Expedia, Priceline Home In on Airbnb’s Turf

Courtesy of Harris Properties

Airbnb Inc.’s grip on the market for short-term home rentals is giving big travel portals like Expedia Inc. and Priceline Group Inc. a fast-growing challenge.

Expedia and Priceline have dominated hotel bookings for two decades. But with the vacation-rental industry rapidly expanding as a popular alternative to hotel stays, the online travel giants are betting big on the sector by boosting their inventory of home-rental options that can be booked similarly to a hotel, with just a few clicks.

The so-called private-accommodation market, which includes vacation rentals, homes or rooms rented out on a short-term basis, is about one-fifth the size of the hotel market based on revenue in the U.S., but it has been growing faster than hotels since 2015, according to data from travel industry-research group Phocuswright.

Revenue in the U.S. private accommodation market grew 11% last year from the year earlier, and is projected to grow 8% this year to more than $34 billion; the U.S. hotel industry grew 5% last year to $151 billion and is projected to do the same this year, according to the data.

As the vacation-rental sector has expanded, online intermediaries such as Airbnb, Priceline, Expedia and TripAdvisor have grabbed larger shares of the listings.

Airbnb remains the leader, particularly for rentals in urban locations, with an estimated 15% of global room nights in private accommodations last year, compared with 12% for Expedia and 9% for Priceline, according to Susquehanna International Group. But Priceline Group and Expedia are increasingly displaying vacation rental properties alongside hotel rooms on their sites. Executives said the goal is to provide travelers with the most comprehensive listings for any destination.

“We think vacation rentals are at the very early stages of being wired up on a global basis,” said Expedia Chief Executive Dara Khosrowshahi. “To the extent that you as an e-commerce player can wire up these fragmented marketplaces, you can add significant value to both the supplier and also to consumers.”

Expedia’s 2015 purchase of vacation rental site HomeAway Inc. has given the company about 1.4 million online bookable listings that it is beginning to roll out on sites such as Expedia.com and Hotels.com. HomeAway saw a 48% increase in online vacation rental bookings in the first quarter compared with a year earlier, to nearly $2.7 billion.

Priceline Group’s Booking.com has expanded its vacation rental inventory by 50% to 613,000 over the past year, according to its most recent filing. Booking.com, a dominant player in Europe, has seen its inventory of vacation rentals grow at more than twice the rate of other properties, including hotels, over the past year.

“For a very, very long time people have wanted to have this type of product,” said Priceline Group CEO Glenn Fogel. “It’s not so much that people have changed. I believe technology has enabled this type of rental property to be so much easier for people to find.”

An Airbnb spokesman distinguished the company’s platform from others, saying a vast majority of listings on the site can only be found there.

“Unlike the more conventional places to stay offered by others, Airbnb offers the unique accommodations and experiences travelers want,” said spokesman Nick Papas.

There are growing pains as the vacation-rental sector increases in size and sophistication. Perhaps most important, a home is a very different kind of asset than a hotel.

Hotels vary widely in amenities, but most customers know what to expect.

Homes, however, come in all shapes and sizes, making direct comparisons trickier. There’s no 24-hour front desk attendant on hand, and owners often have extensive lists of special instructions about properties.

As online travel sites seek to transform vacation rentals into a hotel-like commodity, owners increasingly are handing over control of their businesses in exchange for the online exposure.

Brian Harris of Harris Properties Management Inc., which manages about 90 vacation rental properties along the Alabama Gulf Coast, has listed on home rental site VRBO (now owned by HomeAway and Expedia) since the mid-2000s. The business model has shifted from a listings site, where property owners pay an annual fee to advertise, into a booking platform where travelers pay a fee to book on the site.

Mr. Harris said he feels distanced from his customers. Rather than listing a phone number to contact owners with questions before booking, HomeAway recently started directing them to a company call center.

The switch has presented challenges. Mr. Harris said a recent guest was trying to book a home near family in Gulf Shores, Ala., and was told by a customer service agent that the listing was close by. It turned out to be 20 miles away, and the customer was upset, Mr. Harris said.

“One of the main advantages we’ve got is this staff that’s knowledgeable about the properties,” he said. “This is more about VRBO and HomeAway keeping that guest in their pipeline and getting the guest fee, rather than what the guest wants.”

HomeAway President John Kim said the goal is to prevent fraud and give guests a consistent customer-service experience. “There’s a lot of consumers who get lost in the conversation” if emails are coming from a property manager they don’t recognize, he said. The company said the guest can still contact an owner directly after the property is booked.

Another challenge is the move toward home rentals that can be booked instantly, which bypasses the typical approval process between owner and guest. Booking.com’s vacation rental inventory is all instantly bookable. Airbnb has more than doubled its instantly bookable properties over the past year while HomeAway has grown them more than fourfold, according to lodging search website Alltherooms.com.

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