Will Booking.com Alter Its Vacation Rental Business Model in 2016?

Rest assured that when Priceline Group officials review the company’s 2015 earnings with financial analysts next year, someone will ask how long its Booking.com unit can hold off and ignore the financial opportunity in charging travelers a booking fee for vacation rental bookings.

HomeAway, for example, plans to introduce a booking fee for travelers in the second quarter of 2016 and officials forecast it could eventually triple the company’s annual revenue.

As 2015 becomes history, Booking.com finds its vacation rental business model increasingly isolated — Booking.com officials would call it differentiated — in that the other major vacation rental players, including Airbnb, Expedia/HomeAway and TripAdvisor/Flipkey, will all be levying or increasing booking fees for travelers in 2016 and charging owners lower commissions than Booking.com does.

In explaining why Priceline didn’t pull the trigger and try to acquire HomeAway, as Expedia did, Priceline CEO Darren Huston told Skift in November: “We’ve now been on a path and are sticking to the principle of properties being instantly bookable and verifiable, and no consumer fees,” Huston said. “Now we’re so far along the path that buying something that doesn’t fit that model just didn’t fit us.”

And the Winner Is …

Booking.com, which has a respectable track record in attracting vacation rental inventory from professional property managers, hasn’t been as successful in scaling up vacation rentals from individual owners and part of the reason is that Booking.com is charging roughly 15 percent commission while competitors can charge less because traveler fees are making up the difference, says T.J. Clark, co-founder and CEO of TurnKey Vacation Rentals.

Clark says there will be multiple winners in the vacation rental category although the company that can add the most inventory and be the most comprehensive will have a huge advantage.

“You get the supply and you win,” Clark says.

In that regard, Booking.com, despite that fact that it counts more than 390,000 vacation rentals in its stockpile, could be at a disadvantage with individual vacation rental owners, although not necessarily consumers, if it continues to charge a higher commission than competitors because it refuses to level a traveler fee, Clark says.

Among the four major players, Airbnb is the best at loading supply, although it is probably the smallest among the four in vacation rental supply, Clark says.

“You can be online in a couple of hours,” Clark says, referring to Airbnb’s vacation rentals and apartments.

Instant Bookings … Presto

One facet of Booking.com’s vacation rental model — its insistence on instantly verifiable bookings and updated calendars as opposed to bookings inquiries by request and 24-hour windows to vet guests — will ultimately tend to be the industry standard, Clark says.

Astute vacation rental owners who really want to make money will realize that instantly confirmable reservations is the way the entire industry is trending, Clark says.

He argues that HomeAway’s subscription listings, many of which do not offer instant bookings, will see hotel-like instant bookings pass them by as they get more preference in the HomeAway marketplace in the future.

“The best-performing properties will get the prime space and not the listings properties,” Clark says.

If Priceline’s 2005 acquisition of Booking BV was the “deal of the century” in travel to date, then Expedia’s 2015 purchase of HomeAway will rival it, Clark argues.

He says Expedia will have a “positive influence” on HomeAway’s marketing and “yield-based search expertise,” and will accelerate HomeAway’s move toward instant bookings.

With all of the changes taking place in the vacation rental sector in 2015 and 2016 and the coalescence of Airbnb, Expedia/HomeAway and TripAdvisor/Flipkey around vacation rental business models, the question now becomes how long will Booking.com continue to be the outlier.

”We bring more global demand for partners than anyone else, and with lower commissions than many of our competitors,” says Priceline Group spokesperson Leslie Cafferty. ”Booking.com is a great, efficient way for partners to fill their rooms.”

”We’re always looking at our business model and that’s an ongoing process, so could we potentially adjust our model down the road?” Cafferty says. ”Sure. But it’s unlikely any shift would mean customers pay more.”

There might be room for multiple models in vacation rentals, but which one will gain the upper hand?