that to initiate BIN on a property the advertiser also had to set up what HomeAway calls “Alternate Payments” (AP). This was an insidious strategy that enabled HomeAway and VRBO to implement a way to charge travelers a service fee. In other words, HomeAway and VRBO again deceived its customers. While no one can fault a business for trying to enlarge its share of the value equation, I think it is indisputable that the methods of deceit leveraged by HomeAway were nefarious if not also illegal.
What’s sad here is there were and still are many ways that HomeAway and its sister companies that were acquired by Expedia could have enlarged their aggregate value proposition, and with that, their share of traveler revenue to the benefit of all parties. However, it appears they remain blinded by the low-hanging fruit of leveraging size and market share to the detriment of advertisers and travelers.
While it will take time to fight back against the might of Expedia’s newly acquired market position, advertisers and travelers aren’t stupid. Over time they will discover there are a number of newer and smaller outlets like Vacation Home Rentals, Home Escape, Vacation Stayz and Tripz (just to name a few) that offer the same services as Expedia, but do not charge travelers for making reservations.
I have exclusively used HomeAway/VRBO for years and even pay extra money to TripAdvisor so that I can communicate directly with guests and they don’t have to book via TripAdvisor first… I actually directly all guests inquiring to use the HomeAway website to make their reservations (my methodology was simplicity of 1 calendar and 1 payment/insurance system) but that simplicity has cost me a lot… many months now of very low booking rates… I’m quickly learning that loyalty and/or convenience has cost me ten’s of thousands of dollars…. my biggest issue is how to keep things as simple as possible as I do have a day job as well… perhaps there will be a new player who enters the market soon enough… btw, I did put one of my properties on AirBnb but so far no luck and after renting from their property owners I’m very disappointed as they pretty much allow anyone to rent out a space and what I got compared to HomeAway/VRBO was new vacation rental owners who had no clue what they were doing (list is long but advertised wifi when there was none… btw I was in Spain and needed it, advertised Air-Conditioning, but the only air was a tiny little unit in the living room that was 10 years old and actually no air came out of it) so what I did get from Airbnb was credits for leaving early… not the greatest way to make things “right” for someone traveling 18 hours by plane and ready to have a wonderful vacation… 1/2 my time with Airbnb rentals ended up being finding new accommodations and spending more money for “last minute” left overs that no one else rented…. oh and the sad part was Airbnb asked me if I reviewed reviews which I had but I never thought about how people might be happy in the winter or fall or spring with a place because they never needed the Air-Conditioning at the time I booked which was July!!! I won’t even go into the Vacation Owner saying we use the Air too much when we called to let him know water was flowing down the wall from the only unit we had in the 4 bedroom condo… 1 couple decided to sleep on the couch rather then their room so they could actually sleep at night. Bottom line… real quality and longevity also have value.
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