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.