The Takeoff Episode 02: How Startups Can Adapt and Pivot Sponsored This content is created collaboratively with one of our sponsors.
HomeAway’s Brian Sharples isn’t worried about online travel agencies getting into vacation rentals. InterContinental, Marriott and Hilton have the OTAs on a relatively tight leash, and won’t stand for a serious flirtation with those dreaded vacation rentals.
The largest hotel-booking company on earth, Booking.com, has been adding vacation rentals in Europe, but HomeAway CEO Brian Sharples seems unfazed by it, and in fact he’s learning some lessons from Booking.com’s practices.
On the advertising front, HomeAway is in the midst of an about-face. The company that offered TV and digital advertisements for Super Bowls in 2010 and 2011, is basically giving up on off-line advertising for now in favor of display and SEM ads.
That is the model that Booking.com has traditionally used, Sharples acknowledges, adding that Priceline.com/Booking.com is Google’s largest advertising customer. [Booking.com, however, recently launched an offline advertising campaign in the U.S.]
Sharples says HomeAway spent about $10 million last year in off-line advertising, and will take that money “and spend a year getting really good at search-engine marketing.”
The new strategy coincides with HomeAway’s decision to transition to an optional pay-per booking model for vacation rental owners, starting in the third quarter of 2013, instead of its single-minded reliance on subscription revenue.
It didn’t pay to arbitrage traffic to HomeAway’s sites in the past because traffic was adequate and increased traffic didn’t translate into buffed-up margins, but all that changes with the pay per booking model, Sharples explains.
Not fearing Booking.com and other OTAs
Sharples notes that Booking.com has been adding some vacation rentals in Europe, and also offers hostels and apartment hotels in addition to traditional hotels, but he doesn’t think Booking.com will get into vacation rentals in a major way.
He thinks Booking.com will continue to “play on the margins of vacation rentals” because the amount of vacation rentals in a given destination would overwhelm the number of hotels, hurting Booking.com’s core business.
At the same time, Sharples observes that none of the major online travel agencies have vacation rental tabs, and even Expedia only decided to launch vacation rentals through TripAdvisor, when the latter was still an Expedia subsidiary.
It’s always the same old story, Sharples explains: When it comes time to ink a partnership deal on vacation deals with HomeAway, an OTA’s vice president of hotels always walks in and says the big chains will never go for it.
Case closed, and deal gone.