Vacation Rental Search Startups Face Intensifying Rivalry

Airbnb, Booking.com, and HomeAway grab the headlines when it comes to the online booking of alternative accommodations. But smaller startups are fighting for dominance in the fast-growing category of price-comparison search.

Just as Trivago aggregates hotel inventory and refers customers to other companies to complete their booking, these startups aim to offer similar price-comparison for non-hotel lodging.

Since launching the category in vacation rental search, Tripping has been the most lavishly funded. The San Francisco-based company has raised $55 million to date, it said.

But in the past year, additional venture capital funding has intensified competition among the clutch of startups that help consumers trawl listings across booking sources.

The most significant new challenger has been HomeToGo, a Berlin-based startup.

Five companies claim to be “the world’s largest” by various measures. But a few sources at third-party suppliers who see booking volumes speculated that HomeToGo had become neck-and-neck with Tripping in transaction volume by late 2017. That said, all of the companies keep their data private, the sector is still fractured and maturing, and the game’s outcome remains up in the air.

Last year HomeToGo raised a Series C round. The company declined to disclose the amount but said it was “a significant eight-figure number.” Before that, it had raised $26.6 million in funding.

Holidu, a Munich-based metasearch engine, raised an undisclosed Series B last year, bringing its total funding to what it called “an eight-digit figure.” The business appeared to be rapidly gaining on the other two in integrations with suppliers.

Other contenders for the crown include AllTheRooms, FewoFerien/Holiday Homes, and Hundredrooms — each of which raised modest amounts in the past year.

Are These Startups Necessary?

As a new set of metasearch companies rises, it is an open question whether consumers are clamoring for a search service dedicated to comparing rentals.

When the past stars of metasearch, such as Kayak, Skyscanner, and Trivago, got their start, they weren’t caught in the shadows of legacy players.

But companies like HomeToGo and Tripping must compete in marketing battles against now-giant brands like Trivago — which since November has been adding vacation rental listings in select markets.

Google is crowding out space for brands, too. Since the summer, it has been slowly adding vacation rentals to its search results for hotels.

Given all of the obstacles, Kayak CEO Steve Hafner said: “It’s not a big enough category to sustain a new meta player. I wouldn’t be an investor in any of those fights honestly.” (See his interview in our 2017 Outlook on Metasearch in Travel.)

In short, established players tend to be betting that consumers are increasingly shopping for “lodging” as a broad category, from hotels to shared couches, rather than wanting to go for one site for hotels and another for, say, short-term rentals.

Who Might Win

Vacation rental metasearch startups are betting against that thesis. Search aggregation of rentals is even more compelling for rentals than in the case of hotels or flights, executives said.

Entrepreneurs believe there are different types of travel shoppers, and that one type will prefer to shop at a specialist site for alternative accommodations. They also believe there are enough consumers of that type to build a profitable global brand.

HomeToGo CEO Patrick Andrae said, “Many people search differently for rentals than they do for hotels. You can infer that in how Airbnb’s user interface is structured differently than Trivago’s to be optimized for the different way a rental customer researches and thinks about a decision than a hotel booker does.”

Johannes Siebers, CEO of Holidu, said in an interview that metasearch in rentals is more valuable for consumers than in other categories because supply is more fragmented, which makes comparisions harder.

Siebers argued that it is comparatively easy for a company to start a flight metasearch business by connecting to one of three global distribution systems’ data feeds and relatively easy for a company to create a hotel metasearch site by tying into the data feeds of a dozen major hotel chains that represent a huge chunk of possible inventory. But there is no equivalent source of quick data on alternative accommodations.

“The metasearch company that fills that gap with data integrations will create a high barrier to entry to other companies that may want to enter the market,” Siebers said. He said his company has 350 integrations today and hopes to have 1,000 within a year.

While flights have unique numbers the whole industry agrees upon, owners list their properties across platforms like Airbnb and 9flats in non-standardized ways. Metasearch companies need to identify duplicate listings and only show a property once — along with all the possible prices that can be booked at via different platforms. But that’s a technical challenge.

Tripping co-founder Jen O’Neal said integrations are a key differentiator. While some companies can quickly list properties in their database, it is a hard slog to sign the commercial agreements and pull live, real-time inventory and availability of properties via third parties.

“While quantity matters, quality is most important when it comes to driving bookings,” O’Neal said. “We don’t do screenscraping like some others may.”

Tripping Repositions Its Executives

In the past month, co-founder of Tripping Jen O’Neal moved into the position of president and executive chairman to lead international expansion. Co-founder Jeff Manheimer has become CEO, leading product innovation and other efforts.

Since May, the 46-employee company has created and filled new chief technology officer, chief product officer, chief commercial officer, and chief financial officer positions. Its last financing round was $35 million in late 2016.

Despite being the best funded and having been in business since 2011, Tripping was not making any announcements about its profitability. It said its “unit economics” were “in the strongest possible position.”

The company said it had been in growth mode for years but, in late 2016, it refocused on “nailing its unit economics” while continuing to grow and that it is now ready to scale at a more rapid pace.

It has not yet broken through in broad brand recognition with consumers. The consumer magazine Conde Nast Traveler dubbed dubbed it “the largest rental site you’ve never heard of.” The same could be said about its rivals, of course. But Tripping has been around the longest and raised the most investment.

O’Neal said her focus in 2018 is on leading expansion efforts. Tripping’s inventory is 27 percent in the U.S., and it has a big share in Europe — a market it entered in 2016.

This year Tripping will open an office in South America, and it said it has Asian investors who are actively helping it explore opportunities in China and the broader Asian market.

Rising Players in Europe

HomeToGo raised a Series C funding round last year, but it did not disclose the amount. The Berlin-based company has 150 full-time employees.

The company refers more than 20 million users from all over the world to its partners every month, a spokesperson said.

Last summer it claimed profitability in its core European markets. It is active in the Australia, Russia, Mexico, and the U.S. Its revenue grew 2,201 percent in the past three years, it said.

Meanwhile, Holidu is a Munich-based metasearch engine active in 21 countries, with a claimed stronghold in Europe and growth in the U.S., Brazil, and elsewhere.

Founded in July 2014 by brothers Johannes Siebers and Michael Siebers, the company has 90 employees. In 2017 it claimed to have more small property managers connected to its platform than HomeToGo, Tripping, or other startups.

Earlier in 2017, Hundredrooms, based in Palma de Mallorca, closed a $4.2 million financing that brought its total equity raised to $11.7 million.

The 60-employee company plans to use the funding to focus on apartments managed by private individuals and to consolidate the international expansion into Germany, France, UK, Italy, and Mexico.

Contrarian Play

AllTheRooms is a New York-based startup that takes a different approach from others. It is adding hotel inventory on the theory that consumers want a one-stop shop for lodging.

In 2017, the company received a small undisclosed Series A funding round and launched a site redesign. About eight months ago, its co-founder and CTO William Beckler left to pursue other opportunities.

About half of the company’s focus is on selling analytics data about vacation rental booking patterns to investors and other interested parties, said CEO Joseph DiTomaso.

The Airbnb Factor

Airbnb doesn’t cut deals with metasearch companies, but its stonewalling hasn’t deterred them, executives said.

“Kayak has been successful without Southwest Airlines, one of the largest U.S. domestic airlines, in its search results,” said Tripping CEO Manheimer. “Rental metasearch can still offer consumers a wide array of alternative accommodation options.”

In 2017, Tripping began working with Airbnb on advertising partnerships. “You can find them in a variety of ways throughout our site, and we’re excited to grow our partnership this year,” Manheimer said.

In one more contrarian move, AllTheRooms includes listings of rentals from companies that it doesn’t have commercial agreements with, such as Airbnb, along with ones that it gets a cut of the commission on.

Marketing Challenge

More than its peers, HomeToGo has embraced TV advertising as a way to drive demand. In the past month, it spent $1 million on national TV ads in the U.S. alone, according to analytics firm iSpot.tv. It plans to spend more in many markets in the upcoming months.

Tripping, Holidu, and Hundredrooms have also experimented with TV ads in some markets.

Using TV to compete against the larger players can be expensive. Expedia-owned vacation rental site VRBO didn’t use television ads for most of 2017, but in the past few weeks it spent an estimated $5.8 million on national commercials, according to iSpot.tv.

Having TV budgets like that is a luxury that young startups lack. But all is not lost. Many people who search for rentals start their search on Google or Facebook, and cheaper search engine marketing and social efforts remain effective channels for the startups to gain share.

Possible Exits

Many investors fret about startups whose models overlap with the business plans of giants like Google, which could undercut them.

Others like the margins in private lodging. While not as high as hotels on average, rental margins can average around 10 percent, industry insiders said. Rental stays tend to be higher transaction amounts than hotel stays, making the overal revenue potential attractive.

Some investors also like the “total addressable market.” Beatriz González, a founding partner of Seaya Ventures, said: “The vacation rental space is the fastest growing category in the travel sector, or about 35 percent year-over-year.” For more insights, see the Skift Research Report: The State of the Global Vacation Rental Market 2017.

But will rentals metasearch specifically succeed? Can more than one player become a global success?

Consider this dynamic: Airbnb and other online travel agencies, which take payments from consumers, are harder to build than price-comparison engines. Airbnb took years to grow, but FewoFerien — which only debuted its flight, hotel, and rentals metasearch last September — has already made robust traffic gains in Germany and other markets according to third-party data analytics.

While harder to build, travel agencies enjoy greater market potential. Among the dozen or so largest online travel companies to go public in the past two decades, Kayak and Trivago were the only price-comparison sites.

If that pattern holds true, only one of these startups has a shot at scaled up stardom — though several might become profitable small businesses. The list of fizzled out rental metasearches is large, however, including names such as Enrout, iWannaVacation, Vacayway, Vakast, and Zilyo.

Still, the opportunity is alluring. “Every online travel CEO on stage at the Skift Global Forum in September discussed the vacation rental market,” said O’Neal, “which shows how quickly excitement is growing around the space.”