The acquisition of Texas-based holiday rental firm HomeAway could save Expedia the effort of building a platform for second-hand holiday rentals from scratch.

Expedia CEO Dara Khosrowshahi says he has long had an eye on the booming alternative accommodation sector, "and [Expedia] have been building on our partnership with HomeAway, a global leader in vacation rentals, for two years.”

Airbnb London office
© Airbnb London Office

Khosrowshahi continued: “With our expertise in powering global transactional platforms and our industry-leading technology capabilities, we look forward to partnering with them to accelerate their shift from a classified marketplace to an online, transactional model.”

Although Khosrowshahi isn't mentioning Airbnb by name the two platforms are clear competitors, and the fight just got interesting.

So, what’s the difference?

In reality, not a great deal. Each company allows users to sign up their property to rent out to customers relatively quickly and easily using an online platform. This allows homeowners to make money from their property without having to jump through the sort of hoops involved with setting up an accommodation business.

The key difference comes in how each platform charges customers. HomeAway currently charges hosts an annual fee or a 10% per-booking fee. Airbnb makes most of its money from a 6-12% booking fee from guests, charging hosts a comparatively small 3% “service fee.”

However, HomeAway has announced that it will start charging guests midway through 2016 by adding a sliding scale booking fee, similar to that which Airbnb charge.

It will also be able to further benefit from the Expedia platform from now on. Its properties have been listed through Expedia since 2013, but expect these to gain greater exposure now that the company (and revenues) are in-house.

Airbnb has also expanded its offering for business travellers, whereas HomeAway is a marketplace for holiday homes and tends to be weak when it comes to urban apartment rentals.

According to businesstraveller.com the infant Airbnb for Business programme saw an additional 500 companies sign up within 24 hours of launching, including Google, SoundCloud and Twilio. Airbnb introduced measures that allow users to split their account for business and leisure trips, allowing for a simpler billing process when claiming expenses back.

The Airbnb for Business programme also lets the company subtly enter the events and conferencing market by allowing employees to: “Book a space that inspires you and your team to collaborate better, whether it’s for a day or an entire week.”

The Numbers

Despite being the older of the two companies, HomeAway lags behind in terms of listings, boasting one million in over 190 countries. This is just half of Airbnb’s two million listings in the same number of countries.

Airbnb is still a privately owned company so its financial results aren’t public, but according to the Wall Street Journal its recent valuation of up to $25.5 billion is based on some generous growth assumptions, especially as the company currently runs at an operating loss of around $150m a year.

The paper reported that despite its healthy growth, in order to meet the lofty valuation, “Airbnb would need to increase its share of the global lodging market from 1% to as much as 10% over the next five years.” Put in context, this valuation is six times the amount Expedia just paid for HomeAway.

Brand awareness can be more difficult to quantify, but in terms of social media presence Airbnb is the dominant of the two. It has 2.3 million Facebook likes to HomeAway’s 1.2 million and 433k followers on Twitter to HomeAway’s 40k (this is a combined figure between two verified US and UK accounts).

Controversy

Airbnb’s size has opened it up to negative exposure. Trust and safety have been thrust into the spotlight as Airbnb manages to skirt the rules and regulations traditional lodgings must comply with. For example, Airbnb only “encourages” hosts to install working smoke and Carbon Monoxide detectors in their listed properties. In an attempt to further encourage hosts it is giving away 25,000 monitors on a first come first served basis this year.

Major hotel chains are upset Airbnb doesn’t have to play by the same rules as they do when it comes to taxation and regulations, especially as the property-sharing platform continues to eat into their market share.

Local residents, particularly in New York, also have cause for concern, as Airbnb shifts housing inventory from the rental market to tourists, which bumps up the rental market price. However Airbnb does seem to be making an effort to pay its way in certain regions, or has been forced to by legislators.

HomeAway has generally steered clear of major controversies thus far, but has had trouble with consumer protection issues following cases of online fraudsters posting fake advertisements on its site. This highlights the inherent risk of a community-regulated marketplace, which allows the company to deny any culpability.

Who will win?

It’s difficult to say. It seems Airbnb has the advantage in the lucrative and burgeoning online-rental market, but it must deal with fast changing attitudes and new regulations if it is to grow profits and deal with the greater levels of attention.

Expedia’s clout should bring HomeAway closer to its rival, and if the online travel agent can bring some of its technological and e-commerce expertise to the HomeAway platform they should be able to overrtake the well-established rival, both in financial and reputational terms.

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