Commentary

Expedia Books HomeAway For $3.9 Billion; Will Take On Airbnb

HomeAway, the vacation-rental service eclipsed in headlines about the sharing economy by upstart Airbnb, became the latest acquisition of Bellevue. Wash.-based Expedia, the travel site spun off from Microsoft in 1999 that also has brands such as Orbitz, Travelocity, Hotels.com, CarRentals.com and Hotwire in its portfolio. 

“We have long had our eyes on the fast-growing, $100 billion alternative accommodations space and have been building on our partnership with HomeAway, a global leader in vacation rentals, for two years,” says Expedia CEO Dara Khosrowshahi in a statement announcing the deal. 

“Alternative accommodations, such as those provided by Airbnb, have become an increasingly popular travel option. Because of that, Expedia started a pilot program in 2014 that listed 115,000 HomeAway vacation properties,” Coral Garnick reports for the Seattle Times. “Khosrowshahi said bringing HomeAway into the Expedia family and adding its leading brands to the Expedia portfolio was ‘a logical next step.’”

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The $3.9 billion cash and stock deal has been approved by the boards of both companies and is expected to close in the first quarter of 2016 subject to regulatory approval.

HomeAway, which was founded in Austin, Tex., in 2005 by Brian Sharples and Carl Shepherd, will continue to run “relatively autonomously” from that city “although the companies will consolidate certain operations,” Dan Zehr reports in the Austin American-Statesman.

HomeAway boasts having more than one million paid listings in 190 countries. Besides HomeAway.com, its brand portfolio includes VRBO.com, VacationRentals.com and BedandBreakfast.com in the U.S., as well as several related sites in countries from New Zealand to Brazil to the U.K.

HomeAway also announced yesterday that it was “changing its business model to charge travelers a fee, based on a sliding scale. The company did not disclose details but said it was expected to add an average of 6% to most transactions,” Leslie Picker reports for the New York Times. “Traditionally, HomeAway generated revenue by charging property owners to list their rentals. HomeAway also plans to lower commission rates for these pay-per-booking customers.”

Reuters’ Breakingviews columnist Antony Currie says that “Expedia has found a back door into Airbnb’s home turf,” pointing out that the latter company “now sports a $25 billion valuation after its latest funding round and is expected to book 80 million nights worth of stays this year.” But “city rentals account for less than 7% of [HomeAway’s] business, and Expedia has only recently started adding inventory of its own.” 

In an interview with Reuters, Khosrowshahi said HomeAway “will become ‘more aggressive’ in marketing urban apartment shares that face off with Airbnb,” Jeffrey Dastin and Ankit Ajmera report. “‘We are going to help HomeAway accelerate in its transition from a listings model to a booking model,’ Khosrowshahi said, adding this will help it compete with Airbnb.”

They also write that S&P Capital IQ analyst Tuna Amobi “called the purchase ‘transformational,’ saying it lets Expedia ‘participate in the sharing economy, which might be the next frontier’ for leisure travel.”

Says HomeAway’s Sharples: “We’re in a brand game and a brand battle and we’ve got another competitor out there that’s been a poster child of the sharing economy and has been getting a lot of press,” Chelsey Dulaney and Drew FitzGerald report for the Wall Street Journal

The deal comes the day after Airbnb “won a significant victory in San Francisco, where voters shot down a measure that would put greater restrictions on those seeking to rent out rooms or entire properties,” point out Marco della Cava and Charisse Jones for USA Today. “Airbnb argued that its service helps homeowners stay in their residences by providing extra income through rentals, while opponents — who were outspent eight to one by Airbnb — countered that Airbnb rentals cut into already scarce housing options.”

The New York Times’ Conor Dougherty and Mike Isaac take a look this morning at how “companies like Airbnb and Uber — online platforms that allow strangers to pay one another for a room or a ride — have established footholds in thousands of communities well before local regulators have figured out how to deal with them.”

Hint: It doesn’t hurt to bring aboard savvy, politically connected strategists such as former Obama advisor David Plouffe (Uber) and Christopher Lehane, a co-author of Masters of Disaster who is known as one himself and is Airbnb’s head of global policy and public affairs. Lehane framed Proposition F — the referendum defeated on San Francisco Tuesday — “as a hotel industry-led attack on the middle class,” Dougherty and Isaac report.

Apparently, the vanishing middle class still votes.

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