DALLAS – When Elizabeth and Robin Wood decided to rent out their new vacation home in Florida, they hired a local real estate agent to hunt for renters, but they also paid $300 to list the house on specialized Web sites.
The Woods agreed to pay the agent a 25 percent commission on any rentals they got, even ones that they found online.
“Every tenant came through my listings on the Web,” Elizabeth Wood says. “This summer we parted ways with the Realtor.”
Wood can’t fathom why anyone would list or rent a vacation home anywhere other than online.
Some investors are starting to think the same way, putting money into sites that offer searchable listings, lots of photographs and easy navigation.
One of the companies that Wood used, HomeAway Inc., announced last week that it has secured $160 million in venture capital and will pay an undisclosed sum for an older and leading provider of U.S. listings, VRBO.com, or Vacation Rentals By Owner.
Austin-based HomeAway is less than two years old, but has moved quickly to consolidate the infant industry. The company got started when officials at Austin Ventures teamed with the chief executive of another company they had backed to search for a new technology investment.
The executive, Brian Sharples, was on vacation with his family when he had a Eureka moment.
“We prefer to stay in homes instead of hotels, but it frustrated me that it took so much work to check out vacation rentals,” Sharples said. “I saw how the Internet worked for other forms of travel and thought, why not vacation rentals?”
When he got back to work, Sharples and a chief strategy officer studied the business and learned that there were already several Web sites featuring vacation rental homes, including VRBO. So instead of starting from scratch, they pitched Austin Ventures early last year on the idea of buying their way into the business. Since then, they have bought a half-dozen Web operators in the United States and Europe and combined them into HomeAway.
“We saw it as a business with a huge amount of untapped potential,” said Phil Siegel, a partner at Austin Ventures. “The companies we brought together were growing fast and they were very profitable.”
HomeAway charges $300 a year to list a home in the United States whether the property is rented out once or 20 times. There is no charge for using the site to rent a place.
It is among the most graphical of the vacation-rental sites. Potential renters can search by destination or throw in their choice of a couple dozen preferred property types or amenities to narrow the field. VRBO takes a few more clicks to see photos of a property.
Henry Harteveldt, a Forrester Research analyst, estimates that online travel overall will be a $74 billion business this year. He didn’t put a figure on the size of the vacation-rental end of it, but he predicted it’s ready to boom.
“Not everybody wants to check into a hotel every time they go away,” Harteveldt said. “We don’t want the same-old same-old, even if we go back to the same destination year after year.”
Vacation-home rentals compete with hotels, especially resorts that market to vacationers. For large families, a house can be cheaper to rent than several hotel rooms, and they come with kitchens, which allow vacationers to stretch their budget by preparing some of their own meals.
In the long run, the toughest competition to the online rental sites could come from larger, established travel Web sites that already sell airline tickets, hotel rooms, car rentals and cruises.
“The big challenge is will HomeAway emerge as the large brand, or will Expedia or Travelocity or the real estate companies try to get into this?” Harteveldt said. He said the venture-backed rental sites will have the marketing money to create a preference in consumers’ minds – but so will the big travel agencies.
Travelocity.com LP announced last month a partnership with LeisureLink Inc., putting it into the business of listing vacation condos and time-share units in the United States, Mexico and the Caribbean. Steve Reich, a Travelocity senior vice president, said the deal would raise the profile of vacation rental properties for consumers.
Expedia’s Hotels.com site began offering vacation condos in 2003 and is expanding to bread-and-breakfasts, villas and chalets. Jack Richards, a senior vice president with the Web site, said demand is strong for European properties.
Customers on Hotels.com, which works with real estate companies that manage many properties, can book a condo immediately. But on HomeAway, which deals with individual house owners, customers are directed to contact the property owner, and they must rely on the homeowner to present an honest appraisal of the property. Harteveldt called it the biggest obstacle to renting online.
However, that arrangement provides comfort to owners, who want to know who’s renting their house. It also is an argument for local real estate agents in resort towns, who often handle vacation rentals as part of their business.
“I guess if you’ve had a bad experience, having somebody on site who would notice a problem sooner would help,” said Wood, the Connecticut woman with a second home in Vero Beach, Fla. “So far, we haven’t had any nightmare guests.”
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