Last week, as part of its Q2 2016 earnings call, Expedia provided an update on HomeAway activity.
According to CEO Dara Khosrowshahi, “The HomeAway transition continues to go very well. We have now implemented the traveler service fee in all major markets, allowing us to increase investments in technology and products as well as marketing in order to build our brand globally.”
Khosrowshahi continued, “HomeAway Q2 revenue grew 36% year on year on a pro forma basis, driven by strength in both subscription and transactional revenue. And based on current trends, we expect revenue growth to accelerate in the second half of the year.”
11 HomeAway Takeaways from Expedia’s Q2 2016 Earnings Call
1. Transition from Classified Advertising to a Travel Ecommerce Business
Dara Khosrowshahi: Although this transition is not easy, we believe the pivot from pure classified advertising to a travel e-commerce business is a winning plan that will allow us to create better products for consumers and drive more bookings through our homeowner and property manager partners. In addition, as we move more of HomeAway’s business to online bookable, we will be more aggressive in offering HomeAway inventory on our OTA brands which will drive even more bookings volume and will give our huge global customer base more places to stay.
2. Increase in Online Bookable Listings
Dara Khosrowshahi: The real focus for HomeAway right now is to build up the online bookable muscles. And we’re really, really pleased with the progress there, over 1 million online bookable listings, overall listings growing at 20% plus, actually accelerating versus how fast listings were growing there. That’s the focus right now is the HomeAway team and then taking some of that revenue and reinvesting in marketing to make sure that our homeowners and property managers get plenty of traffic.
Dara Khosrowshahi: When we look at HomeAway conversion versus, let’s say, Hotels.com or Expedia conversion in like destinations, HomeAway conversion is far lower. So, we think we’ve got plenty of work to do there. And we think that we have got plenty of upside there.
3. Impact of the Addition of Booking Fees
Dara Khosrowshahi: The reaction — when we did bring in the booking fees, etc. — we did see a conversion decrease initially. And the great news is that chain, the HomeAway technology team — now they have got traffic and they are able to optimize the site in a way that they were not able to. So conversion is actually up on a year on year basis, because of the optimization work and because of the feature work that the teams are embarking on. And I think that that momentum is going to continue for some period of time.
4. Subscription vs PPB Listings
Dara Khosrowshahi: The other factor that we want to look at is subscription renewals and subscription renewal rates. And again, things look good there. So I think, anytime you change your model you introduced some uncertainty into the marketplace. We’ve had to over-communicate to our homeowners and our workers, but I think now we’re settling down and we can both build a great business together.
Dara Khosrowshahi: As far as the HomeAway new subscriptions and the change between PPB and subscription, I think it remains to be seen. I do think that one way or the other, more and more players are going to come online and make their listings online bookable. Whether they want to go through subscription is — we’re fairly neutral to and really we just want to make it easier for our users to become online bookable. And then, once we have become online bookable for obviously over the long term, going to see the majority of demand in that marketplace because it’s clearly what our consumers want. And ultimately we think it’s going to be a win-win in this marketplace when consumer expectations are met with homeowners and property managers. That’s really what this model change is all about.
5. Growth in Professionally Managed Listings vs Owner Listings
Dara Khosrowshahi: I’d say that in general the professional managers group is probably engaged a little more quickly. They’ve got a bunch of volume and they are leaning forward into the traffic growth that HomeAway is delivering now. But we continue to work with our individual owners. They are an incredibly important component of our marketplace and we see excellent progress in bringing them online and making them online bookable. So it’s a process. It’s a communication and education process and I would say so far, so good.
6. Increase in Transactional Revenue
Dara Khosrowshahi: Last quarter we actually ordered a book to transactional revenue number, just to give you a sense of it. And what that represented is essentially the revenue that HomeAway derives from bookings that have been online, on a booked basis. Recognition happens on stay. That number this quarter was well north of 200% year over year. So we’re seeing really strong results there and we’re able to actually put that increased volume and increase revenue that HomeAway has back into the business.
7. Increased Marketing Spend
Dara Khosrowshahi: And one of the most significant investments that HomeAway has been making is not only in product and technology to make the experience better for both owners and managers as well as consumers, but they have put a significant amount of money back into sales and marketing.
Dara Khosrowshahi: In the first half of this year, direct sales and marketing spend up over 80% year over year. So we’re really creating this flywheel and it just seems the more volume we create, the more attractive online bookability becomes for owners and managers. And we’re starting to get real traction there that we’re very pleased to see.
8. Online Payments and Traveler Guarantee
Dara Khosrowshahi: We’re working to introduce more payment methods, online payment methods, especially on the international front — PayPal, all kinds of credit cards, etcetera.
And we’re also looking to build out products like the traveler guarantee for HomeAway that incents travelers to book essentially on system because there are some bookings, obviously, that go off system which is to people talking to each other and writing a check and hoping that the check lands someplace.
So we think that we can create a safe and cheap environment for consumers to come together with homeowners within the HomeAway platform and we will be looking to optimize that a go-forward basis.
9. Vacation Rental Regulatory Impact
Dara Khosrowshahi: From a HomeAway standpoint, we tend to have a more significant portion of our business today in destinations that are not urban destinations and destinations that are mountain/beach destinations. And these are destinations that had had this business around for a long time. The majority, the vast majority of HomeAway’s business are whole homes. All of HomeAway’s business is whole homes.
