What Expedia's Purchase of HomeAway Means for Your Next Vacation

With acquisition, Expedia gets deeper into vacation rentals as HomeAway and VRBO.com plan to charge more fees and push instant booking.

Expedia has agreed to acquire vacation-rental giant HomeAway for $3.9 billion in cash and stock. The companies believe the transaction will close—after regulatory approvals—in the first quarter of 2016.

The Expedia-HomeAway combination would displace Booking.com as the world’s largest lodging seller in numbers of hotels, vacation rentals, apartments, etc. Expedia Inc. would offer at least 1.3 million properties compared with Booking.com’s 821,400.

Expedia Inc.—which has over the last year acquired Travelocity, Orbitz Worldwide and Australia’s Wotif—is competing with the likes of the Priceline Group’s Booking.com and Airbnb.

HomeAway revealed it will change its business model midway through 2016 and will add a booking fee for consumers. Until now, unlike Airbnb, HomeAway charged fees to hosts but not to guests.

HomeAway said its board of directors unanimously approved the acquisition, which will include all of HomeAway’s global brands, including VRBO, HomeAway and VacationRentals.com in the United States; HomeAway and OwnersDirect in the United Kingdom; HomeAway in Germany; Abritel.fr and Homelidays.com in France; HomeAway and Toprural in Spain; AlugueTemporada.com in Brazil; HomeAway and Stayz.com in Australia; and Bookabach in New Zealand, plus Asia Pacific short-term rental site, travelmob.com.

Mike Janes, the chief marketing officer for San Francisco-based Vacatia, a resort-residence rental company, told WhereTraveler, "Obviously, the news of Expedia acquiring HomeAway is a major shift—a 6.0 on the Richter scale."  

A quarter of travelers have stayed in a non-hotel in the last year, he said. Vacation rentals are a $100 billion industry worldwide, and is expecteded to grow 50 percent in the next five years. Hotels are expected to grow by about about 30 percent. "So vacation rentals are a big business already. ... With big players like Expedia getting in the game, there's no reason to think that growth won't continue."

A "Game Changer"

With more than 1 million paid listings in more than 190 countries, Expedia’s acquisition of HomeAway is a game changer in that it saves Expedia years of building its own vacation-rental supply in an increasingly popular lodging sector.

Expedia Inc. CEO Dara Khosrowshahi told skift.com that his company’s acquisition of HomeAway makes good on a mistake he made when Expedia spun off TripAdvisor in 2013: He allowed Expedia’s acquisitions of vacation-rental sites such as FlipKey in the U.S. and Holiday Lettings in the UK to get away with TripAdvisor’s exit.        

“So I’m making up for that mistake now,” Khosrowshahi said.

In a Nov. 4 conference call, Khosrowshahi said, "HomeAway has been undertaking a challenging transition. That of a listing-based model to an online transactional marketplace. The HomeAway team was working on this challenge on a stand-alone basis, but together we believe we can get there much faster and with greater certainty." 

Plans call for HomeAway’s vacation rentals to appear on Expedia.com, Hotels.com, Travelocity, Orbitz and other Expedia brands. In turn, Expedia’s apartment listings in urban areas, which are not a current HomeAway strength, will show up in HomeAway’s global brands.

Vacatia focuses on resort rentals, basically apartment-sized rentals at full-service resorts, whereas sites such as HomeAway rent out houses or rooms in houses. Still, Janes said, "We're squarely in vacation rentals, so obviously anything that is positive with that, we're watching intently." 

HomeAway's New Fee

HomeAway will introduce a traveler booking fee for all online bookings starting in the second quarter of 2016.

HomeAway CEO Brian Sharples told Skift that the company’s “traveler’s fee” would average around 6 percent of the booking but would be leveled on a sliding scale.

In turn, travelers would get access some under-development new products that would enhance their trust in HomeAway despite lots of fraud in the vacation-rental space, he said.

Though HomeAway’s consumer customers would face booking fees, hosts that have chosen to list on HomeAway sites for free and pay 10 percent commissions per booking would see those commissions lowered, Sharples said. In addition, vacation-rental hosts and managers that pay HomeAway subscription fees to list their properties would get incentives to entice them to make their vacation rentals online-bookable, he added.

About half of HomeAway’s listings are online bookable, and the goal is to get that figure to 90-100 percent by the end of 2016. Vacation rental owners who transact their rentals offline can get away without charging guests a booking fee, but HomeAway is threatening to drop properties that are not online-bookable by the end of next year.

Janes, of Vacatia, said Expedia will bring its customer base, marketing muscle and technology. "Half of HomeAway's business is not instant-booking. Expedia will change that immediately. This also will increase consumer acceptance of vacation rentals even more."

Airbnb charges guests booking fees of 6-12 percent and charges hosts a 3 percent commission.

Dustin Turner
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