2008-12-01

Are OTAs brave enough to go for the holiday rental market?

Something has puzzled me for a week or so after the PhoCusWright conference in Los Angeles.

Maybe 'puzzled' is the wrong word: 'intrigued' is probably a better description when pondering how the UK travel industry will react when the growth potential of the holiday home market is realised.

Obviously Brian Sharples, CEO of US 'vacation rentals' giant HomeAway, was quite understandably talking a good game when he told me in Los Angeles about the size of the European market - an astonishing $25 billion, based on HomeAway's evaluation following a paid-for report by PhoCusWright into the US market.

A sizeable share of this bounty is still transacted privately through classified listings and affiliate sites.

HomeAway made what appears now to be a good decision in 2005 to buy Holiday-Rentals, the UK holiday home letting website and market leader. It also bought Owners-Direct.

The Austin, Texas-based outfit has recently found itself on the end a mammoth funding round of $250 million.

[As someone pointed out to me the other day, this investment was probably the biggest injection of private capital into an online travel firm since the equity rounds with the big tech firms in the US at the back end of 2006-early 2007]

So while so many on the 'traditional' wings of the travel industry, others are seeing huge growth opportunities.

Sharples admitted HomeAway, which until now has stuck to its owner-subscription business programme, could well follow the path of the start-up holiday home sites in the US, such as VacationRoost.

This would be a major decision to switch disciplines to an online travel agency model but it may well also be necessary.

One of the critical questions in all this is whether the existing European online travel firms will attempt to move in to capture growth opportunities which are now emerging.

The holiday rental market in the UK could be turned on its head if the likes of Expedia or lastminute.com or Thomas Cook and Thomson decide to actively target homeowners and offer them a new distribution channel.

The marketing muscle would be an obvious benefit to homeowners if any of these companies decided to have a serious go at the market and, some might argue, the hotel contracting teams operate in a similar way, meaning the recruitment of homes would be a smoother process (although the volume would be considerably different).

So, should the existing holiday rental sites be concerned about the - as yet unknown - intentions of OTAs and others with regards to this enormous, as yet untapped market?

Would moving into holiday rentals be a step too far or an inspired move for travel firms?

NB: Here is some interesting context about how unrealised the rentals market truly is. At the same event where the tips for targeting bloggers came up last week, the MD of the host agency - which is one of the biggest in the UK - was completely unaware of the size of the market.

"I better get myself one of those rental sites as a client, eh?" the boss said reasonably sheepishly.

This post was originally posted by Kevin May @ Travolution Blog.
> Read the original post here