retail news in context, analysis with attitude

by Kevin Coupe

Interesting piece in Barron's about how "Expedia ’s recent purchase of vacation-rental company HomeAway has given it access to the same growing market as Airbnb," allowing it to compete better for customers that it was losing to a company that was disrupting the category. And in doing so, it is applying discipline to the HomeAway business model without wrecking the components that made it work in the first place.

Here's how Barron's explains it:

"Before Expedia bought the company for $3.9 billion, HomeAway charged homeowners a fee every year to list their properties, but that brought in too little revenue. In 2015, HomeAway had $15 billion in gross bookings (the total amount people spent to book rooms on its platform) but only $500 million of that came back to HomeAway in the form of revenue. Airbnb had $8 billion in gross bookings, but a reported $900 million in revenue, according to CLSA. So HomeAway got 3.3% of the value of its bookings, while Airbnb got 11.3%.

"Already Expedia has begun to change the way HomeAway, which has more than one million listings, makes money. To close its “take-away” gap with AirBNB, HomeAway now charges a booking fee to property owners and a renting fee for the traveler, just like Airbnb."

And "what’s more, Expedia plans to cross-sell HomeAway listings on its massive Expedia network. That makes it a threat to Airbnb, because vacationers who don’t care if they stay at a hotel or a home can now simply search one site."

It is a good example of how things change. Remember that a certain point, Expedia was the disruptor ... and then, because evolution is inevitable, it had to figure out a way to compete against players who saw opportunities where it did not.

This time, it was Expedia. it has happened to a wide variety of players. The next time it could be you.

It'll be an Eye-Opener.
KC's View: