According to market reports, the vacation rental market for the U.S. and Europe was worth $85 billion in 2010 and Travel Insured International estimates this market to grow at a rate of 13% this year. HomeAway claims to be the world’s largest online marketplace for vacation rentals. Recently, the company went public under the ticker symbol AWAY. Below is a brief overview of the company’s growth thus far.
HomeAway’s Financials
Texas-based HomeAway was founded in 2005. Today, comScore estimates its properties to have more than 9.5 million unique monthly visitors accessing its over 560,000 paid rental listings. The company earns revenue through annual fee charged to property owners wishing to list their property on the site. Membership to the site also enables access to some free and other paid software tools that help the property owner manage listings and reservations. Vacationers wishing to access the property listing site can do it free.
Their biggest online properties are VRBO.com and HomeAway.com. The base annual listing fee on these sites is $300 per listing and can be upgraded with premium features which include prominent listings, additional pictures at an extra charge.
Over the years, HomeAway has grown through acquisitions. Since its inception, the company has made 17 acquisitions, of which the most recent one was in 2010 and that of BedAndBreakfast.com which helped it to enter the B&B market.
HomeAway reported fiscal 2010 revenues of $167.9 million which grew 40% over the previous year’s revenues. Revenue from rental listings contributed 91% of the year’s revenues. Net income for the year of $16.9 million grew from $7.6 million a year ago.
For the recently ended second quarter, the company’s revenues grew 41% over the year to $58.7 million. However, net income of $2.2 million was significantly short of previous year’s $14.9 million which had benefited from a deferred tax asset valuation last year. Growth has been driven through an increase in listings and in the average listing fee. Listing revenue grew 34% to $51.0 million with paid listings growing from more than 525,180 listings last year to more than 626,660 this year. A quarter ago, they had 575,166 paid listings. Rising average revenue per listing has also helped drive revenue. During the quarter, average paid listing fee grew to $339 from $298 reported last year and $328 recorded the previous quarter. The listing renewal rate has also been on the rise. Second quarter renewal rate of 76.2% was higher than previous year’s 75.1% and previous quarter’s 76.1%. However, net income of $2.2 million fell significantly from the previous year’s $14.9 million.
For the current quarter, they are projecting revenue of $57 million to $58 million with adjusted EBITDA of $16 million to $17 million. They expect to end the year with revenue of $224 million to $226.0 million and adjusted EBITDA of $62 million to $63 million.
HomeAway’s International Expansion
HomeAway has focused on expanding their reach internationally. Last year, the company saw 62% revenues from the domestic market, while 37% revenues came from Europe and the remaining 1% from Latin America. The company operates 32 websites in 11 languages and has property listing spanning more than 99 countries. They recently expanded their presence in the Asia Pacific market through the acquisition of realholidays.com.au, an Australia-based vacation listings site. Realholidays.com.au came with more than 21,000 listings in the Australian market.
HomeAway’s Social Networking Focus
Additionally, HomeAway acquired social vacation rental site Second Porch. Oregon-based SecondPorch is a vacation rental site that lets homeowners and property managers list their vacation homes to travelers through their connections on Facebook. Through the acquisition, HomeAway will be able to integrate the social features across their network.
HomeAway’s stock is trading at $31.67 with a market capitalization of $1.25 billion. In June of this year, the stock was priced at $27 for its IPO.
AirBnB’s Financials
Another company trying to cash in on the vacation rental market is AirBnB. Founded in 2008 in San Francisco, AirBnB offers an opportunity for owners to let out spaces like a castle, houseboat, an apartment or even a tree house to vacationers. Unlike HomeAway, AirBnB earns revenues through a margin it charges both the property owner and the renter. The company charges the host 3% of the listing price each time the property is rented through the site and charges the vacationer a mark-up of 6% to 12% of the rental fee.
While, their financials have not yet been made public, Airbnb is estimated to be on track to make over $25 million revenue in 2011 on volumes of $500 million this year.
The company has an estimated 110,000 listings across 16,701 cities in 186 countries. To date, they have raised $120 million in funding from investors which include Y Combinator, Sequoia Capital, Youniversity Ventures, Greylock Partners, SV Angel, Ashton Kutcher, Andreessen Horowitz, General Catalyst Partners, Jeff Bezos, and Digital Sky Technologies. Their most recent $112 million funding round pegged its valuation at $1.3 billion.
AirBnB’s International Focus
Like HomeAway, AirBnB is also focusing on international growth. They are expanding in markets such as Germany, the U.K., France, and Brazil. These markets are seeing good traction as renters can not only rent homes here, but in some cases entire villages. A German wine village was available for rent through the site for $50,000 a night, and the entire country of Liechtenstein was available for rent at at cost of $70,000 a night. They are also seeing growth in China and Asia.
However, recently, the company received severe media criticism. Some property owners saw their properties destroyed, and in one case, their identities and valuables stolen when they rented their property through AirBnB. But the company says it is taking strong action and to prevent further damage, has initiated insurance schemes available to homeowners, and has introduced features like 24/7 phone support and security features that include a quick screening of renters and member verification procedures.
Analysts estimate that a mere 12% of the $85 billion vacation rentals market was booked online last year. Surely there is huge potential for growth for both HomeAway and AirBnB.