After a public spat in June, Pegasus Solutions gave in on some demands, leading to an agreement with the Vacation Rental Managers Association to build a vacation rental switch designed to get more professionally managed properties online.
But, as the two parties work to launch a beta of the switch on VRMA's Discover Vacation Homes site by the second quarter of 2012, one of the key questions is whether vacation rental powerhouse HomeAway will participate in the switch from a supply and distribution perspective and/or whether HomeAway will compete and work at loggerheads with this industry initiative?
For now, HomeAway is saying all the right things about the switch.
Asked for its take on the Pegasus-VRMA agreement and prospects for the switch, HomeAway states: "We continue to work with VRMA to participate in the new switch product and have been very proactive in our efforts. A lot of work remains to be done in evaluating how best HomeAway integrates with the product both on the PMS (property management system) supply side and consumer distribution side of the business."
But, one vacation rental analyst, who declined to be identified, says he doubts HomeAway, which is a VRMA member, will ever join the party.
After all, some of the largest vacation rental management companies already distribute through HomeAway and use its Instant Software andEscapia business management and distribution solutions, the analyst says.
And, HomeAway is busy working on these platforms as its distribution solution for the industry.
In its third quarter earnings call last month, Brian Sharples, HomeAway's co-founder and CEO, noted that HomeAway owns the two largest property management platforms, and plans to open it up to competitors.
"We believe we will be the best ROI (return on investment) solution for property management," Sharples said.
Sharples said that with 35% to 40% of vacation rentals in the U.S. coming from management companies, HomeAway's share is lower than that and increasing that percentage is a priority.
While competitors such as Airbnb and the prospect of the government clamping down on the taxation of vacation rentals pose potential threats to HomeAway, the analyst argues, VRMA's vacation rental switch would not be in that category.
A second analyst describes HomeAway's position this way: "They cannot afford to denigrate the initiative as many of their customers are VRMA members, and the property management market is very important to HomeAway. But the switch is a directly competing product and HomeAway can't buy Pegasus to make it go away."
Meanwhile, more details are emerging about how Pegasus Solutions and VRMA came to an agreement after the two parties had walked away six months ago.
Mike Montemurro, senior vice president of product strategy and support for Pegasus, says the company dropped its earlier insistence on volume guarantees from the VRMA and "took a more deliberate approach to build confidence and participation."
Launching the switch in phases, with the first being a beta on Discover Vacation Homes with a limited set of destinations, will give VRMA and Pegasus a chance to showcase the product to consumers and vacation rental managers, Montemurro.
"If we prove our worth and capture incremental business, it will prove its worth in the long run," Montemurro says.
Subsequent phases will entail discussions with some of the "channels" that specialize in vacation rentals, and Pegasus also sees a potential distribution market in DMOs (destination management organizations) and meetings and conventions.
In the earlier talks, which broke down, "control" was an issue, Montemurro says.
Instead of Pegasus having the flexibility to strike out on its own if the switch doesn't gain enough traction, Pegasus agreed "to stick with it for a period of time," Montemurro says.
"Let's go arm in arm and work through this and stick with each other to make this successful," Montemurro says.
The vacation rental switch will be open to VRMA members and nonmembers, although members get "more favorable terms and conditions," he adds.
Steve Trover, VRMA president, says the primary business model for the switch "will be a transactional percentage shared by participating parties."
"In certain cases, where state laws require it, a fee-based model will have to be used," Trover says.
When the talks broke down this summer, the VRMA initiated a new RFP (request for proposal) process in search of another vendor to build the switch.
That may have been enough to bring Pegasus, which has been footing the development costs, back to the table.
"After VRMA revisited the RFP process, Pegasus reached back out to us and we were able to work through our initial concerns to build a partnership for the joint development of this new interface," Trover says.
He confirmed that no volume mandates will be at play.
"Our members will not have to commit to certain volumes," Trover says. "We will encourage the participation of our membership by creating the right platform for them to do so. Members have expressed significant interest since we first announced the vacation rental switch and this interest in participating has continued to grow as the project has taken shape."
Montemurro of Pegasus declined to detail whether any major vacation rental management companies, many of which already list their inventory on HomeAway sites, have committed to participate in the VRMA switch.
The VRMA and Pegasus would welcome HomeAway's participation, Montemurro says, adding "I know they are evaluating it."
"Beyond that, we'll have to take their comments at face value," Montemurro says.