While Airbnb has been brashly adding independent hotels, HomeAway has been quietly doing the same — although it has been using an entirely different business model given its ties to parent Expedia. Curation may have its place, but all of these companies realize that the more inventory and choice they give consumers, the more likely they are to spend on a stay.
Airbnb announced boldly a few months ago that it was making a concerted push to add bed-and-breakfasts and boutique hotels to its platform as it called out Expedia and Booking.com for their allegedly excessive commissions.
But Airbnb isn’t the only alternative lodging brand expanding its hotel ranks — HomeAway and sister vacation rental brands such as VRBO are doing it, too, but with a twist. HomeAway is adding hotels from parent company Expedia Group.
It’s been fairly well-publicized that Expedia’s core online travel agency brands, albeit with an emphasis on Expedia.com, have been adding HomeAway’s vacation rental listings and mixing them in with its hotel listings. In fact, Expedia added 25,000 vacation rentals from HomeAway in the first quarter, and the total Expedia gets from HomeAway now stands at around 150,000.
But HomeAway spokesman Jordan Hoefar said Tuesday that the inventory sharing between HomeAway and Expedia goes in the other direction too. HomeAway is adding hotel suites and home-like lodging from Expedia under the theory that expanding the number and types of properties improves conversions of lookers to bookers on HomeAway’s sites.
So HomeAway’s VRBO site Tuesday was offering stays at Sonesta ES Suites Chicago-Lombard in Highland Hills, Illinois, and The Historic Powhatan Resort by Diamond Resorts in Williamsburg, Virginia — both of which came through HomeAway’s relationship with the Expedia Affiliate Network.
It’s interesting to note that to book a one-bedroom suite for a January 7-11, 2019 stay at The Historic Powhatan Resort in Williamsburg, VRBO was charging consumers $283.28 versus $276.36 on Expedia.com.
Hoefer said HomeAway was mostly looking to fill gaps by adding hotels from Expedia in markets where HomeAway doesn’t have a lot of offerings, such as in some urban locations. That’s where Airbnb is particularly strong, and HomeAway is weak. He added that HomeAway can add any hotels from sites that have Expedia Affiliate Network agreements.
While Airbnb in some cases is going directly after hotels or adding them through agreements with lodging associations, and is touting that it is charging commissions of only 3 to 5 percent, HomeAway is tapping into a completely different business model. The Expedia Affiliate Network might pay a partner site a 5 percent commission for prepaid hotel booking and a lower rate when the customer pays at the hotel.
Expedia CEO Gung-Ho About Alternative Lodging
Speaking at the Goldman Sachs Lodging, Gaming, Restaurant & Leisure Conference in New York City Tuesday, Expedia Group CEO Mark Okerstrom expressed his optimism about alternative accommodations and its HomeAway business, in particular. HomeAway now offers 1.6 million inventory listings, and at the end of the first quarter the brand for the first time notched $10 billion in gross bookings for a trailing 12-month period.
Okerstrom said alternative lodging is growing faster than the hotel business and quicker than the travel industry overall. While HomeAway has been focused on transitioning from a subscription to a transaction-based business, and making its listings online bookable, its next phase will be expanding into urban markets, he said.
Okerstrom added that the push into cities, however, won’t happen for another two to three years.
He said monetization from HomeAway bookings is up to around 10 percent on average, including commissions and consumer booking fees, and there is plenty of opportunity for the company to increase those rates, although that is not the current focus.
“Now, we have certainly not been focused on extracting every last penny out of this, and I suspect we probably won’t for a long period of time,” Okerstrom said. “We’ve been very focused on building incredible experiences for customers as they become loyal to the product —— to the platform, incredible experiences for owners and property managers so that they can really value the platform.”
The Strength of Brands
In other news, Okerstrom, talked about Google becoming a more expensive marketing channel for Expedia, and he argued that some other third-party channels are seemingly becoming less valuable from a marketing standpoint.
“So Google, if they shrink the free traffic and replace it with paid is, in fact, getting to be a more expensive channel in totality,” Okerstrom said. “Now if you take a look at the paid channels in isolation, as we become more sophisticated in bidding as our product has gotten better, we’ve been able to drive very strong business through Google, and they’ve been a great partner. On the other side, of course, the free traffic is shrinking, and that hurts, but this has been going on for years, but things are getting more expensive.”
Okerstrom said metasearch channels such as TripAdvisor, Booking Holdings’ Kayak, and Expedia’s Trivago have very competitive auctions, with Expedia and Booking.com bidding against one another.
He said, though, that when Booking.com decided last year to pull back on its marketing spend in Expedia’s Trivago to emphasize the Booking.com brand, TV advertising and direct bookings, Expedia, too learned something from that development.
“And the interesting thing I think we found is as Booking started pulling back, it’s got knock-on consequences across the whole ecosystem,” Okerstrom said. “And I think what we’re finding is that the strength of brands, maybe surprise, surprise, but the strength of brands in the travel industry, yes, even in the Internet, is important. And businesses coming to Expedia, Hotels.com and, yes, some of our competitor brands, as well and, in many cases, they’re coming to us through more direct channels than they have in the past.”
In fact, Okerstrom, Expedia now attracts some two-thirds of its bookings directly.
“And I think we’re finding that maybe some of these channels were less — are less — incremental than we thought they were originally,” he said.
In other words, although Expedia has long said that its typical customers are price-conscious and brand agnostic, maybe some of its TV advertising and other brand marketing have more appeal than it previously expected.
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Photo credit: Pictured is a suite at the Sonesta ES Suites Chicago - Lombard in Highland Hills, Illinois. Vacation rental site HomeAway is now listing this hotel through HomeAway's relationship with the Expedia Affiliate Network. Sonesta ES Suites Chicago - Lombard