Expedia partnered with HomeAway on vacation rentals last week. One day it is going to partner with or acquire a sharing economy company built in the Airbnb mold, depending how the market shakes out. When you are as big as Expedia, you can afford to sit back and see how things shape up.
Expedia Inc. CEO Dara Khosrowshahi sees a lot of potential in Airbnb-type short-term rentals, and could envision partnering with these types of sharing-economy businesses to meet consumer demand in the future.
“From a consumer standpoint, it seems to be a good product and a product consumers like,” Khosrowshahi said during Expedia Inc.’s third quarter earnings call.
An analyst asked Khosrowshahi for his take on short-term rentals as practiced by companies such as Airbnb and Wimdu, particularly in Europe.
Having just announced a deal to partner with HomeAway on vacation rentals, which often are leisure bookings over several days to a week, Khosrowshahi said short-term rentals have “hit a consumer chord,” adding that the eventual size of the market will depend on the regulatory environment.
Airbnb is growing rapidly, but is facing regulatory hurdles, particularly in New York, where an existential battle may be shaping up.
Khosrowshahi thinks short-term rentals will attract more regulation over the long term, and Expedia’s response to the burgeoning market will hinge on how large the market becomes given the regulatory response, and how short-term rentals will relate to hotel occupancy and VAT taxes.
Khosrowshahi said short-terms rentals would be a new source of lodging supply for Expedia “to the extent it is scalable and safe.”
On the HomeAway partnership, which is slated to be implemented in 2014, Khosrowshahi said Expedia wants to integrate vacation rentals as tightly as possible, but wants to see how they resonate with consumers.
Whether vacation rentals will be integrated with hotel search results or accessible through a separate vacation rental tab will depend on consumer preference, Khosrowshahi said, adding figuratively, “We will let consumers vote.”
On other matters:
The Travelocity Deal
Officials said the Expedia agreement to power Travelocity websites in the U.S. and Canada will be phased in, beginning with hotels in 2014.
Expedia expects the Travelocity partnership to provide a $40 million to $65 million EBITDA contribution to Expedia on an annualized run-rate basis.
Expedia CFO Mark Okerstrom said work had already begun on the Travelocity transition and that Travelocity’s performance “may be significantly different,” meaning better, once the migration to Expedia technology takes place.
Officials said Hotwire’s revenue and profitability continued to under-perform in the third quarter. The Hotwire team is currently focused on making the product more relevant, improving its mobile capabilities, and readying Hotwire to better-compete against Priceline’s Express Deals.
Khosrowshahi said Expedia, which only accepts hotel reviews from guests who have booked stays with Expedia Inc. brands, has a “significant competitive advantage” over companies (like TripAdvisor) that accept unverified reviews.
There’s lots of irony in that statement given the fact that TripAdvisor used to be the fastest growing member of the Expedia Inc. family before being spun out in late 2011.
Khosrowshahi said user reviews improve content and enhance converting lookers to bookers, and Expedia is currently focused on increasing the percentage of users who write reviews.
In the next stage, Expedia hopes to improve that percentage from mobile customers, he said.
Marketing Through TripAdvisor
Khosrowshahi said Expedia’s marketing results have improved through TripAdvisor hotel metasearch in the third quarter, although it varies weekly and by geography.
In the second quarter several months ago, Expedia attributed some of its under-performance to the difficulties in marketing through TripAdvisor’s recently launched hotel metasearch product.
Referring to using TripAdvisor for marketing in the third quarter, Khosrowshahi said, “We are generally regaining click share.”
Tags: airbnb, expedia, sharing, travelocity