HomeAway will copy Airbnb and Booking.com for new initiatives

HomeAway will be shaking up its subscription-listing business for vacation rental owners by adding an Airbnb-like pay-per booking option later this Summer.

The model will also become available for professional property managers later in 2013, and that could provide this biggest upside for the vacation rental company.

Instead of paying a subscription for listing their properties, vacation rental owners would list for free and pay HomeAway roughly 8% to 10% of each reservation, although details haven’t been determined, CEO Brian Sharples said yesterday.

Airbnb currently charges hosts 3% of the reservation, and guests get tagged with 6% to 12% of the booking fee.

Sharples pointed to Airbnb “as a great example” of a company effectively using the pay per booking model as large numbers of people who rent out their abodes have no experience with subscription-based listings.

“Subscription will still be the huge monster that drives this business,” Sharples said, adding that pay-per booking is expected to become a “moderate” part of the HomeAway business over the next few years.

Sharples says HomeAway expects that only a small number of listings subscribers would switch to pay per booking, but it would attract new customers and be especially enticing to professional property managers who favor performance-based models.

Punting on Super Bowl and TV advertising

In other developments, after doing a lot of TV advertising over the last three years, including spots in two Super Bowls, Sharples said HomeAway will largely adopt Booking.com’s traditional practice of shunning TV advertising in favor of cost-per-click and display advertising only.

Sharples said HomeAway believes it is better to reinforce or introduce the brand while driving traffic instead of merely pushing brand alone, as is often the case in TV advertising.

“Display is something we are really going to flex our muscle in this year,” Sharples said.

Subscription renewal growth takes a hit

Sharples comments came in a call with financial analysts after HomeAway released its fourth quarter and full-year 2012 earnings February 20.

Fourth quarter of 2012 net income came in at $4.5 million, compared with a $256,000 loss a year earlier. Revenue in the fourth quarter rose 22.4% to $71.6 million.

On the down side of the ledger, HomeAway’s subscription renewal growth rate in the fourth quarter slowed to 73.8%, down from 76.8% a year earlier.

One of the factors in the decline was eliminating a UK customer that had provided 13,000 listings to HomeAway, Sharples said.

He emphasized that the slowdown in subscription renewals was also due to HomeAway offering lots of promotional discounts to owners who listed for the first time, and many of them don’t renew once the promotion ends.

For full-year 2012, HomeAway’s net income fell to $15 million, down from $18 million in 2011. Total revenue in 2012 increased 21.8% to $280.4 million.

HomeAway is incurring increased costs as it adds employees to support online booking. About 53,000 or 7.5% of HomeAway’s listings subscribers have adopted online booking over the past year.

HomeAway officials said they hope to get that number up to 80% over the next few years.