1 Reason to Still Believe in This Rule Breaker

Hotels bother me now.

It wasn't always this way. For years, my wife and I vacationed using hotel affinity points to pay for rooms for short vacations -- either alone or with our kids. What's changed? HomeAway (Nasdaq: AWAY  ) and competitors such as TripAdvisor's (Nasdaq: TRIP  ) FlipKey have made renting a vacation condo about as easy as booking a hotel room.

And that changes so much:

  • Space is no longer at a premium. A good condo will supply not only a full range of facilities for cooking but also ample room for lounging and sleep. By contrast, hotel rooms are necessarily cramped because of the need to maximize revenue per available room, or REVPAR.
  • Food savings add up fast. Each winter, all five of us head to Hawaii for an extended break from the snow as the New Year turns. Our first stop when we land: Costco. Annual rebate check in hand, we buy at least 10 days' worth of food at cut-rate prices. All pressure to "go out" melts away as we prepare simple meals on a nearby grill or in the kitchen. We also blend our own cocktails and squirrel away our own snacks for day trips. The result: We rarely spend more than $50 per day on food versus the $100 or more we'd spend in a more cramped beach resort.
  • You don't have to buy anything! While big hotel chains still pitch time-sharing as a sort of vacation nirvana -- Marriott International (NYSE: MAR  ) last year spun off its time-sharing operation into a distinct business -- it's been decades since condo hoppers had to also be owners. VRBO.com, a HomeAway property, has been serving listings since 1996 and to this day maintains one of the world's most respected names in vacation rentals. (Alexa ranks VRBO.com as the 733rd most popular site on the U.S. Web, versus 1,240th for HomeAway.com, 1,631st for AirBnB, and 4,337th for FlipKey.)

 What I learned on my Cancun vacation
HomeAway is easily the brand leader when it comes to vacation rentals, which makes the company's family of listing sites highly appealing to owners of rentable second homes or condo properties.

Vacationers aren't nearly as brand-interested or loyal. They're looking for the best deal, and AirBnB and FlipKey appear to deliver every bit as much value as HomeAway. Check out these figures for a potential spring-break trip to Cancun, Mexico, from where my wife and I just returned:

Property Attributes

Luxury Hotel Timeshare

HomeAway Top-Rated

FlipKey Top-Rated

AirBnB Top-Rated

Sleeps

4

10

6

5

Square Feet

740

2,150

2,000

1,403

Pool?

Yes

Yes

Yes

Yes

On the Beach?

Yes

Yes

Yes

No

Per-Night Rate

$319

$250

$429-$699

$91

Sources: Starwood, HomeAway, FlipKey, AirBnB.

No doubt there are deals to be had from every one of these suppliers, since they're competing for tourist dollars. What I like is that the vacation rental sites -- notably HomeAway and AirBnB -- quickly found high-rated properties that would be appropriate for any traveling family.

I'm not the only one who's noticed the change. According to HomeAway's latest rental marketplace data, roughly three-quarters of owners reported occupancy rates of 76% or more during the summer travel season versus 68% last year. Hotel occupancy also rose but more slowly: from 68% to 70%, the report said.

The data implies a gradual shift toward vacation renting and may help to explain why priceline.com (Nasdaq: PCLN  ) and newly public Kayak Software (Nasdaq: KYAK  ) are showing more vacation rentals in search results. Also of note: HomeAway is partnering with Priceline for airline and car reservations.

The real reason to believe in HomeAway
But again, what sets HomeAway apart is a series of newer services that make the site more like a traditional hotel portal. Immediate booking, for example: Reorganizing my Cancun search results found at least 11 properties whose owners accept online payments.

What's more, in an interview during last year's South by Southwest Interactive conference, CEO Brian Sharples said HomeAway is in the process of introducing a number of margin-boosting initiatives. Among the list: tiered pricing for owners willing to pay to see their properties rank higher in search results. For travelers, HomeAway is working on invoice-based insurance products for protecting against damage, fraudulent claims, and unforeseen circumstances that would force a trip to be cancelled.

Breaking bad rules
There are simply too many vacation rental options for our family of five to spend much time thinking about hotels anymore. HomeAway aggregates more of them than anyone else, in a package that gives property owners tools that used to be out of reach for all but the most technically savvy.

That's why I still believe in HomeAway, and why I think you should, too. Do you agree? Disagree? Leave us a comment in the space below. Or if you'd prefer to see how we think about these sorts of rebellions in the making, consider taking a 30-day trial subscription to Motley Fool Rule Breakers.

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Fool contributor Tim Beyers is a member of the Motley Fool Rule Breakers stock-picking team and the Motley Fool Supernova Odyssey I mission. He didn't own shares in any of the companies mentioned in this article at the time of publication. Check out Tim's Web home, portfolio holdings, and Foolish writings, or connect with him on Google+ or Twitter, where he goes by @milehighfool. You can also get his insights delivered directly to your RSS reader.

The Motley Fool owns shares of priceline.com. Motley Fool newsletter services have recommended buying shares of HomeAway, priceline.com, and TripAdvisor. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days. The Motley Fool has a disclosure policy.


Read/Post Comments (2) | Recommend This Article (1)

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Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On October 16, 2012, at 2:40 PM, scott1020 wrote:

    I disagree. I have been doing some research on the online travel industry and while Homeaway is the current global market leader for vacation rentals, I think that TripAdvisor has more listings in major metropolitan areas, a.k.a., higher tourist volume areas. For example, TripAdvisor has 1,925 listings in New York City and Homeaway has 1,644.

    I think TripAdvisor will compete aggressively in this space. Additionally, TripAdvisor has a more diversified business model. What happens when hotels begin to compare pricing and cut rates to compete? If a significant number of leisure travelers shift from hotels to vacation rentals, then hotel pricing will adjust. Staying in an apartment in Paris sounds nice, until a hotel or pension is cheaper.

    Overall, I like the vacation rental idea, I would just take my chances with TripAdvisor as they have more of an established business. I'll be tracking Homeaway to see how they do.

    Here's another site as well: http://www.itrip.net/destinations

    The vacation rental market will probably see more competitive entrants.

  • Report this Comment On November 25, 2013, at 12:26 PM, rosiew wrote:

    Timeshares are never a good investment. You can only use them for a certain time each year, and the upkeep payments on them are not worth it. When you go to sell them, you never get the price you paid. In the long run you'd be better off renting places in different locations each vacation. You aren't locked into one place that way:

    http://www.timesharescam.com/blog/58-is-timeshare-a-good-inv...

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