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The HomeAway Service Fee Debacle

March 18, 2016 By Darren 28 Comments

Roughly 4 – 5 weeks ago HomeAway introduced its new ‘traveler fee’ to a lot of negative feedback from owners. Since then the discussion over HA’s business model, fees and future direction seems to have amplified massively.

A section of owners are very upset with this change of direction by HomeAway, some have gone so far as to start a protest movement, complete with social media accounts and a website highlighting the comments of HomeAway’s customers and generally bashing this policy change.

The negative reaction to the new fee even drew a response from Brian Sharples (HomeAway CEO) in which he attempts to answer some of the more general comments which have been aimed at his company.

At a recent Expedia (HomeAway’s new parent company) investors meeting (reported excellently by VRMIntel) their CFO commented on HomeAway’s future direction and on the performance of conversion rates after the traveler fee introduction.

To sum up, HomeAway introduced an additional fee and property owners are not happy about it.

Let’s explore some of the reasons why this is and make some predictions on how it may all pan out.

Why Have They Brought In This Extra Fee?

If you read both the Brian Sharples response and the Expedia investors meeting notes (linked above) you will find that they are basically saying that the fee is for the following:

to be able to compete against the likes of AirBnb
to grow the VR market overall
to grow their own market share
to battle legislation against the home sharing economy

All the points seem logical and straightforward from their point of view.

AirBnB have basically turned up and made a massive impact in the home sharing space over the past few years, their growth has been phenomenal and HA see a lot of that down to the fact that AirBnb manage to keep somewhere up to 15% of the revenue from each transaction that happens on their platform.

Brian claims that HA’s traditional take is only around 3% with subscription listings so there is obviously a gap here that needed closing up.

HA are also making a point of the new traveler guarantees which cover things like fraud, double bookings and problems with a customer’s rental property experience.

What Are Property Owners Issues?

HA’s customers have a different take on this new fee, reading through many social media comments the general feeling seems like it is simply a money grab on the part of HA and it is not hard to see why this conclusion has been reached.

A lot of the negativity comes from the fact that many customers have paid a fairly large subscription fee on the basis of an advertising and business model that has now been changed by HA.

When their CEO states in November 2014 that HA is going to be free for travelers, and then they announce and introduce a ‘traveler fee’ less than 18 months later there is always going to be a bad reaction to this.

There has also been a lot of noise about owners losing bookings because of the new fee, reports of big drops in enquiry and conversion rates since the fee introduction and complaints about how the fee is displayed to potential guests in the booking process.

@homeaway @travelblogger Fact: No bookings from @vrbo in 13 days. 2 properties. Normally summer rentals fill up now. #vrboservicefee

— Chuck Breckenridge (@ChuckWBreck) March 17, 2016

.@ClarkHoward See how @VRBO is being transparent w/ #vrboservicefee Screen shot of VRBO app. #findthefee #fuzzymath pic.twitter.com/7ZBFazmwQT

— Royce Ard (@royceard) March 4, 2016

@VRBKNOW @HuffPostTravel @YahooFinance @FTC VRBO owner loses guest due to new #vrboservicefee #boycottVRBO pic.twitter.com/o2O0ylW0mY

— BelmarVacationRental (@BelmarVRbyO) February 28, 2016

A recent article on the evolve VR blog covering the new fee has also sparked a bit of commentary from disgruntled HA customers. The article made some points about the evolving nature of bookings and the conversion process. I’ll cover my thoughts on this shortly but I wanted to first highlight a comment from ‘OpinionatedVROwner’ on the new service level that HA claims to be offering guests:

Link to full comment

It’s very hard to disagree with what they are saying on many of the points relating to the HA traveler guarantee.

The Cynical View

Astrid (in the evolve blog article above) sees the new fee as ‘inevitable’ and I think it is too but not for the exact same reasons.

Expedia have just paid $3.9 billion for HomeAway and will want a return on this. HomeAway see their biggest threat to be AirBnb who charge both owners and travelers and have a 4/5 x bigger slice of revenues generated through their business model.

As HomeAway there is absolutely no way on earth that they are not going to try and take a lot more revenue out of the business model. AirBnb have proved travelers will pay it, it would be crazy for them not to take it.

Do they need to charge this to compete with AirBnb and other listing sites? Probably, AirBnb have a model which generates more revenue and they have a lot of investment behind them, they are a formidable competitor so a major jump in income for HA will obviously help with this battle.

It would also be naive to think that jumping from a roughly 3% take rate to something approaching 12% – 15% isn’t going to impact their share price either…

Are they bothered if some owners complain? Yes, of course any negativity is bad for business but they will be betting that in the long term owners and travelers will just accept it and I think eventually many will. Albeit reluctantly.

How It Will Pan Out

In my humble opinion, this is what is going to happen.

Some owners will continue to protest against the fees but HA will not reverse their decision.
Some of these owners will leave HA and find other marketing channels with varying levels of success
Many owners will stick with HA because it is all they know and whilst they may not be happy with the increased fees they see little option for change
HA will shortly reduce the annual subscription fees to ‘compensate*’ for the introduction of owner and traveler booking fees

*I use the term compensate lightly, HA will still end up massively better off due to the increased fees but will spin a reduction (or even elimination) of subscription fees as a positive for property owners.

