Other than at exception-to-the-rule Google, metasearch has been on a downward spiral in vacation rentals for years. HomeToGo is turning itself into a series of booking sites instead, which just might work in that holiday home sector.
HomeToGo is acquiring vacation rental booking site e-domizil for about $45 million (40 million euros) to accelerate its shift toward a marketplace strategy that may end up working for holiday homes, but has failed elsewhere in online travel.
Founded in 2014 as a vacation rental metasearch or holiday home comparison-shopping business that sends site visitors to third-party partners to finish making their reservations, Berlin-based HomeToGo has been moving toward a hybrid model combining what it calls “onsite” bookings and offsite metasearch referrals to partner sites over the past few years.
Co-founder and CEO Patrick Andrae said during HomeToGo’s fourth quarter and full-year 2021 earnings announcement Thursday that the acquisition of e-domizil, which is based in Frankfurt, will accelerate HomeToGo’s onsite strategy. That’s the model fully in use by e-domizil, which has some direct relationships with holiday home property managers that HomeToGo doesn’t have, and would fuel the latter’s European expansion.
E-domizil, with some 100 employees, was already a HomeToGo partner so the 370,000 holiday home listings e-domizil offers on its websites won’t appreciably bolster the HomeToGo inventory stockpile, but the $22.3 million (20 million euros) in booking revenue that e-domizil generated in 2021 would expand HomeToGo’s topline performance in future years. On its own, HomeToGo, which claims to have access to 15 million vacation rental offers, recorded $105 million (95 million euros) in revenue in 2021, an 83 percent jump compared with pre-pandemic 2019.
While e-domizil was profitable on an earning before interest, taxes, depreciation and amortization basis in 2021, HomeToGo, which is pursuing somewhat of a rollup and growth before profits strategy, notched a net loss of $182 million (166 million euros) in 2021.
Facilitated Bookings Have a Sketchy Track Record
HomeToGo’s onsite strategy for vacation rentals has rough parallels to the facilitated booking strategy that mostly metasearch businesses such as Kayak, Tripadvisor and Google have pursued over the years for hotel bookings without much to show for it. When Tripadvisor embarked on a so-called “instant booking” strategy in facilitating booking on Tripadvisor several years ago, Kayak CEO Steve Hafner said Tripadvisor would eventually find out that such bookings are not a game-changer.
Tripadvisor eventually abandoned the effort and reverted predominantly to classic metasearch referrals, where it sends would-be guests to partner sites for booking and picking up a click fee in the process.
These onsite bookings are not to be confused with an online travel agency model. In both the onsite or facilitated booking models, reservations take place on the metasearch site itself without the complications of transferring the customer to a third-party partner site for bookings, and whether it’s on HomeToGo, Kayak, Tripadvisor or Google, they are not the merchants of record.
In a Skift interview after HomeToGo’s earnings call, Andrae of HomeToGo said its onsite model has partners paying commissions per booking, and on the other hand with its metasearch referral arrangement, partners can choose to pay commissions on bookings or get charged on a cost per click basis. In the metasearch referral model, partners have lots of flexibility to establish their own cancellation policies, he said.
Responding to skepticism that metasearch would not work for vacation rentals because it is so difficult to compare properties that are often unique, Andrea replied that’s exactly the problem HomeToGo was established to solve and that it has a lot of technology working in the background to make those comparisons easier.
“If you can solve it, you add value to the market,” Andrae said.
Still, HomeToGo is tilting away from metasearch and toward onsite bookings, although it doesn’t intend to abandon metasearch altogether. Some 44 percent of its booking revenue, net of its subscription and services businesses, came from onsite commissions in 2021, and that was a 13 percentage point boost compared to 2020.
While facilitated or onsite bookings hasn’t provided much uplift for companies — Google, Kayak, and Tripadvisor, for example — that tried to do it for hotel bookings, Andrae said holiday homes, which are a much more fragmented sector and under-served technology-wise, is a completely different market.
He said onsite bookings will add lots of value in the holiday home sector because often really nice inventory comes from smaller partners who face disadvantages in metasearch because their websites might not be great or they are little-known and so consumers might not trust them.
Transitioning those smaller partners from metasearch referrals to onsite bookings on HomeToGo’s domains will increase their bookings and provide significant upside, he said. Onsite bookings are the optimal model for smaller partners, Andrae added.
Asked what competition HomeToGo faces in the vacation rental metasearch portion of its business, Andrae said Google is the only company doing it, and he argued that HomeToGo has a better product and more supply.
“We had to fight our way up with our product as a company, and with our organic results Google just puts them where they want and uses their monopolistic power there,” Andrae said.
Mergers and Acquisitions
HomeToGo went public in a special purpose acquisition company merger in September, and emerged with around $277 million (250 million euros) that it might use toward acquisitions if it finds the right targets, Andrae said.
In addition to announcing the acquisition of e-domizil Thursday, HomeToGo raised $150 million in 2018 to acquire its largest competitor, U.S.-based Tripping, which was struggling, and it bought Hamburg-headquarered Casamundo for an undisclosed sum that same year.
HomeToGo made its 2022 revenue projections of growing 27 to 32 percent to $133 million to $137 million (120 million to 125 million euros) before the e-domizil acquisition so the latter’s impact is not included in the outlook. HomeToGo intends to update its guidance in the near future to include e-domizil.
HomeToGo projects profitability within two years.
During HomeToGo’s earnings announcement, Andrae said the company will benefit from e-domizil’s 20 years of experience, its fully onsite booking model, and track record working with property managers.
The acquisition “will be highly accretive to HomeToGo,” Andrae added.
It would be accretive to the new HomeToGo in formation, the one that no longer refers to itself as a metasearch business, but an “integrated marketplace.”
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Photo credit: Patrick Andrae, co-founder and CEO of HomeToGo, said the company is shifting from metasearch toward an integrated marketplace.