The Blog

Foregetaway – The Weather Channels (TWC) vacation rental marketing arm - recently announced a multi – year deal (no financial terms disclosed) making AirTran the official airline of ForGetaway.com.

The deal ensures that AirTran will have a featured link on every page of TWC’s listing service for the next seven years. This is an interesting deal, as it marks the first exclusive airline partnership in the vacation rental market.

AirTran operates scheduled airline service primarily in short-haul markets in the eastern U.S. Below is a snapshot of AirTran (ticker AAI on the far left) and its competitors, as determined by Yahoo finance. Illustrated below, AirTran is a smaller player compared to larger operators, such as JetBlue, Delta and SouthWest.

Despite its size, AirTran does offer service to several key vacation rental destinations, such as, Florida, Colorado, North Carolina, Massachusetts (Cape Cod) and South Carolina. Key markets AirTran does not currently service include Myrtle Beach (SC), Hawaii, the Caribbean and Europe.

The deal continues the exploration of new revenue categories that are emerging in the vacation rental marketing arena. FlipKey recently reported on HomeAway’s introduction of display advertising across its network of sites. TWC’s partnership with AirTran is the first dedicated airline partnership - a logical extension of its service, complimenting vacation rental interest with relevant content and offers. With the emergence of more sophisticated vacation rental properties we won’t be surprised to see similar deals announced in 2008.

What’s that? Oh, the phone is ringing… I wonder if it’s Delta! : )

Over the last year I have been “cold called” by three different new vacation rental listing services (that will remain nameless). Here is the basic run down of my conversations when fielding these calls.

Caller (clearly reading off a script): Hello, can I speak to the rental manager

Me: Speaking

Caller: I’m calling on behalf of (website name) and we would like to offer you an introductory rate of $99. Our website features all the latest internet technologies and is considerably cheaper compared to the current marketing services you are using.

Me: How did you get my number?

Caller: You are on my contact list

Me: How did I get on your contact list?

Caller: (silence)

Me: I think we are done here

Don’t get me wrong, a component of growing a new business is selling and you have to sell to somebody, but there are rules of engagement. The only service where I listed my number is a third party website. In other words, I am a small operator and therefore I don’t have my own website and only use third party sites like VRBO. The contact information I put on these sites is solely intended for the use of my prospective guests.

By calling me, these new companies are telling me, “I took your information from a competitive service and I’m now using it to get you to use our service”. First, this is a clear violation of the Terms of Service of the sites I use to market properties. Secondly, it annoys me because the caller simply pushes their service without taking the time to understand if I have any problems that need to be solved. “A nicer looking / cheaper VRBO” is not a helpful pitch – putting people into my homes at a higher nightly rates is.

HomeAway has created a bit of a buzz in the industry with their recent decision to start including banner advertisements on their Web properties (vrbo.com, vacationrentals.com, et al). The decision has left a sour taste in the mouth of many rent-by-owners, as evidenced in various online forums.

While it is widely accepted by most Internet consumers that advertisements are par for the course on “free” Web sites, there has always been a much larger debate about advertisements on “paid” sites.

Comment left by a HomeAway Subscriber:

“I guess it was inevitable. Banner ads have started appearing on all the HomeAway sites (including VRBO and Vacation Rentals. com). So far,I’ve encountered ads for Verizon, Apple, and Nationwide Insurance.

On the plus side, by giving HomeAway another revenue stream, it may help to forestall a price increase for those of us who list our properties on these sites. I just hope they keep the ads to a reasonable number. They are sure to be a distraction and will often lead prospective renters away from our vacation-rental listings and off to buy phones, computers, and other products.”

To date, HomeAway has slowly rolled out its display ads and has limited the displays to select pages. The only real risk to the introduction of display ads, as highlighted in the comment above, is the potential adverse effect on inquiry rates. I’m sure HomeAway will be keeping an eye on this – as will their subscribers.

