How’s this for a shocker? HomeAway and Expedia have finally begun their beta testing after announcing a distribution deal l in October, but only about 1.3% of HomeAway’s properties are currently capable of distribution through an online travel agency.
HomeAway CEO Brian Sharples revealed as much during the company’s fourth quarter earnings call February 19, saying only about 12,000 HomeAway properties out of the 890,000 listed on HomeAway global sites are distribution-ready.
Sharples said HomeAway will spend the rest of 2014 building a distribution platform to get properties ready for electronic distribution.
The development of a distribution platform, and news that HomeAway is poised in the second half of 2014 to go beyond its traditional SEO practices and may ramp up search engine marketing symbolize how HomeAway is transforming its business.
Sharples said the testing with Expedia in a limited number of markets has gone well, and the beta currently revolves around whether travelers are interested in booking HomeAway’s vacation rentals on Expedia.com, and whether those bookings are hurting Expedia’s hotel sales.
So far, Sharples said of the testing, “we are happy with that. They [Expedia] are happy with that.”
This year should be considered a test year, Sharples said, as HomeAway mulls doing distribution deals with other online travel agencies and even Chambers of Commerce, and hones its skills in search engine marketing.
Sharples pointed out that HomeAway earns 10% commission from properties that use its new pay-per booking model instead of paying a subscription-listing fee, and that commission would have to be split with a distribution partner.
So HomeAway will have to figure out the return on investment of distributing through partners versus using SEO and search engine marketing to drive bookings to pay-per booking customers on the company’s sites.
Search engine marketing also has its branding benefits, Sharples said, noting that the Booking.com brand has benefited from premier positions in Google’s paid search results.
HomeAway launched pay-per booking on HomeAway.com in the fourth quarter and on its VRBO site last month. These listings are positioned low in HomeAway’s search results for now, and there has been no huge attempt to monetize them in a big way in the near-term, Sharples said.
To rectify that over the long term, HomeAway is in the early stages of testing search engine marketing to drive bookings to its pay-per booking customers, Sharples said. HomeAway expects to decide in the second half of the year whether it will step up search engine marketing or not.
It seems like a no-brainer that HomeAway will increase its search engine marketing spend — if it can’t deliver better performance for its pay-per booking customers, which are generally professional property managers — than the entire new business model is called into question.
Sharples said HomeAway has never done a lot of search engine marketing because its search engine optimization in organic Google results was so strong. But, a new business model obviously requires a different approach.
On other issues:
- Sharples said HomeAway isn’t seeing any loss of customers to competitors such as Airbnb. He added that the new pay-per booking model in fact may be strengthening HomeAway’s competitive position because it has tapped into a customer base “that may have been going elsewhere.”
- HomeAway will continue to focus on growth through acquisition in 2014, with Russia, Eastern Europe, and Asia-Pacific being areas of interest, Sharples said.
- Sharples said another focus for HomeAway in 2014 will be improving the quality of listings, and that includes user reviews because listings with reviews convert dramatically better than listings that don’t have them.