Vacation rental platform HomeAway has hit a major milestone, celebrating its first decade in business this month.
Such moments offer a pause for reflection — or a swift kick to recalibrate a company towards the next decade of business.
In HomeAway's case, it seems to be a bit of both, with CEO Brian Sharples focusing heavily on using a brand retrenchment to differentiate from its thriving primary competitor, Airbnb.
Although, it's fair to say that the point of this brand retrenchment is to stem the comparisons between the two companies and to remind the world — including the trade media and industry insiders — that HomeAway is a vacation rentals brand rather than a city escape brand.
The point is to go back to its roots and focus on the vacation rental market of secondary homes that drove its success thus far. The company is pursuing a double-pronged approach in order to accomplish this. First up is a reenergized marketing arm.
This has never been a huge priority for the company, and they rarely splashed out on spendy television commercials or shiny print advertising. But in order to set up the brand's core tenets in the minds of new customers, as well as to remind current customers what it stands for, marketing is the way to go.
HomeAway has released a new marketing campaign that demonstrates the messaging for its next ten years: a very clear differentiation from the city-focused Airbnb, which has enjoyed enormous popularity since launching back in '08.
The campaign could be dubbed "whole home, whole family," emphasizing that HomeAway is generally about whole home vacation rentals and that vacationing has evolved to now include the "modern family" of multi-generational travelers.
The ad campaigns employ panographic photo technology, which is a smart use of a format that emphasizes 360-degree inclusion.
The second step is to focus on technology — if you can't beat 'em, join 'em.
Rather than fight the consumer expectation to be able to book all inventory online, HomeAway has set an aggressive target to move all of its bookings online by 2016. This is a complicated undertaking, as many of its property owners are not as sophisticated as a professional property manager. Not to mention that the owners have been used to doing business a certain way for years.
Tnooz spoke with HomeAway CEO Brian Sharples about these two approaches, and how the company is positioning itself to welcome the travelers of the coming decade — while also remaining an appealing M&A target.
It's been ten years since you first opened the vacation rental door. How has your demographics changed in this time? Who’s using the platform these days, and what shifts are you seeing?
We have not seen huge changes yet, but we’ve been studying the demographics carefully. We do believe that as we set the company up for the next 10 years, we have to operate differently.
Demographically, there is a new group of people coming up the curve. Families have been getting older the past 10 years, so the families and groups we are about to deal with are those who grew up with technology in their hands, push button everything, find it online types.
It is the fact that we decided to set an aggressive goal to get all of our properties on the site to be online bookable by the end of 2016.
The reason we made it 2 years is to give our suppliers time to transition. We also weren’t stressed about it overnight, but we realized there was a coming wave of people who have expectations of online booking.
The majority still want to make a phone call, but having that full transparency and access to information is going to be really critical for us. And, of course, competitors are also helping to set those expectations.
The second shift we are seeing is that people are waiting longer to have kids. You have a lot of split families, and so the demographics say that only 19% of families are “traditional.”
Someway si going to market these changes and celebrate the diversity of families. Because the bigger the family you travel with, the better we are. We’re in the whole home business, and we have a lot of homes that fit.
So it sounds like the company is now working to set the brand story up for the next ten by differentiating cleanly from the likes of Airbnb. Tell me more about the marketing campaign to be launchedon February 23.
We did go through a huge exercise this fall and over the course of December and January to take a hard look at our market, our demographic, expectations and looking forward.
Everybody’s been looking at this stuff, and the idea for us was to get all of that information together and really start targeting our message to the segments we serve best.
The theory is that when you have competition, you need to be a “better us” instead of a “worse them.” The campaign puts that stake in the ground and what we are. The tagline is “whole houses, whole families, whole vacations.”
The whole house piece is that we are in the house business, and not the rooms business. The whole families piece is to leave no one behind no matter who your family is - we have price points that can hold all kinds of people, including the dog.
The whole vacation is a reminder that we are in the vacation business, we aren’t in the business conference style business. We’re about vacations.
We’re going to be using a unique style of photography that uses a pano lens that bends a picture in a way to put more in it, where you can see the house, the beach, the family and all the things going on in a scene that are fun and interesting and complex in certain ways.
Driving the point home of whole house, whole vacation.
The print stuff is going to make people think. It’s going to show a fairly complex family.
There will be a diversity to make people think: how much fun is it to take a group of people that you love, and not just the two kids you live? I’ve learned that my kids have better vacations if they have friends.
They are better memories with more people to hang out wit. Hopefully we can spark that debate, and I think it's a trend anyway according to the data.
HomeAway is going to market these changes and celebrate the diversity of families. Because the bigger the family you travel with, the better we are.
We’re in the whole home business, and we have a lot of homes that fit a lot of people. We are in the world of modern families, and we can encourage a kind of travel that typically doesn’t fall to a hotel or HomeAway.
What areas of growth are you seeing on the accommodation type front? How about regionally and cities — will you go head to head with Airbnb?
The last time we checked, there are about 10 million properties that fall into the true vacation space. We don’t want to be tempted to move towards the Millennial rooms business, when the market were’ in has som much growth left in it.
