What's your business model?


How does HomeAway make money?

And how does it compare with Airbnb?

Innovation series by Faith Merino
May 30, 2014 | Comments
Short URL: http://vator.tv/n/373d

Over Memorial Day weekend, I took a relaxing, restorative, regenerative vacation in Mendocino. It rocked my world. My husband was a sad Kanye, as he always is on vacations, but damn if it wasn’t the best vacation ever.

We stayed in a cute little cottage in the woods that I booked on HomeAway. Admittedly, I wasn’t happy with the actual booking process. The messaging system is pretty wonky and lots of messages exchanged between the owner and me were lost in the ether. I actually missed out on another rental because the owner never got my message asking to bill me via PayPal. Lots of owners don’t update their availability calendars, so you have to ask each one if the rental is available for a certain time period…it’s kind of a mess. But HomeAway has a lot more listings than Airbnb, so…

Which led me to wonder how HomeAway makes money. With 952,000 listings in 190 countries, the company generated $346.5 million in revenue in 2013, an increase of 23.6% from 2012. Net income for the year came in at $17.7 million, which is up from $15 million in 2012.

Since the company went public in 2011, its stock has fallen 20% to $30 from $38. It had actually reached a high in February of nearly $48, but increased spending on marketing led analysts to change their rating on HomeAway to overweight.

By comparison, Airbnb has some 600,000 listings and is rumored to have generated $250 million in revenue in 2013. Interestingly, the startup has a valuation of $10 billion, which is more than three times HomeAway’s market cap of $2.88 billion.

While Airbnb makes its money by charging guests a 6-12% fee and taking a 3% cut from hosts, HomeAway has never charged guests. Hosts front the whole of the costs by either paying a subscription fee or handing over a cut of each booking.

Subscription fees range from $349 a year to $999 a year, and different packages offer different perks, such as better rankings in search results. The subscription feature is great for hosts who have properties they want to rent out year-round.

Last fall, however, HomeAway acknowledged that not everyone wants to make that kind of commitment, so the company launched another option: pay per booking. Now, owners have the option of handing over a cut of each booking rather than subscribing for a full year. It’s a lot higher than Airbnb’s 3%, though. HomeAway charges owners a minimum of 10% per booking, and up to 20% for those who want HomeAway to manage the whole listing.

When HomeAway launched the new pay-per-booking option, the company estimated that there were some 13.5 million second homes or vacation homes throughout the U.S. and Europe that were not part of the vacation rental market.

The pay-per-booking option appears to be having a positive impact on HomeAway’s bottom line. Average revenue per listing in the fourth quarter rang in at $377, an 8% increase from $349 in Q4 2012. 


Related companies, investors and entrepreneurs

Description: Name of the company

Related news

blog comments powered by Disqus

Featured Stories

Other episodes of this series

How does Wikipedia make money?


What's your business model?

by Steven Loeb
Wikipedia gets most of its money through donations, but also sells goods on the Wikipedia store

How does SurveyMonkey make money?


What's your business model?

by Steven Loeb
SurveyMonkey uses a freemium model that it says helps to creates organic viral loop for the product

How does Twilio make money?


What's your business model?

by Steven Loeb
Twilio clients pre-pay for services like SMS messaging, phone numbers and minutes, then draw it down

How does Trulia make money?


What's your business model?

by Steven Loeb
Trulia makes most of its money from subscription products, along with some revenue from advertising

How does Spotify make money?


What's your business model?

by Steven Loeb
Spotify makes most of its money off a subscription service, but is in the red due to royalty payouts