In July we wrote about Rentors.org and its close relationship with HomeAway. Originally created to provide a universal calendar solution for the vacation rental market, Rentors.org is now fully owned and operated by HomeAway. HomeAway purchased Rentors.org many moons ago; however, the service continued operating under the Rentors.org brand until Dec ’07.

For the many users of Rentors.org you will now be redirected to homeawayconnect.com. Don’t be alarmed – all your information will still be there. The biggest difference is that Rentors.org is now more upfront about which listing sites they work with. In short, they work exclusively with HomeAway properties.

The image below is taken directly from the homepage of HomeAwayConnect.com.

The implications of using HomeAwayConnect (HAC) as your primary calendar system:

1. It allows you to centralize your calendars for up to 99 properties in one location. By updating your calendar on HAC your calendars will be automatically updated across all HomeAway properties you list on.
2. HAC only works with HomeAway properties. This means if you would like to import your calendar to another service HAC will not allow the calendar to be embedded on the site.
3. If you discontinue using HAC you will no longer have access to any information saved on the service.

HomeAway has an incentive to control calendar data, so we don’t blame them for their closed approach, but it’s not an optimal policy to promote more effective marketing in the vacation rental space.

Ideally the industry would have access to a central and open calendar system that allows managers to input availability once and allow it to appear on any site of their choosing. The iCal protocol has delivered tremendous value in allowing thousands of general calendar systems to share data. Will a similar solution present itself in ’08 for the vacation rental industry?

In September we posted an article highlighting The Weather Channel’s (TWC) expansion into the vacation rental industry. The article outlined TWC’s significant internet presence and its potential to act as a strong referral agent for the vacation rental market.

Similar to The Weather Channel, despite being substantially smaller, Rentals.com launched their secondary vacation rentals service in mid June. Rentals.com “where renters and landlords click” was originally created as a site for renters to find apartments and is attempting to enter the vacation rental market in hopes that people coming to rentals.com could also be looking for vacation rentals.

We wanted to get a sense of the progress made by TWC and Rentals.com. Using traffic estimates provided by Compete, Inc we analyzed the volume of traffic each service is generating and the percentage of their overall visitor base they are exposing to vacation rentals.

• TWC has successfully tripled the volume of visitors to its ForGetAway vacation rental service between Nov ’06-Nov ‘07
• Despite the growth of ForGetAway, only 0.60% of TWC’s overall site audience checked out a vacation rental in Nov ‘07

• Rentals.com vacation rental service is a fairly new service and has yet to attract a significant audience.
• However, Rentals.com does appear to have a more relevant audience compared to TWC. In November 2% of Rentals.com visitors visited its vacation rental service vs. only 0.6% of TWC audience during the same period.

Conclusion

TWC has made significant progress in building ForGetAway into a relevant property within the vacation rental market. Although ForGetAway’s traffic significantly lags the breadth of HomeAway owned properties (VRBO alone attracts over a million visitors per month), it is slowly emerging as a second tier service. If TWC can improve its ability to promote the service among its ~20M monthly visitors it could emerge as a strong marketing resource for the vacation rental market.

Rentals.com only attracts 500K visitors each month compared to TWC’s 20M. With only 2% of Rentals.com visitors checking out its vacation rental service its unclear whether vacation rentals will emerge as a strong offering by Rentals.com. There are few, if any, similarities in the underlying market dynamics between long term apartment rentals and vacation rentals. With that said, we would all have to agree it’s a great domain name.

Last month, Escapia, a long standing property management software company, launched its first consumer focused product – ClearStay.com. ClearStay is a consumer facing website that helps people find vacation rentals. At a glance, ClearStay is JALS (Just Another Listing Service), but it is unique in that it’s the first site dedicated solely to property managers. ClearStay will only list properties that use Escapia’s software and/or properties represented by property managers.

By not allowing RBOs (Rent By Owners) to participate on its site ClearStay is positioning itself as an advocate of property managers. The industry often finds itself at odds with RBOs, because RBOs disintermediate property management services and often don’t pay taxes (and therefore have pricing advantages).

From a consumer perspective ClearStay is positioning itself as a more trusted resource compared to open listing services like VRBO. In theory a consumer should feel more comfortable renting from a professional hospitality specialist compared to an independent owner. Concerns of fraud, guest support and overall process are diminished when the consumer knows someone is there to ensure they have a great trip.

ClearStay’s approach is compelling, but similar to all consumer offerings they are faced with some challenges:

- Marketing sites (e.g. listing services) are only as valuable as the traffic they attract. How will ClearStay attract traffic to its site given HomeAway’s SEO dominance and the SEO investment each property manager has made over the last several years?
- Consumers want security, but they also want choice. 33% of the market is represented by RBOs. When you exclude RBOs you exclude choices. Will consumers respond positively to the dichotomy ClearStay is promoting?
- From a supply perspective Escapia has the advantage of promoting its existing client properties; however, Instant Software and other market vendors represent the majority of vacation rental software solutions. Will Escapia be able to expand its inventory beyond its own consumer base?

ClearStay is a noteworthy addition to the FlipKey Blog radar. The ClearStay approach helps educate consumers on the advantages of property management and supplies additional promotion for our industry. In addition, offering a free marketing solution to its clients adds another quiver to the Escapia software value proposition. If ClearStay is able to establish consistent traffic they will introduce a new dynamic to the vacation rental marketing spectrum.

Speaking from experience, after renting vacation homes in Italy and Croatia last year, there is a small corner of your heart that sinks as you approach your foreign destination and you hope that your vacation home is actually there and the keys are accessible. But this is balanced by the diligence of your contact with the property manager or owner.

To address fraudulent property listings, several listing services have begun offering guarantees. PickPackGo was first to market with their ‘Security Blanket Guarantee.’ HomeAway took notice and followed last week with their own ‘Rent with Confidence Guarantee.’

The Security Blanket Guarantee offers “one night’s free stay at an alternative accommodation if you are unable to access the rental property you booked through PickPackGo in a timely manner and the property manager or owner is not available to provide an alternative accommodation.”

With HomeAway’s Rent with Confidence Guarantee, “[i]n the event that a listing is determined not to be legitimate in accordance with our policy, we’ll reimburse you for actual amounts paid by you to the owner (up to $5,000).” Under this policy “legitimate” covers two scenarios: (1) the rental property does not exist; and (2) you are intentionally denied access to the rental property for your vacation.

We applaud efforts in this industry to increase consumer confidence in the vacation rental booking process, however these guarantees send the wrong message to consumers. If you arrive and your vacation rental home does not exist, the damage is done. PickPackGo’s one night coverage isn’t going to salvage your trip and will only give you one day to think about how you’ll never rent a vacation home again. HomeAway may reimburse you, but you better have registered your trip with HomeAway prior to your trip, or else you are on your own. Most importantly, neither guarantee is going to be able to help you find an available room during a busy travel week.

By offering these guarantees, we are telling the consumer that their rental home ‘might not be there.’ If we are going to provide a guarantee to the consumer, let’s guarantee that their vacation home will be there. Let’s concentrate on introducing prospective travelers to legitimate and well-managed homes. Whatever we do as an industry, lets not promote the idea that people’s rental homes might not be there when they arrive.

The Weather Channel – www.weather.com – is a well known and popular internet destination. According to Compete, 16.7M people in the U.S. visited weather.com in August, ’07. During the winter months, weather.com tends to attract over 20M visitors.

After a decade of establishing itself as a top internet destination, weather.com is looking to expand its service beyond Mother Nature. In September, ’06 the Weather Channel launched its ‘ForGetAway’ service – a standard vacation rental listing service.

It’s a logical service expansion. People use the Weather Channel to research the weather conditions in desired vacation destinations – helping them find a unique accommodation is a useful ancillary service.

Announced on September 25th, the Weather Channel raised its ante in the space and acquired LakeRentals.com for an undisclosed amount.

Looking at ForGetAway, it has quickly grown into a moderately large vacation rental site, surpassing the 100K visitor barrier in May.

Beyond its affiliation with the Weather Channel, there isn’t any thing special about ForGetAway or LakeRentals.com. They provide standard listing service features and charge an annual advertising fee of $125/property. LakeRentals.com is a clean site, but only attracted 41K visitors in August according to Compete. In addition, visitors tend to be a lot less engaged on LakeRentals.com and ForGetAway compared to more established vacation rental sites.

We are excited to see a new, well financed, entrant to compete against HomeAway. We’ll keep our eye on the Weather Channel and announce any new findings we come across.

The vacation rental market is suddenly a hot bed for new listing start-ups. HomeAway’s acquisition warpath has people all over the globe thinking, “I can build a better VRBO, charge less and still make a lot of money.”

The good news is that owners and property managers have hundreds of listing options at their disposal. The bad news is that it’s getting more difficult to determine where your marketing dollars are best spent.

Example - GoHideAway.com

GoHideAway (GHA) provides near identical functionality compared to VRBO, VacationRentals.com and/or any other listing service. GHA’s value proposition is simple, “we’re cheaper”.

On the surface, GoHideAway (GHA) appears cheaper, but let’s consider some variables.

• VRBO is still the most dominant property in-terms of natural search placement
• In the last year I would estimate I have received 200 emails for my Boston condo through VRBO
• A search for “Boston” on GHA yields 27 results. The first property featured is a nice little home in Maggie Valley, North Carolina. It’s fair to assume GHA will struggle to attract guests to my specific condo
• Let’s assume I give GHA the benefit of the doubt and purchase a listing. To be generous I will assume they will purchase key words for my property and will generate 40 email inquires over the course of the year for my property

A quick cost-per-inquiry analysis indicates that even with these aggressive assumptions, GoHideAway is comparatively more expensive than VRBO and HomeAway. In fact, you could reduce the number of inquires I have received from VRBO by 66% and it would still be a more economical service.

We highlight this analysis not to pick on GoHideAway, but to suggest owners and managers analyze the relative cost of each inquiry they receive. You are only interested in two metrics.

Cost-Per-Inquiry (CPI) = Subscription Cost / Inquires (email and phone)
Booking-Per-Inquiry (BPI) = Total bookings (via listing service) / Inquires

The goal is to minimize CPI and maximize BPI. CPI is your true cost and BPI measures the quality of your leads. It’s simple, but will help you evaluate which marketing channels are the most effective.

The Internet has slowly challenged the traditional pay per listing (PPL) model. Craigslist has nearly killed newspaper classifieds, and local services such as Yelp and CitySearch have begun replacing that gigantic directory that is tucked away in most kitchen cabinets (aka. Yellow Pages). However, the PPL model remains pervasive in the online vacation rental industry. The most popular listing services, such as VRBO, CyberRentals and VacationHomes.com, employ an annual subscription fee to each home listed on their respective sites. It is of no surprise to see some alternative models beginning to emerge. But - if not PPL, then what is the best pricing model for this industry? Similar to their American kin pickpackgo.com, the newly launched rentability.com is testing the pay per inquiry model (or ‘enquiry’, as they call it across the pond).

For the most part Rentability sticks with a tried and true formula when it comes to helping guests find rentals. Their property listings are searchable on a number of criteria and they also provide a map-based solution for browsing by location. In terms of design, Rentability goes for the simple clean Web 2.0 look with a handful of nifty AJAX features thrown in along the way. Rentability’s inventory is currently limited, but I’m sure it will grow over time. The major differentiator between Rentability and Pickpackgo appears to be their primary areas of focus - Rentability’s inventory is nearly 90% in Europe while Pickpackgo is almost exclusively US-based.

Rentability is an interesting service and has earned a spot on FlipKey’s watch list.