November 5, 2015

Expedia buys HomeAway for $3.9 Billion – What does it mean for vacation rentals?

By this point you have no doubt heard the news. After years, yes years, of speculation, HomeAway has found a new home. And no, it was not Priceline, though that is what many in the industry predicted.

HomeAway will now be part of Expedia, but what does this mean for you?

There can only be two

I have said this before, and I will continue saying it, but HomeAway and others like it are not accommodation brands. Not in the sense that Hilton, Hyatt, or Marriott are at least. If you can book a castle on the same site you can book a $54/night shared cabin, how can that “brand” mean anything?

Rather, HomeAway and its ilk are online travel agencies (OTAs) that happen to focus on a specific area: vacation and short-term rentals. As such, finding a home at Expedia or Priceline did not only make sense, but it was inevitable. In the world of OTAs, there can only be two.

If there were any doubts of this before this year, Expedia’s acquisition of Travelocity, then Orbitz, and now HomeAway should put all doubts to rest. If you are in the OTA space, at some point you will work for Priceline or Expedia. It’s physics.

The sharing economy is THE hotness in travel

This has probably been obvious for a while, but this acquisition further cements this truism. Expedia just paid more than TWICE as much for HomeAway as it paid to acquire Travelocity and Orbitz combined. People will continue to use traditional travel options, and it will remain one of the largest industries in the world, but traditional travel will just not come close to seeing the growth that the new models created and provided by the sharing economy provide.

Given that, it is not surprising that growth hungry public companies sitting on piles of cash are feeling acquisitive. HomeAway may be first, but who is next?

There went your exit strategy

It seems that nearly every week a new vacation rental focused startup appears. And these companies for a while had a relatively easy path to fundraising – capturing over $500 million in funding in 2013 alone. How did they do it?

Well, as with any good pitch deck, there was always a slide on the company’s exit strategy. And the most named strategy? You guessed it: HomeAway. With 30+ acquisitions under its own belt, HomeAway was not only the natural home for many of these companies (see, e.g., Dwellable just last month), but it almost set a “floor” on valuations in the industry. Now the carpet has been pulled right out from under that floor, and the companies who built foundations upon it. Ooops.

The wild card

So what does all of this mean for Airbnb? Is it next in line? Does that mean Priceline will soon come knocking?

I doubt it. Airbnb’s $25+ Billion valuation makes me think they are priced out of the acquisition route at this point.

Will Airbnb instead break this OTA duopoly, and become the “Amazon of travel” as Del Ross proposed?

It is a great question, and one I do not feel qualified to answer. As the great sage Yogi Berra once said: “It’s tough to make predictions, especially about the future.”

Let us know what you think of the acquisition. How will this affect your business?

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