The Blog

PickPackGo (PPG) is a new entrant to the vacation rental market. PPG went live this week pre-populated with thousands of vacation home listings. Before discussing the details of the service – How did they get all these listings?

How My Home Got Scooped up by PickPackGo

As of today, you can visit PPG and find my home listed for short-term vacation rentals and send me an email inquiry. I really don’t recall signing up for the PPG service, but here’s how they got me to register.

I am a paying subscriber of VRBO. When I’m away on business trips I often rent my two bedroom condo. A few months ago I received the following email from PPG:

The first email I received from PPG (5/29/07)

“See my Boston Property?” - you can imagine I was interested in what PPG was and why they apparently had a listing for my property - not to mention my email address. I clicked through to the site and found the exact details of my property on PPG (as you would find them on VRBO).

My property as it appears on PPG (5/29/07)


What I found particularly interesting was how PPG had replaced the VRBO watermark (see below) with the PPG logo:

My property as it appears on VRBO (6/27/07)

This was hilarious - how could I not register? For free, PPG featured my listing and promised to provide me guest inquiries in the future for a small fee.

This week I received my first inquiry from PPG. My co-founder Carl noticed PPG went live and jokingly sent me an email asking if he and his wife could rent my place and throw a kegger. I visited the site to see how my listing looked and noticed a few dramatic changes. Can you spot the difference?

My property as it now appears on PPG (6/27/07)

Did you figure it out? My photos are gone! My first thought was that VRBO was less than pleased that they had scraped their site and asked PPG to remove all listings that were acquired via VRBO, but then I noticed other listings featured a combined VRBO / PPG watermark. Are VRBO and PPG working together? Or is this a quality control oversight by PPG, failing to remove all VRBO watermarks?

Another Boston Listing Featuring Both VRBO and PPG Watermarks

The PPG logo covers up the “.com” on the VRBO watermark. It’s hard to imagine this was approved by a brand manager, but who knows - maybe PPG has partnered with VRBO.

What does this all mean?

First of all, it means there is a new listing service in town. PickPackGo appears to be introducing a Cost Per Action model. From my user account PPG explains that I will be asked to pay to respond to email inquiries someday. This model is interesting and is in sharp contrast to HomeAway’s annual subscription model. It’s hard to imagine they are working together, but crazier things have happened.

The other question that remains is, “How did they get my email address?” It’s easy enough to scrape content from standard formatted sites like VRBO, but emails are masked. I don’t recall signing up for PPG’s beta service, but maybe I did. If I didn’t sign up, then PPG likely sent me an email through VRBO to elicit an email contact to match my listing. And that’s a pretty interesting way to build inventory…

We have written about the fragmentation of the Vacation Rental market and HomeAway is the first entrant that is aggressively creating a mega-listing property. Although you may have never heard of HomeAway.com, you have probably heard of one, if not several of its portfolio sites – VRBO.com, CyberRentals.com, VacationRentals.com, TripHomes.com, and a handful of other properties.

Over the last 18 months HomeAway has been acquiring the largest vacation listing sites on the web. To illustrate HomeAway’s approach, we conducted various vacation home related searches on Google, identified 30 unique sites, and then measured the traffic using Compete.com. Notice that 7 of the top 11 sites, based on visitor traffic, are owned by HomeAway.

Consolidating these large listing services wasn’t cheap. HomeAway has raised over $200M in venture funding and continues to raise more, which begs the question – what’s their plan? World domination?

My guess is that good business is at the root of their plan. Here is my back-of-the-napkin logic:

• 600,000 people renting their homes in the U.S. Over 2M worldwide.
• Assume through acquisitions and general marketing HomeAway can build a portfolio of sites representing 300,000 properties (<15% of all vacation homes)
• HomeAway upgrades all listers to it’s $299 package, which provides listings across all of its core properties
• HomeAway yields annual revenues of $89.7MM
• The cost of hosting property listings is basically $0
• By tying in the properties to each other HomeAway can bolster natural search results (ie. free marketing)
• Because the properties are working with each other and not against each other, HomeAway can reduce competition for paid search terms – again, saving money

Net result = Increase average listing fees by 50% and decrease marketing costs.