They are usually second homes and they are usually in destinations where the home rental, the seasonal home rental business has been around for a long time and is a very significant contributor to local economies, etcetera. So we’re watching with interest what’s going on. Every single municipality is looking at this issue in a different way. We’re working closely with those municipalities. And we think, in the end, this is a product that consumers want. It attracts travelers to destinations.
Travelers bring jobs, they bring money. And we think that in working with these local municipalities ultimately we will come up with the appropriate laws to protect consumers and homeowners and the residence of those municipalities as well. This is a process that’s going to take a long time. But we’re in for the long haul. And at this point, the activity that we see is affecting us less than, let’s say, some of the other players out there.
10. Addition of Urban Destinations
Dara Khosrowshahi: As far as HomeAway inventory adding urban inventory to the mix, we’re looking at adding to inventory all over. I do think that our strengths tend to be in the resource area as far as sun destinations, mountain destinations, etc. But we’re adding urban listings as well. And I think that as we integrate more fundamentally with Hotels.com, Expedia, Travelocity Orbitz, the pace of urban listing acquisition is going to increase.
11. Integration of HomeAway’s Inventory into Expedia’s Broader Network
Dara Khosrowshahi: We don’t have specific timing at this point on it…The thing that you should look for is a much deeper integration of the HomeAway inventory onto the Expedia platforms, in general. Prior, when we worked with HomeAway as partners before, the integration was more of a link-off experience.
It was a little bit of a shock for users. And this HomeAway inventory is going to be fundamental to our product on a long term basis. So we’re making the kinds of investments that we have to, to make sure that the integration is perfect and our clients who are online bookable and especially instant bookable get plenty more traffic the way they want that traffic.
We expected to be bringing in a really strong company and we wrote a big check to bring in HomeAway. And I’d say so far the results have been better than expected. So I think that this alternative lodging space is — it’s just a big space. And HomeAway is benefiting from that and obviously Airbnb which is the other player in the category, is clearly benefiting from it as well.
Expedia is on the verge of bankrupting vacation rental homeowners. Did they buy out Homeaway just to squash the competition
The service fee is like a private 5.5-10 percent tax upon a tax as they levy it upon the full price including sales taxes and accommodations taxes. Too many taxes drive travelers away because most people need value to maximize their vacations in order to be able to afford it.
The last thing travelers need is another corporation picking their pockets
Which kind of property owners will give keys of their properties – $100 of thousands worth of real asset – to strangers without proper time to vet ?
Of course, the property manager with no risk and property owners with low quality inventory in an undesirable neighborhood.
Expedia and HomeAway will feel the demise of their unworkable approach losing first notch quality inventories, one house at the time.
Homeowners with good properties will always have the option of long term rentals instead of putting at risk their asset with the click of a button just because HomeAway wants to put heads in beds at any cost to collect fees.
HomeAways perceived leverage in the absence of any asset of their own, will not reach far.
Total BS. all ruined for the owners…I.e. The customers. Only the benefit for home away. I believe class action lawsuit will be very successful
My vacation rental property is in an area that had its busiest summer ever this year. By contrast, my property, even with consistent 5-star reviews, rented one third less than past years. I attribute this partly to the fact that other Expedia properties nearby are advertised on my page, both at top and bottom. Expedia’s “improvements” to the website have caused problems for me and my guests. Increasing its automation has made it difficult for me to communicate accurately with my guests. I cannot see any return on the additional fee that Expedia grabbed, and this increase in my guests’ cost requires me to keep my price lower with no benefit to me. I will not be renewing this fall.
This is all good news for owners who do not want to manage their property and their bookings – just step back and joint the HA franchise.
Those of us who really do want to communicate with our prospective guests, offer them the best price, and service their needs, are waiting with bated breath for a website where we can advertise our properties and deal direct. Something like Owners Direct used to be.
This will be beneficial to both owners and guests, since guests will not face additional charges levied for the benefit of paying on line, something that many owners can offer anyway through their own websites.
Keith, go to home escape.com
Article also fails to mention class action case against Homeaway for bait and switch tactics and for taking money of home owners and then changing subscription terms and condition half way through – including adding a so called service fee to travelers not flagged at subscription renewal time. Vulture capitalism at its worst.
It would be interesting to strip Khosrowshahi and Sharples of their personal fortunes and make them survive on the income that they could generate from a 4 bedroom property promoted solely on VRBO.
It could take the form of a “celebrity big brother” for obscenely overpaid CEO’s.
Let’s see how they’d like jumping through their own hoops. It would make fascinating viewing.
I wonder if Khosrowshahi would be using the phrase “better than expected” after a couple of years of that or if Sharples would still be calling it “best match” after receiving worthless enquiries that affect his listing position.
I find it interesting that not a single analyst has asked about HomeAway churn… The safe bet is that is going up, and that is not a good sign.
It is not at all surprising that revenue is up – current subscriptions need to run their course. Next year as subscriptions come up for renewal, and comparisons will be tougher, the impact of churn will most likely result in slower growth at best, and could easily end up with negative growth.
Individual owners are flocking to alternate sites, and independent web pages.
What is is sad here, is Expedia has done very little to leverage the HomeAway acquisition by using it to own vacations. Instead they are simply picking low hanging fruit, and that is not a sustainable growth business model.