Dozens of owners of vacation rental properties have spoken out online against HomeAway's new fees, introduced as part of a switch in model from classified listings to an instantly bookable, transaction-focused marketplace.
Tnooz has received 280 comments on our recent article "HomeAway tweaks its rental commissions, adds traveler fee". Most of them express a sense of betrayal over the business change. They echo countless comments in HomeAway's own property owner forums.
Last month, the vacation rental booking portal began to add a variable guest fee that averages 6% of a transaction's value -- a move that as recently as November 2014 its CEO was implying to owners wasn't going to happen.
Tnooz asked HomeAway to respond to the comments, and a spokesperson said:
"To reiterate the earlier context we provided, we’re investing a large portion of the traveler fee into increased marketing to drive more traffic to our owners and managers. We have also significantly increased the guarantees we provide to travelers as part of this program."
In other words, some of that money is being used for new fraud protection coverage for guests and new guarantees to property owners. The increased marketing expenditure will result in more bookings for owners, the company said.
The spokesperson acknowledged that there is a passionate slice of property owners who have protested the changes via online forums. Many of these owners have also contacted the company's representatives.
But the company has not seen a material drop in business, the spokesperson said.
A lot of the anger has been caused by misinformation that's been spread, the spokesperson said, adding:
"The update here is that we’re focused on communicating directly with owners, including a webinar later this month."
Analysts at Barclays Capital have estimated that HomeAway was -- before the fee change -- generating revenue that was worth about 3.5% of the bookings completed through its platform.
That figure was low compared with the more than 6%, and sometimes as high as 18%, take collected by its competitors. A case in point: HomeAway rival Airbnb has long charged a guest service fee that's effectively between 6% to 12% of bookings.
HomeAway told Tnooz that it had planned the fees and its shift in emphasis from listings to transactions before its acquisition this winter by Expedia Inc.
The striking nature of the shift in business model is demonstrated by a November 2014 video that has resurfaced of CEO Brian Sharples speaking to a crowd of property owners for one of the company's brands, VRBO.
In the video, Sharples tells the story of how, in early 2000, Expedia bought vacation rental marketplace listings site VacationSpot for what Sharples says was $75 million. A year later, the site shut down.
What happened? In Sharples' parable, Expedia had ruined the business by trying to apply the hotel transaction model to it and getting rid of subscriptions and instead taking a cut of the sale. He says ex-CEO Richard Barton was his source.
A spokesperson said its response to the video gets back to this statement Sharples made in his Feb. 24 HomeAway Community forum post:
"Second, I want to acknowledge that we are in the middle of a huge shift for the industry.
The good news is that vacation rentals are now considered a mainstream travel option, but as a result travelers are demanding more from listing sites like HomeAway and VRBO.
Our research and experience shows that it is no longer enough for us to just operate an online classified listing site."
In other words, the landscape has changed. In the intervening years, Booking.com has come into the vacation rental market, and Airbnb last year raised $1.5 billion from investors who believe in its promise. In 2015, TripAdvisor grew its vacation rental listings 18%, to 770,000.
Plus, consumer behavior and expectations have changed with the rise of mobile booking options. Being able to offer instantly bookable inventory is an increasing demand-side expectation, and building the infrastructure to support such booking costs money.
Overall, HomeAway hopes to extract more money from its vacation rental ecosystem than it has before, partly to respond to market demands. As Sharples said in an August 2015 investor call:
"We seek to improve overall monetization of transactions from both performance-based commissions on the supply side and revenue from travelers for the sale of ancillary products and services."
The bet appears to be that, unlike with Expedia's 2000 try with VacationSpot, this time disgruntled vacation rental owners will have nowhere else to take their business that can provide the same amount of steady inventory and that, once the final math is done, they will be better off under the new situation.
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