From a financial perspective, charging a booking fee to travelers was the missing piece from HomeAway -- and the company telegraphed several months ago that it was coming. Charging travelers fees will enable HomeAway to lower commissions to vacation rental owners to be more competitive with Airbnb and Flipkey.
HomeAway, which announced it will be acquired by Expedia Inc. for $3.9 billion, has been sitting on a potentially very lucrative asset in a traveler booking fee, and has now decided it will introduce one for all online bookings starting in the second quarter of 2016.
During a call November 4 about the acquisition, HomeAway CEO Brian Sharples said the company’s “traveler’s fee” would average around 6 percent of the booking but would be leveled on a sliding scale.
In turn, travelers would get access some under-development new products that would enhance their trust in HomeAway despite lots of fraud in the vacation rental space.
While HomeAway’s consumer customers would face booking fees, hosts that have chosen to list on HomeAway sites for free and pay 10 percent commissions per booking would see those commissions lowered, Sharples said. In addition, vacation rental hosts and managers that pay HomeAway subscription fees to list their properties would get incentives to entice them to make their vacation rentals online bookable, he added.
About half of HomeAway’s listings are online bookable and the goal is to get that figure to 90 to 100 percent by the end of 2016. Vacation rental owners who transact their rentals offline can get away without charging guests a booking fee, but HomeAway is threatening to boot properties that are not online bookable by the end of next year.
Of three of the major vacation and apartment rental listing sites, HomeAway had been the only one not to charge consumers a booking fee — until now.
Airbnb charges guests booking fees of 6 to 12 percent and charges hosts a 3 percent commission.
TripAdvisor’s Flipkey charges commission-paying hosts a 3 percent fee and guests a booking fee ranging from 5 to 15 percent.
Sharples said HomeAway has been testing charging travelers a booking fee and is confident it won’t deter transactions because in many cases HomeAway offers unique properties that consumers want to book.
Still, a lot of that inventory is not unique and is listed on competitors’ sites so implementing that traveler fee is not a slam dunk without potential complications.
Sharples said introducing the traveler fee has the potential to triple HomeAway’s revenue. He estimated that bookings in 2015, prior to the fee being introduced, would be $14 billion to $16 billion.
HomeAway plans to invest a big chunk of the traveler fee back into marketing as it “aggressively” ramps up its marketing spend, Sharples said.
Sharples said bring HomeAway’s global brands into the Expedia Inc. fold will “turbocharge our growth for years to come.”
Expedia plans to integrate HomeAway’s vacation rentals into brands such as Expedia.com, Hotels.com, Travelocity and Orbitz, and Expedia will test introducing its still-dimunitive roster of apartments’ inventory into HomeAway’s brands, officials said.
Sharples said he believes there will be a “tremendous upside” to integrating HomeAway’s more than 1 million listings in more than 190 countries into Expedia’s global brands.
The combined Expedia-HomeAway would feature 1.5 million properties, officials said, and that would dwarf the previously largest lodging site, Booking.com, which offers 821,406 hotels, vacation rentals and apartments.
Expedia Inc. CEO Dara Khosrowshahi said Expedia can leverage its experience and expertise in conversion to spur HomeAway’s growth and make HomeAway’s transition to a marketplace that is fully online bookable faster and with “greater certainty.”
Asked what kind of reaction Expedia might face from hoteliers concerned about the introduction of vacation rental listings, Khosrowshahi said he’s found that increasing supply and a subsequent increase of marketing spend tends to increase demand, which benefits hoteliers.
Khosrowshahi said Expedia’s acquisition of HomeAway, which already delivers more vacation rental bookings than any other site, would amount to the next chapter in the sharing economy, which is the fastest-growing sector in lodging.
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Photo credit: A still from a HomeAway TV advertisement in March 2015. HomeAway