Not a bad business plan, right? HomeAway’s size will make it defensible… and the economies of scale are obvious. With that said, there is a downside to the owner / property manager community that I will discuss in my next rambling.

A few weeks ago, I posed a few quick questions to a group of friends. The responses were telling. (feel free to play along at home):

Q: Where do you go when you want to book a flight?
A: Responses were plentiful and immediate - travelocity.com, kayak.com, orbitz.com, etc.

Q: Where do you go when you want to rent a car?
A: Responses were plentiful and immediate – budget.com, avis.com, travelocity.com, etc.

Q: Where do you go when you want to rent a vacation home?
A: A few seconds of silence… “Can you do that on expedia?”, “umm, craigslist I guess?”, “google?”

A Tale of Two Studies

Case Study #1: Finding a Flight

I need to go from Boston to DC for a business trip on Wednesday July 18^th. I want to fly out the evening of the 17^th, and return first thing in the morning on the 19^th.

I search on Orbitz and find this perfect flight:

I then search on Travelocity and find the exact same flight (for a $1 difference in price):

I could show you all the other travel sites, but I think you get the point. I’m going to find the same thing everywhere, so there isn’t much value in hopping around from site to site. Once I’ve picked my flight, I just click a few buttons, enter a bit of info, and my flight is confirmed. That was easy.

Travel sites aren’t fighting over inventory. They are fighting over features and usability. When that happens, the consumer wins.

Case Study #2: Finding a Vacation Home

Last year I set about to book a lakeside vacation home in Maine for a week in August.

I started at Google with a search for “Maine vacation home”, yielding results that were all over the place.

Now, I’m a picky shopper – I like to see and compare my options, read reviews on the product I’m about to purchase (rent), and generally feel like I got a good deal on something.

Take 1

I finally picked the “perfect” house and e-mailed the owner. The owner responded a few hours later saying “I’m sorry we are booked for that week.” Booked? But the calendar showed the property as open, both before I sent the e-mail and after I received the owner’s response.

Take 2

I found another nice property, and sent my second inquiry. Two days go by and no response. Who knows if my inquiry even made it to the recipient via the form I filled out. I resubmitted. Still nothing. I guess that’s a no.

Take 3

I find a third place that I didn’t like nearly as much as the first two, but I was tiring of the process. It’s available, the owner responds, great. I fill out the agreement and send them a check. Fast forward to my stay there – I’ll share the details another time, but suffice to say, I would not stay there again.

To recap, all I wanted to do was book a vacation home for some much needed R&R. Instead, I spent the better part of a week dealing with three different people amidst calendar and responsiveness issues, only to end up at a falsely advertised property.

Vacation Homes Need a GDS

Compare the two experiences. The airline industry is a well-oiled machine. The vacation home industry isn’t.

Most sectors of the travel booking industry have been commoditized. The reason for this is the airline industry, as well as most of the travel industry, is all interwoven via Global Distribution Systems (GDS). GDS’s (such as Sabre, Amadeus, et al) maintain large data stores of information about airline flight information, schedules, prices, reservations, etc. So when you search for a flight on Orbitz or Travelocity, what is happening is the site is tapping into one of the Big GDS systems, and you basically end up with the same search results at every site. I know in real-time what my best options are, how much they will cost, and whether the option is truly available or not.

The existing GDS system will not work for vacation homes due to the fragmentation of the marketplace, but the industry needs to begin pursuing a workable global integration system/solution. Currently, listing sites and industry software solutions all work in a bubble creating firewalls of inefficiency. The internet has liberated several verticals from self imposed growth limitation and it’s time we begin discussing the next generation of the vacation rental experience.

We have said this before and we will keep saying it “the vacation market is not a zero sum game”. There are tremendous opportunities for growth but we need to begin opening up solutions and working together to realize the marketplace’s potential.

