VRM Intel receives daily complaints from vacation rental managers and homeowners about HomeAway’s latest changes and actions, which are largely related to its decisions to: charge additional fees to guests, require online booking, mask customer data to eliminate direct communications between managers/owners and shoppers, remove all manager/owner information from listings to reduce “leakage,” and threaten to remove listings for perceived infractions of the new policies.
However, several HomeAway representatives believe the angst among vacation rental managers and owners is unfair, especially when compared to Airbnb.
After all, Airbnb also charges guests added fees, and it requires online booking. Airbnb also masks customer data and often removes listings for any perceived violations. In fact, all of HomeAway’s actions mirror those of their number one competitor, Airbnb.
And there is more to come. Airbnb employs pricing suggestion tools and automation (widely reported to push down pricing), and it standardizes contracts and cancelation policies, initiatives that Expedia-owned HomeAway is expected to launch over the coming weeks and months.
So why is HomeAway the recipient of so much passionate criticism while Airbnb skates by?
The answer is both simple and complex.
The simple answer is that, first, in traditional vacation markets (which include beach, lake, mountain, and Disney-oriented destinations), suppliers do not receive enough of their revenue from Airbnb to warrant such a response. Second, Airbnb didn’t change their policies. From the time that Airbnb began attracting suppliers in traditional vacation rental markets, their policies have remained consistent.
(We recognize that vacation rental managers and homeowners do not like to be referred to as “suppliers.” However, the OTAs consider managers and homeowners to be suppliers of the inventory that is available in their marketplaces, so forgive us for using the term going forward in the article.)
The more complex reason that HomeAway is being bombarded with upset suppliers is that its suppliers previously had a “relationship” with HomeAway. These owners and managers feel that they entered into—what they considered to be—a partnership with HomeAway (more specifically, HomeAway-owned VRBO.com). They paid a subscription fee to HomeAway and gave the company their inventory for the mutual benefit of increasing awareness and providing a two-way marketplace for vacation rentals. As a result, in what they thought was a trusting partnership with a company that valued their needs, suppliers obtained more bookings, HomeAway flourished, and vacation rentals as a lodging alternative became mainstream.
When Expedia purchased HomeAway, the game changed.
Suppliers felt duped.
History Lesson: VRBO.com was founded in 1996. VRBO.com was purchased by HomeAway in 2006. Expedia purchased HomeAway in 2015.
Expedia turned HomeAway’s listing sites into eCommerce platforms and fundamentally changed the way vacation rental managers and homeowners conduct business.
To take a deeper look, HomeAway’s supplier base can be divided into four distinct segments which have differing, yet equally infuriated, responses to the recent changes.
4 HomeAway Supplier Segments
1. Vacation Rental Homeowners
VRBO.com was a major vacation rental industry disruptor, as it provided homeowners—for the first time—the opportunity to promote and book their vacation rental homes to the mass market without the use of a property manager. In turn, the supply these homeowners gave the marketplace allowed VRBO.com to thrive. The partnership was a good one for both VRBO.com and homeowners. Consequently, homeowners placed all of their “eggs in one basket” with VRBO.com and utilized the site as their primary source of revenue. Through the VRBO.com marketplace, homeowners communicated with guests, screened out potentially disruptive parties, and set realistic expectations.
With the recent changes to policies, homeowners are no longer able to conduct personalized pre-stay communications and negotiations. In addition, the new “service” fees charged to guests have significantly increased the cost of bookings, have resulted in friction between the traveler and the owner and in many cases a substantial decline in bookings.
2. Vacation Rental Management Companies Founded Pre-2002
For vacation rental management companies founded before 2002, the disruption created by VRBO.com was significant. All of a sudden, homeowners had an outlet to market their own properties to consumers. These vacation rental managers found themselves competing, not only for inventory, but for guest awareness against HomeAway’s huge online marketing budget. This created a new segment of competition for professional property managers, a market-wide loss of inventory, and a push-down in market pricing.
In 2010, HomeAway purchased Instant Software, the largest software provider for these traditional vacation rental managers, which further entangled property managers with HomeAway and created a new layer of dependency on the company. After the software purchase by HomeAway, the company promised a “wall” between the software division and the distribution sites. In recent months, however, after Expedia’s purchase of HomeAway, that “wall” has come down, and property managers are just now beginning to experience the ramifications of Expedia’s use of their data.