The one thing about Airbnb is that, at the price point they operate, it’s tough to understand how you would make money. Marketing in cities is very expensive.
When you think about people online trying to get to the city traveler, it includes every hotel in the city and every platform doing short-term rentals.
If you’re only making 10% on a 3-night stay at $100, what did you have to pay to get that booking with all that competition in the city?
When people stay longer during a vacation, the average ticket is much higher, around $1,6000 — or even $30,000. We think the vacation rental space is more profitable to be in. We want to defend the place that we’re in and we want to expand it.
Even so, one thing moving forward in the next 10 years, you’ll see us growing aggressive into cities. Maybe with different inventory than our competitors but it's doing extremely well and generated great traffic reviews and growth.
The business is growing well, and it’s across the board in the vacation markets.
The US is definitely stronger than Europe, but on the property perspective there is growth across the board - we naturally grow in the vacation home markets.
There are certain geographic areas, such as Asia, that are growing well just with smaller numbers. The interesting thing about cities, we are in the same growth as the guys at Airbnb where they have made most of their money and revenue growth.
When we look at our supply/demand within our company, the place where we have the biggest imbalance is in cities. We have strong demand and we historically don’t have a lot of inventory there.
We are focused on second home rentals and our competitors are focusing on primary home and room rentals.
That’s not consistent with our approach, but now that Airbnb has become popular, there are people going to cities and thinking this is an option. We are doing work internally to see how we can expand that market.
Cities do have 100,000s or millions that are owned by investors; the majority are rented on a long-term basis.
A lot of our focus in the coming years will be for investors who rent that long-term nd have them think about the economics of short-term rentals.
If you’re willing to put in the work, as its a different business, you’ll make more money since you are charging a nightly not monthly rate. Even if occupancy is lower, the overall number will be higher.
This year, we are actually going to be running some significant tests against a limited amount of cities to understand what sort of inventory we can build.
These will be cities where regulations are clean and well-understood so we don’t get into issues like Airbnb in NYC. And where our data says we have a lot of lookers on site and we don’t have the inventory to fulfill that need. We will experiment with ways to bring on inventory that our travelers want to stay in.
We don’t want to jump headlong into the primary home market, as that’s just not consistent with what we’ve done as a brand. Never say never, but that’s not how we’re looking to grow.
HomeAway recently filed suit against the new San Francisco legislation. What are your thoughts on losing the SF battle as far as changing those rules to allow non-permanent residents to rent out their homes in the short-term?
It was actually kind of a clever move on their part, because we obviously sued for a couple of reasons. One was the discrimination against others from out of town, and the other was the ordinance that we have to collect taxes but we don’t handle the money for our owners.
The ruling says that HomeAway is exempt since you’re not a transaction platform collecting money, but we're also exempt from discrimination against homeowners, so it’s up to you to figure that out. Our position is the same: regulation is good, it legitimizes the industry.
We believe that you shouldn’t discriminate against someone who lives there full time or part time. If someone who lives there part time, that house is left empty part of the year and the city doesn’t benefit economically.
So it will have to be the owners who will have to get together and make the changes; we help with that stuff, as we’ve built a platform to connect our owners.
The power to drive change comes through the people that are affected by it the most. We’re going to watch it closely and we’re out of the battle for the moment. We don’t have to change our business model to comply with the city of SF.
Travel seems to be expanding deeply into the wider hospitality space in new and unique ways. First Travelocity and then Orbitz for Expedia, and most recently OpenTable for Priceline. It seems to be a Priceline vs Expedia world. Any chanceon selling? How do you think all of this madness will play out? How does HomeAway fit in?
Consolidation of lodging and air platforms just makes a lot of sense to me. When you run a public company, there’s such pressure for growth and global expansion.
You’ve got some very big players in the business, and it's inevitable that those guys are constantly looking for ways to eliminate some competition and expand.
All three of those companies and even Alibaba in China, to be the global leader in the business. If you have the most supply and the best pricing, it’s a good thing for the business.
None of the travel acquisitions surprise me, although I am surprised that Orbitz hung around so long with the low market cap.
OpenTable was a bit of a surprise to me because it would seem to me that if I were Priceline there might be some other things that are more important. I guess it started with the acquisition of La Fourchette, but I’m not sure about how the fit is there.
With respect to HomeAway, we own the category of accommodation and I think this is the year where everybody in the OTA space is trying to figure out how to make a play here. TRIP is testing booking, Expedia is testing a partnership with us.
And just like La Fourchette leads to OpenTable, now all of these companies are looking to the space. If a company comes after HomeAway, it comes down to whether to not they think they can do it better.
It’s a public company, so if someone comes to us with an offer it's not my choice but the shareholders and the board. It’s a question of how much someone wants to be in this space.
It makes sense though, as it is the second largest category of accommodation.
Forty percent of our properties are professional managers, and so it makes sense for OTAs to start in that part of the market since its closer to what they already deal with on the supply side.
The big thing we have is the 60% in the rent by owner category, and then beyond that it has taken us 10 years to service those people profitably. THere’s a lot of hand-holding and customer service and
There’s a lot of hand-holding and customer service and sales force driven service products that are geared towards dealing with individual owners.