This is my prediction and I’m happy putting it out there for anyone to see.

Final Thoughts

I have some final thoughts which I’ve been mulling over the past few weeks / months.

1. HomeAway and AirBnb are different beasts. Whilst on the surface they are very similar, AirBnb target rooms in homes whereas HA has always targeted second / holiday homes. Whilst these are obviously related they are two distinct audiences and business models.

Yes, there is always going to be some overlap, and yes, AirBnb will likely start eating into HomeAway’s market sooner rather than later but that doesn’t mean that HA should be forcing their entire customer base into an AirBnb style model either.

2. Properties are mainly owned by real people. Comparisons between the home sharing economy and traditional hotel rooms have been made a lot recently. Services like AirBnb have the potential to impact on hotels profits, hence the new legislation battles going on right now.

HomeAway and AirBnb see this battle and want to provide a model which will let them compete with established hotels. Online instant booking is a major part of this, it’s hard to compete without it. The problem is that the inventory, people’s houses and homes are just that, people’s house and homes! Despite wanting to earn income from their homes (and second homes) there will always be a large segment of owners that want a lot of control over who stays in their properties.

The ‘hotel’ instant booking model will never cater for this for everybody’s needs.

3. Ever increasing fees are not the only option for home owners. Relying on any one listing site is not a good idea, it never has been. Property owners should be exploring ways of having their own website, with their own ability to take bookings and card payments, bypassing commission payments entirely.

This way will be a bit more work to setup and will take some time, but should pay for itself in a reasonably quick time frame.

Even if you keep an account with HA I’m sure it would be nice to accept bookings and payments on repeat guests, or referrals without having to go through a major listing sites booking process and paying the fees involved with this.

This is all possible for the pro-active owner.

So, that’s my take on it all. Agree? Disagree? Think I’ve missed something crucial to the debate? Just let me know below.

Why You Need Your Own Website

June 18, 2015 By Darren 4 Comments

Imagine a future where enquiries flow in at a steady but manageable rate, repeat bookings and referrals make up a large proportion of your income and your advertising costs are consistently and permanently low.

Does this sound like an unrealistic dream? Well it’s really not, in fact it’s probably more achievable now than it ever has been.

The tools to make this happen are out there and are getting easier to use all the time, what you need is a plan, a strategy to work towards which will deliver the results you want.

One of the crucial aspects of this self-sustaining strategy is owning your own website.

In my last post I made the point that relying on the large listing sites for your future rental income is probably a bad idea.

You might have read that and thought ‘Great, now what do I do?’, well I hinted at a different way forward and this starts with having your own website.

But how does this sound to you?

Are you thinking ‘Man, this sounds like a lot of hassle which is probably going to cost me a small fortune’, or are you sat their smugly thinking ‘Well duh! Of course everyone should have their own site, I’m way ahead of you and already have one’.

To the former I’d say consider the very real and major benefits to having your own site, which I’ll get on to in a moment, before ruling it out.

And to the smug ones amongst you? Well done you, but read on to see if you’re actually making full use of your website.

More Than an Online Brochure

For most property owners I think that they look at a website as an online brochure for their property, it has pictures on it, some content about the property and local area, a list of rates and perhaps an availability calendar.

This is a good start and the items mentioned should definitely be a major part of the site, however I believe that a bit of a mind-set shift will take having a website from a ‘nice to have’ to a ‘must have’.

The way I think you should look at a website is as a central hub for all your rental property related tasks. Almost everything you do online and off-line should include your website as some part of the process.

Doing this will improve your marketing efforts and could help reduce the costs of running your rental business.

Reducing Your Marketing Costs & Listing Site Reliance

So how does having your own website reduce your marketing costs and help mitigate against ever rising rental listing website costs?

Let’s say that you created your website ‘www.myrentalwebsite.co.uk’, and you went about promoting that address consistently both online and offline. With a bit of work it would eventually start attracting traffic through search engines, social media, referrals, emails, etc…

Because you’ve created some good quality original content about your property, the local area, events and attractions, then visitors coming into the site would naturally be interested in seeing what you had to offer in terms of holiday accommodation.

This would then lead to enquiries and bookings, and because they have been generated by your own website then there would be no commissions due to 3^rd party listing sites.

Generate enough of your own bookings and you could scale back your listing site subscriptions to lower levels which will definitely help save you money.

Owning Your Referrals

Are the renters of your property having a great time? If they are then you should be encouraging them to refer people to you, people are naturally happy to do this when they feel like they have had excellent service.

If you don’t have your own website then they might refer friends to your ad on a listing site, which is just 1 click away from hundreds (or thousands) of other properties that might take their fancy.

Having your own site means that the referral is coming back to you and only you.

If you’re serious about staying in the rental business with your property then you can use your own website as a foundation for some pretty advanced marketing tactics over time which will help drive further visitors, enquiries, bookings and then referrals.

