HomeAway optimistic of China market’s potential for vacation rentals
HomeAway is well positioned to capture a slice of the market through its partnership with China’s Tujia.com.
Tsang Shuk Wa reports
As Chinese travelers traveling with extended families are discovering the advantages of staying in vacation rentals instead of hotels or serviced apartments, leading global vacation rental portal HomeAway is well positioned to capture a slice of the market through its partnership with China’s Tujia.com.
In the partnership announced in May 2012, HomeAway takes a minority stake in Tujia and the two parties maintain a non-exclusive distribution agreement that enables HomeAway’s vacation rental properties outside of China to be listed for booking on Tujia.com.
The partnership gives HomeAway a foot in the door to China’s enormous outbound market.
“We are very excited about the potential in China, as nearly 40 million Chinese travelers vacationed overseas in the first half of 2012,” said John Weimer, HomeAway vice president.
“If we can grow the level of awareness and highlight the benefits of vacation rentals, we will continue to see a strong network affect as we've seen in the US and Europe, where our vacation rental listings attracts Chinese travelers, who in turn attract more owners and property managers to advertise with HomeAway.
He is confident the vacation rental concept is catching on among Chinese travelers. “While the concept of vacation rentals is new in China, we believe it will be readily adopted by travelers looking for more space at better prices for their families and friends when considering accommodation options for their vacation,” Mr Weimer said.
Typically, the Chinese travelers who go for vacation rentals are traveling with an average of five family members, usually grandparents, parents and a child, staying 5-6 nights in a villa in Southeast Asia, he revealed.
Since the distribution partnership was in place in December 2012, more than 2,500 HomeAway properties in Southeast Asia, the United States and Europe (out of its total 710,000 paid vacation rental listings as of end of 2012) have been translated into Chinese and listed on Tujia. The initial batch of properties was selected based on location, traveler reviews and other criteria.
Mr Weimer said they had seen “a steady growth in demand” for vacation rentals among Chinese travelers but declined to quantify the growth level. “It is still too early to comment on the pace of growth. Our focus right now is putting up quality translations and putting customer service processes in place to facilitate communication between Chinese travelers and HomeAway owners,” he said.
Tujia takes charge of the listing’s translation as well as customer service to the Chinese travelers, including communication between Chinese travelers and HomeAway owners. In return, Tujia receives a “small commission” on bookings.
HomeAway picked Tujia as its partner in China as its management team is well equipped to build the leading business in China focused on vacation rentals, said Mr Weimer.
Vacation rentals a global trend
Vacation rentals are fast becoming viable accommodation options globally as they enable travelers to experience a destination like a local and provide more privacy and comfort and access to other amenities such as kitchens, washer/dryers, private pools and pet-friendly options.
HomeAway’s performance reflects the growing potential of this segment. Its revenue was up 21.8 per cent year-on-year, totaled US$280 million, and paid listings were up 11 per cent to 710,000 in 2012. The number of paid vacation rental listings has grown further to the current level of 742,000.
Staking its claim as the market leader in vacation rentals, HomeAway does not foresee the emergence of any significant players challenging its niche in the US and Europe.
In Asia, where HomeAway looks to further establish its presence, the company has already established a couple of partnerships in the last year. “We have partnered with other Asian-based companies outside China such as WeGo, travelmob and Tripvillas to grow our inventory throughout Asia. We will continue to build partnerships both to increase our inventory and to grow awareness of the vacation rental category,” Mr Weimer said.
HomeAway property owners on average yield 18 weeks of rental per year of their second or holiday homes, earning US$26,000.
He said an “overwhelming majority” of HomeAway’s customers prefer to pay a subscription than a commission on rental in order to maximize their return on investment. The subscription-based model also offers the benefit of being highly predictable and consistent which Wall Street appreciates.
However, in order to cater to property managers and owners who are new to renting their homes and uncertain with paying an upfront fee, HomeAway is launching a pay per booking model later this year (2013). “We believe owners who use this model will eventually change to a subscription model in an effort to increase their return,” Mr Weimer said.
Having established a leading position in vacation rentals, HomeAway is not concerned with competition from other vacation rental websites or websites with a focus on primary rentals, such as Airbnb and Wimdu, which offer a different experience targeted at singles and couples for shorter stays.
“We do not believe any new significant players will emerge in the vacation rental industry in the US and Europe. However, websites with a focus on primary rentals may continue to emerge as this is a new market that is still less than five-years-old and is without an unquestioned leader,” he said.