Really none of those OTAs have that. They may be content with going after that 40% professionally-managed side of the business. It doesn’t make sense to only own a site that has professionally-managed properties, and no one has been able to crack that.
It would come down to how much is the value by an acquisitive company - I don’t think anyone thinks they can go after that part of the market.
For most of the years we’ve been in business, it was actually more like 80%. When we created the free listing product, we saw an explosion of managed listings since they didn’t have to pay upfront to list each of their properties.
You’ve been running trials with Expedia to sell vacation rentals on that platform. Tell me about how that’s going.
Expedia is a pretty cool company, because they are a very test-and-learn driven organization. With them, we are literally every day, if not every week, trying different configurations on the site, from a tab for rentals, to burying results in hotel searches, to testing the demographics that we serve results to as far as number of travelers.
There’s an enormous amount of testing, and it’s a fantastic partnership because we share everything together.
We’re learning that there are a lot of people in the Expedia world that may not have used rentals before, but when they are presented in the right way, they grab them.
It creates additional business for Expedia, and of course they have to study the margin of the hotel booking versus vacation rentals. They want to make sure the business and margin are incremental for them. We’re also trying to be sure that we wouldn’t have gotten that customer without them.
Expedia has at least 4 times our traffic, so many of those people don’t come to HomeAway. We also know that 84% of first-time vacation renters will do it again. So that just creates more consumers for our marketplace. Things are going well. It’s been a really good partnership.
Late last year, you announced participation in a $20 million Gogobot investment. How’s that going?
Gogobot is going well. We’re in the process of integrating Gogobot more deeply into our platform, that hasn’t happened yet but we’ve been doing a ton of work on that. They have a ton of terrific content, especially in cities where we haven’t been strong historically.
When they are deeper integrated, we’ll have our owners generating content for them and a lot more content showing up on site.
There are two ways to go on mobile: either the owner can populate the recommendations themselves or for owners who are slow to the punch, we want to be sure that we have useful information.
We can populate that app automatically form our database, including phone numbers, addresses, and a map.
So if someone doesn’t put in any recommended things to do, we will auto-populate with Gogobot data. Owners can modify if they want or substitute of they want. If they create new content, that gets exported out to Gogobot.
In theory, those numbers are big - we have 1 million properties, which can be a lot of people writing for them. We do find that when an owner used the app, they are putting in 15-20 different content items. So when someone decides to use it, they go very deep.
Brian, put on your Bain consultant hat … what are the three businesses outside of your sector you would pitch on a major strategy initiative in the next six months?
Certainly OTAs fall into that bucket as we are in discussions all the time. Financial services companies are interesting, because how you manage payments in this business is critical.
You have to do that very well on a global scale to get right. I think beyond that, we are really interested in talking to companies that can help tie together traveler experiences for people who are in-market. For example, we have connected with Uber for transportation and Instacart for groceries.
We think that HomeAway is about experiences and compete with hotels to make the experience of going on vacation as easy as possible.
If there was as global platform for chefs that we could connect to, we would be all over that. Cleaning services would be in that category. Delivering tickets and entertainment as part of that experience would be ideal.
Right now we are focused on booking. We’ve focused first on inventory and now we are looking at the ease of booking. Now we are going to move to a world where we manage the whole experience. Our next 10 years is going to be about that.
The most exciting thing is that there are a lot of people that are trying to start businesses to corral experiences around the world together, and someone is going to succeed in doing that. And we would love to partner with them when they do.
How does corporate business travel fit into HomeAway’s revenue mix?
I don’t think so. I’m sure it’s there, but we’ve never gone after it. We don’t work with corporate travel agencies. We don’t work with HR departments in companies.
It just has not been a priority for us. 90% of what we have is not in corporate-oriented markets. In Austin, for example, I think we do ok here because we have our executives that stay in a HomeAway house when they are visited. Austin is probably a bit different, since we over index.
We recently wrote about the Credit Suisse analyst report that suggested alternative channels such as Airbnb were having downward pricing pressure on hotel prices in New York City. Do you think that’s the case?
I personally have always felt that we are in the family business stay for a week. In terms of families traveling on vacation, the industry has gone from 15% of the market to maybe 20-25% based on the data.
I can’t believe that we’ve had a big impact on resort pricing or something like that. There’s more of what we do know, but I’ve never seen that effect.
When it comes to cities, that we are small enough in most cities that our effect is impossible. It’s nothing like Airbnb, so we’re not certainly have an impact. In terms of Airbnb, maybe.
The hotel business is really good with short term stays, but the 2-3 stay market in a city when you have so many Airbnb options. So it could have some pricing pressure.
But then again, I also saw some data on a national sample of 1,000 Millennials, and they responded to a question about using Airbnb and it was still just 5% of them that had tried Airbnb.
I think there’s a little bit of overhype and concerns about the impact on the hotel business. A lot of what has happened is that we’ve bene in the market for 10 years, and its created new vacations that have never taken before.
In the case of HomeAway, people decided to grab groups of friends and family and get a bit place to go off and be with them.