By Chris Kirkham
Airbnb Inc.'s grip on the market for short-term home rentals is
giving big travel portals like Expedia Inc. and Priceline Group
Inc. a fast-growing challenge.
Expedia and Priceline have dominated hotel bookings for two
decades. But with the vacation-rental industry rapidly expanding as
a popular alternative to hotel stays, the online travel giants are
betting big on the sector by boosting their inventory of
home-rental options that can be booked similarly to a hotel, with
just a few clicks.
The so-called private-accommodation market, which includes
vacation rentals, homes or rooms rented out on a short-term basis,
is about one-fifth the size of the hotel market based on revenue in
the U.S., but it has been growing faster than hotels since 2015,
according to data from travel industry-research group Phocuswright.
Revenue in the U.S. private accommodation market grew 11% last year
from the year earlier, and is projected to grow 8% this year to
more than $34 billion; the U.S. hotel industry grew 5% last year to
$151 billion and is projected to do the same this year, according
to the data.
As the vacation-rental sector has expanded, online
intermediaries such as Airbnb, Priceline, Expedia and TripAdvisor
have grabbed larger shares of the listings.
Airbnb remains the leader, particularly for rentals in urban
locations, with an estimated 15% of global room nights in private
accommodations last year, compared with 12% for Expedia and 9% for
Priceline, according to Susquehanna International Group. But
Priceline Group and Expedia are increasingly displaying vacation
rental properties alongside hotel rooms on their sites. Executives
said the goal is to provide travelers with the most comprehensive
listings for any destination.
"We think vacation rentals are at the very early stages of being
wired up on a global basis," said Expedia Chief Executive Dara
Khosrowshahi. "To the extent that you as an e-commerce player can
wire up these fragmented marketplaces, you can add significant
value to both the supplier and also to consumers."
Expedia's 2015 purchase of vacation rental site HomeAway Inc.
has given the company about 1.4 million online bookable listings
that it is beginning to roll out on sites such as Expedia.com and
Hotels.com. HomeAway saw a 48% increase in online vacation rental
bookings in the first quarter compared with a year earlier, to
nearly $2.7 billion.
Priceline Group's Booking.com has expanded its vacation rental
inventory by 50% to 613,000 over the past year, according to its
most recent filing. Booking.com, a dominant player in Europe, has
seen its inventory of vacation rentals grow at more than twice the
rate of other properties, including hotels, over the past year.
"For a very, very long time people have wanted to have this type
of product," said Priceline Group CEO Glenn Fogel. "It's not so
much that people have changed. I believe technology has enabled
this type of rental property to be so much easier for people to
find."
An Airbnb spokesman distinguished the company's platform from
others, saying a vast majority of listings on the site can only be
found there.
"Unlike the more conventional places to stay offered by others,
Airbnb offers the unique accommodations and experiences travelers
want," said spokesman Nick Papas.
There are growing pains as the vacation-rental sector increases
in size and sophistication. Perhaps most important, a home is a
very different kind of asset than a hotel.
Hotels vary widely in amenities, but most customers know what to
expect.
Homes, however, come in all shapes and sizes, making direct
comparisons trickier. There's no 24-hour front desk attendant on
hand, and owners often have extensive lists of special instructions
about properties.
As online travel sites seek to transform vacation rentals into a
hotel-like commodity, owners increasingly are handing over control
of their businesses in exchange for the online exposure.
Brian Harris of Harris Properties Management Inc., which manages
about 90 vacation rental properties along the Alabama Gulf Coast,
has listed on home rental site VRBO (now owned by HomeAway and
Expedia) since the mid-2000s. The business model has shifted from a
listings site, where property owners pay an annual fee to
advertise, into a booking platform where travelers pay a fee to
book on the site.
Mr. Harris said he feels distanced from his customers. Rather
than listing a phone number to contact owners with questions before
booking, HomeAway recently started directing them to a company call
center.
The switch has presented challenges. Mr. Harris said a recent
guest was trying to book a home near family in Gulf Shores, Ala.,
and was told by a customer service agent that the listing was close
by. It turned out to be 20 miles away, and the customer was upset,
Mr. Harris said.
"One of the main advantages we've got is this staff that's
knowledgeable about the properties," he said. "This is more about
VRBO and HomeAway keeping that guest in their pipeline and getting
the guest fee, rather than what the guest wants."
HomeAway President John Kim said the goal is to prevent fraud
and give guests a consistent customer-service experience. "There's
a lot of consumers who get lost in the conversation" if emails are
coming from a property manager they don't recognize, he said. The
company said the guest can still contact an owner directly after
the property is booked.
Another challenge is the move toward home rentals that can be
booked instantly, which bypasses the typical approval process
between owner and guest. Booking.com's vacation rental inventory is
all instantly bookable. Airbnb has more than doubled its instantly
bookable properties over the past year while HomeAway has grown
them more than fourfold, according to lodging search website
Alltherooms.com.
Write to Chris Kirkham at chris.kirkham@wsj.com
(END) Dow Jones Newswires
July 24, 2017 05:44 ET (09:44 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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