3. Vacation Rental Management Companies Founded Post-2002
After 2002, a new group of vacation rental managers emerged. These managers began as homeowners, found marketing success booking through HomeAway/VRBO, and were able to build successful property management businesses by optimizing the marketplace and providing more personalized property care.
These companies literally grew up with HomeAway/VRBO and are especially reliant on their performance. For these companies, pulling their supply off of HomeAway is simply not an option, as it is their primary source of bookings.
4. The New Multi-Destination Vacation Rental Manager
As a result of the booking success of HomeAway, new multi-destination property management companies (i.e. Vacasa, Turnkey, etc.) have emerged with an above-average dependency on HomeAway as a primary booking channel. These companies have been able to flourish by leveraging HomeAway’s audience and have been more than willing to adapt to the company’s changes as they do not incur the additional marketing costs of using traditional or local marketing channels. However, these new companies are more susceptible to HomeAway’s changes than any other group. These companies are largely funded by outside investment, which gives them a short-term advantage in weathering changes. Yet with a decline in reservations generated by HomeAway, these new multi-destination companies face the immediate challenge of either finding new ways to get more bookings from HomeAway or attempting to replace these bookings through additonal channels.
Is the Supplier Push-back Against HomeAway Fair?
While it is true that Airbnb’s policies are no different, the resistance to HomeAway’s changes are felt much more closely to the wallet.
Airbnb dominates the shared-housing market and the short-term rental market in urban markets, but HomeAway accounts for the largest share of non-direct bookings in every traditional US vacation rental market. Any changes to the HomeAway model are felt immediately by their suppliers in these destinations.
In addition, many of HomeAway’s suppliers were able to build their property management companies and rental income based on their perceived “partnership” with the company. The reported decline in bookings generated by HomeAway decreases their ability to operate their businesses or—for homeowners—pay the mortgage on their vacation home.
But This Is How Hotels Work With OTAs. Or Is It?
When discussing OTAs and the vacation rental industry, experts often compare the hotel industry’s experience with OTAs. However, the comparison is far from apples-to-apples.
Here are some ways that hotels are better able to work with OTAs
- Hotel brands are prominently displayed on OTAs, while HomeAway has removed any mention of a vacation rental brand.
- Hotels have independent market data to keep OTAs from dictating pricing. HomeAway’s upcoming pricing tool and “Offer Strength” sort metric cannot be combatted without independent market data.
- Hotels have the ability to offer guests 24-48 hour cancellation windows. According to Jon Gray, ex-chief revenue officer for HomeAway, “The booking window for vacation rentals is typically ninety days.” In vacation rental markets where bookings are made an average of ninety days in advance, rebooking a vacant period caused by a cancellation made 24 to 48 hours before the guest’s check-in day is nearly impossible without offering potential guests heavy discounts and paying the high marketing cost of advertising that discount.
- Hotels do not have a need to communicate directly with guests. From the guest’s perspective, vacation rental shoppers often are looking for accommodations for up to 20 people in a party, have special needs, and need detailed questions answered. From the supplier’s perspective, accommodating for a large number of guests and setting the right expectations require direct communication with guests. It would be similar to hotels allowing instant online booking for meetings, weddings, and groups.
Will Suppliers Be Able to Sway HomeAway?
Expedia is accustomed to being disliked by its lodging suppliers and is not phased by the multitude of articles, blogs, forums, AHLA actions, and anti-OTA initiatives. The only strategy that will be efffective in swaying behavior at Expedia-owned HomeAway is for suppliers to remove inventory, and most of the supplier segments outlined above simply cannot afford to remove their supply from HomeAway’s sites. Expedia believes that, like hotels, vacation rental suppliers need them.
Yet a surprising fact is that, unlike hotels, in most traditional US vacation rental markets HomeAway only lists less than than 60 percent of the available inventory; and in many markets, HomeAway represents less that 40 percent of the vacation rental inventory. There is a slight possibility that vacation rental suppliers might come to the realization that OTAs need their inventory more than they need them.