I wanted to take this first post to talk about the Vacation Rental industry, the motivation behind FlipKey and future plans for our blog. To begin, I wanted to jump start the conversation with some interesting data points. According to National Association of Realtors:

• In 2005, 3.3M new and existing home sales were secondary homes.
• In the U.S., in total, there are an estimated 6.5M secondary homes (i.e. vacation homes).
• The average vacation home owner will only spend 39 nights in their secondary home each year. (That is not a typo)

The problem… Less than 10% of secondary home owners are actively renting their properties when unoccupied.

The graph below shows the volume of people that visit VRBO.com on a monthly basis compared to the number of units listed on VRBO.

VRBO represents one of, if not the, largest online vacation rental listing services. The discrepancy between interested travelers and available homes illustrates the immediate opportunity for people to begin sharing and monetizing their homes.

Call me crazy, but this appears to be a market gap that home owners should be celebrating.

Personally realizing the opportunity cost of not renting

A year ago I purchased my first home in downtown Boston. I love my place - a nice two bedroom right in the heart of the city. However, the condo came at a cost and my first mortgage bill was a bit of a reality check.

A few weeks after I purchased my home I had to leave town on an extended business trip. I sat on my patio and calculated that my condo cost was ~$100/day, which meant the opportunity cost of me being on the road for two weeks was nearly $1,500. $1,500!

My mind started wandering:

“What if I could rent my unit while I was gone?”

“I bet I could get $150/night and not only finance my mortgage, but also make some extra cash on the side.”

“Is anyone doing this?”

I went online and discovered hundreds of thousands of people were doing this… with their vacation homes. It made sense…

I thought my two week business trip was costing me money. The secondary home owners have a much larger opportunity – their places sit unused 46 weeks/year. I assumed there has to be someone out there helping people realize this opportunity.

The Vacation Rental Industry

As I suspected there where a lot of people trying to help people rent their homes. After a few hours of casual browsing I discovered the following:

• There are over 1,000 sites dedicated to helping people list their homes for short-term rentals
• The majority of sites are small sites owned and operated by vacation rental property managers
• There are about 10 large listing services that have tens of thousands of listings

So this appeared to be a mature industry, but as I peeled back the layers there seemed to be a major gap.

• At best, only 600K people are renting their vacation homes. This means vacation rental participation is under 10% in the U.S.
• The demand for vacation rental homes FAR exceeds the supply of actual units.
• The fragmentation of online listings presents a very difficult environment for guests to evaluate the reputation, availability, and details of vacation homes.

So the opportunity seemed clear, “let’s figure out a way to get more people to rent their homes and help guests find the right home.”

The FlipKey Blog

FlipKey is developing its core service and will launch publicly this coming Fall. In the interim, we would like to share our insights and opinions with the larger vacation rental community. The three founders of FlipKey are conducting a tremendous amount of research, coding into the wee hours of the night, and pondering the future of the vacation rental market. We do not believe in information firewalls, so we are excited to share our thoughts with the community. The vacation rental market is NOT a zero sum game. There is a lot of room for growth and we look forward to helping owners, property managers, guests, and industry vendors capitalize on the market opportunity.

We started FlipKey to help expand the vacation rental market by providing a platform to highlight professional reputation and trust. There are 6.5 million vacation homes in the U.S. and less than 10% are rented to travelers looking for a great place to stay. This means over 5 million secondary home-owners are foregoing the economic benefits of renting their homes when they are not occupying them. We are convinced there are simple solutions to help bridge this gap.

The FlipKey Blog is our first contribution to the rental community. The founders of FlipKey are passionate about the internet and how it can improve the home rental marketplace. We have industry-leading research, insightful observations and opinions we want to share.

The humble goals of the FlipKey Blog:

• Encourage more owners to rent their homes and more guests to rent vacation homes.
• Provide free access to premium research that has never been available to the vacation rental industry.
• Cultivate a sense of community and thought leadership among property managers, listing services and owners to expand the vacation rental marketplace.

FlipKey’s core service is still in development and will be launching this Fall. If you are a property manager, homeowner or are involved with the vacation rental industry and would like to be included in our service launch, please contact us at chartermember@flipkey.com.

Enjoy the Blog and we look forward to your thoughts and comments.