For the old HomeAway community of landlords hard days have started: The flagship in acquisition of renters for the vacation rentals is changing its business model. And even more: HomeAway’s new business model is changing a complete “ecosystem” for independent vacation rental owners and managers.
The Change in the HomeAway Business-Model
In former times owners paid for the simple advertising and even was able to buy the position in HA’s search results, all requests and handling was processed by the owners direct. The Owners paid for advertising to receive leads for their business.
Owners of vacation rentals and many vacation rental managers used HomeAway and build up the own business strategy. Good ranking in the HA search results guaranteed a steady flow of inquiries and a full house.
Homeaway was earning the money from the listing-fees.
This system worked for more than a decade.
It does not work for any more.
“Today, our subscription customers pay us roughly 3% of the revenue we generate for them while our major competitors charge 6-15% (mostly in service fees). … But we simply can’t provide the level of marketing and service that today’s travelers expect without asking travelers to also pay a fee for the service we provide.“ (Brian Sharples in HomeAway Insights / 24.02.2016).
Service Fee Instead of Subscription Fee
In late 2014 HA asked all of the vacation rental owners and managers to make their properties bookable online by the End of 2016.
In February 2016 HomeAway announced a service fee from 5-9 % to be paid by the traveler. This fee is charged in all transactions through HA’s Online Booking.
In April 2016 HomeAway announced a changed structure in subscription fees for owners, promoting the direct booking for homeowners and the use of HA’s Online Booking.
Meanwhile the “HomeAway Best Match” algorithm changes the way of sorting the search results. HomeAway is favouring online bookable properties in the sort algorithms; plus rewarding listings when they have higher conversion rates. The five-tier model to buy better rankings in search results will end in July 2016.
There is no doubt HomeAway wants to get all bookings through their portals through online bookings, where they will be participate in the service fee.
The next step most probably will be to implement Expedia’s Accelerator Program or something similar for vacation rentals.
That sounds like a well done plan for HomeAway. But what is about the vacation rental owners and managers?
The Forgotten Customer – Vacation Rental Owners
Why vacation rental owners are complaining? What is good for HomeAway is good for the owners – right? More money for marketing and service, more website visitors, more bookings for Homeaway should satisfy the owner’s needs. In view of HomeAway it should.
But it does not. Many individual owners and managers do not see a personal benefit in a stronger HomeAway. They fear negative impact for the single vacation rentals:
- Owners and managers feel a dramatically loss in bookings. Many of the formerly successful owners are reporting significant drops in their occupancy. They claim that travelers are not willing to pay the additional service fee.
- Owners and managers feel lost in the Search. Owners who depend on their positions in search of HomeAway are afraid about not be found any more. It is no secret to any of the owners and managers that a higher position in sort leads to more bookings.
- Owners and managers are confused about the new sorting. To get a high position in sort is not simply to sign up for a “better” subscription and pay some more money but a sorting algorithm. “SEO for HomeAway” is getting complicate.
- Owners and managers loose independence using HA’s booking system. To be listed well, owners have to use the HomeAway Online Booking. They cannot use own booking systems or bring the renter away from the HA websites.
- Owners and managers feel betrayed because of the “Best Match” algorithm. Independent owners, who are using HomeAway for the acquisition of only parts of their renters, cannot compete with the amount of conversions of dependent owners.
- Owners and Managers are afraid about not being competitive. The overall price is what stays in mind of a renter and what has to be paid. Competitive offers will be available with or without the service fee.
Especially the old and faithful listing owners seem to be harmed by the Homeaway changes. Many of them have their own websites and own booking systems. They are hit hardest by the “Best Match” algorithm.
It is not easy to come hungry into the favourite burger restaurant and get the message, that the restaurant will now sell only pizza because it has a better margin.
Many of the most loyal HomeAway owners are disappointed, as HomeAway’s changes killed their decade old business model.
Once owners felt like HomeAway was working for them, now it feels like they are forced to work for the listing-site.
The New HomeAway Offer – The Choose Between A Rock And A Hard Place
First of all to faithful and loyal HomeAway users: The “good old times” of vacation rental marketing on listing-sites like Homeaway and VRBO are over. The “By Owner” concept (to rent directly, without third-party commissions) is obviously history on HomeAway and its related Websites.
Loyal vacation rental owners and managers can choose from three different subscription offers:
- The pay-per-booking option (8%) is good for owners who have low prices. If the rent of an object per week is for example 1000 or less, at least 4 bookings per year are needed to reach the fix subscription fee and it is not guaranteed, that you will get them. It is paid from the rent – so no investment has to be done. It matches the requirement of the big vacation rental management companies.
- The use of the “cheap” subscription (349/year accepting online bookings) will show a vacation rental more prominent in the search results. But: The Service Fee related to the Online Booking will make the offer less competitive. Travelers might skip this option.
- The use of the “expensive” subscription (499/year without using the online booking) will cause a deeper position in the search results and there might be a low attention to the offer – even if it is more expensive.
None of them do really match the requirements of the loyal HomeAway community.
Meanwhile even loyal owners and managers have several exciting options to secure their businesses.
There Are Plenty Of Other Fish In The Sea
The “Big Four” of international listing-sites for vacation rentals – Homeaway (Expedia), TripAdvisor with Flipkey, Priceline with booking.com and Airbnb are getting closer in their conditions.
No one has to stay ONLY with HomeAway for promoting a vacation rental business. Loyalty to the marketplace does not give any benefit nor any guarantee for a minimum occupancy.
If all listing-sites have similar conditions – why not use all for the own marketing? As there are options to register without any setup cost, you just need to open your set of profiles.
To avoid the heavy work for synchronisation and double bookings one of the public channel managers is very helpful.
Increase Direct Bookings Without Service Fee
We do not need to analyse to know that people will prefer to book direct if there is no service fee. Many people look for the contact to the owners direct because of the hope to save commissions.
To check for additional records in google for a chosen object – maybe to see more reviews or to come in touch with the owner direct – is a common practice.
A strong brand for the individual vacation rental business and a great website will help travelers to find service fee free offers.
Owners and Managers will take a close look onto their websites and make them ready for the “Billboard Effect”. The Billboard Effect describes the options for a raise of direct bookings being listed on mutual listing-sites.
HomeAway’s changed business model can be seen as an invitation to become more independent. The individual vacation rental business is too valuable. It must not be sacrificed on the altar of profit optimization for a large company.