How does HomeAway make money?

And how does it compare with Airbnb?

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.