It’s a snowball effect that you can achieve, little by little adding more to the mix so that eventually you are operating completely independently and are in control of your own future.

That’s the dream but it is unachievable without having the fixed home base of your own website.

Increasing Your Enquiry to Booking Conversion Ratio

If you read forums online where owners talk to each other then one of their pet peeves is dealing with pointless enquiries, answering the same questions over and over again.

You’re always going to have to deal with enquiries that come to nothing, that’s part of the game, but you can certainly take steps to try and mitigate some of the questions by using your website more effectively.

For example, you could create an FAQ page (or collection of pages) which address all the questions you regularly get asked. Visitors could answer their own questions here and even if they don’t you at least have somewhere handy to point them with a quick email reply.

Look at it this way, for every person emailing you asking a question you probably have 7 or 8 people wondering the same thing but not being bothered to even ask you about it, they just leave and never come back.

It’s a generally accepted principle of modern online marketing that the more content you provide about a product or service the higher the number of sales or conversions.

Regularly adding new pages or content about your property, the local area, local events and things like that will only help sell your property over someone else’s, and the cost of adding these extra pages? Nothing but a bit of time.

Prepared For an Ever Evolving Future

As much as you might not want it to, the future is happening and it is unavoidable.

Everyone’s talking about online bookings and online payments, cheques are dying and potential renters are being told not to wire / bank transfer money as it’s not safe.

It’s debatable how true all this is, you probably have your own data or gut feeling on how it’s all playing out for your property, but projecting forward for a minute, technology is changing the face of how we all interact and pay for services and we at least have to consider the implications of it.

It might seem like a daunting task now, but if you integrated an online booking process into your own website this could help secure extra bookings, bookings that you may currently be missing out on from people who prefer the convenience and security of paying with a credit card.

Accepting payments this way is almost certainly going to be cheaper and you’ll likely get your money paid to you quicker than using the services of the big listing sites.

I’m not saying you should definitely do this right now, it may or may not make sense for you, but it is something you should be aware of and perhaps be planning towards at some point in the future.

Setting up a solution like this is going to get very convoluted if you don’t have that website as a base of operations.

A Valuable Asset

It may not be something that you’re thinking about in the near future, or perhaps ever, but if you ever did need or want to sell your rental property then supplying it with a fully functioning website would be a big selling point.

Imaging you’re looking into buying a property, there are 3 that you’re interested in and they are as follows:

Property 1: No website, current owners never rented it out before.

Property 2: Basic website and advert with a listing site.

Property 3: Has its own website which generates 8 – 12 bookings a year. Also has an email list of past renters and people who have made enquiries.

All other things being equal which one would you go for? It’s a total no-brainer, everyone would choose property 3, you might even be tempted to pay a little more for it perhaps?

Building a website can build you value in more ways than one.

Convinced?

Hopefully by now you can see why having your own property website is a pretty good idea?

I could go on about this some more to be honest, I haven’t even touched on how and why you need to start owning the customer relationship or the idea of digital sharecropping and how it is likely already taking away opportunities from you.

I’ll probably get to them at some point soon though, so don’t worry!

Having your own website is not something that has to cost a fortune and there are a number of ways of getting a website up and running which take varying amounts of time, effort and money, I’ll explore some of these shortly.

But for now, why not let me know below how you feel about the subject. Do you already have a site? If so how is it working out for you? I’d love to hear from you.

Why You Can’t Rely On the Big Listing Sites for Your Future Rental Income

May 22, 2015 By Darren 1 Comment

If you own a holiday home which you rent out to guests then it is more than likely that you have an advert with one of the big listing sites.

In the UK the big 3 are HomeAway, Owners Direct and Holiday Lettings and between them have 1.5 million property listings according to their sales materials.

That’s a big slice of the market to control and when a few companies work their way into that kind of dominating position in any industry it never ends up going well.

How Did They Get So Big?

Initially the big listing websites like Holiday Rentals and Owners Direct rose to prominence because they offered a good service to property owners.

You paid for your listing and you got your enquiries / bookings, the process of connecting holidaymakers and property owners worked well and everyone benefited.

Where Does Our Initial Property Inventory Come From?

June 28, 2014 By Darren 3 Comments

Our listing websites are focused on specific countries or regions, we build them initially using a process of applying our custom web technology on to a new site.

Once the mechanics are in place we spend time looking at the specific areas that make up the country and divide it up into sub regions and then towns and resorts.

At this stage we have the outline of the website but that’s not a lot of good without any properties to display to visitors.

Villa Holidays Specialist Villa Parade Has Ceased Trading

May 23, 2014 By Darren Leave a Comment

It’s been an interesting few weeks in the villa holiday space here in the UK, a very public spat between two rival companies ended earlier on this month with the closure of the business behind Villa Parade.

This has created confusion for customers who had holidays booked this summer and has no doubt also affected some property owners quite badly at the same time.

It’s never nice to see a business go under, especially in a very public manner like this, it does prompt some questions though, why have they ceased trading and what is the real cause of their downfall? Did a social media disaster destroy them or was there more to it? [Read more…] about Villa Holidays Specialist Villa Parade Has Ceased Trading