Investors often read only the earnings headlines, but a ton of useful information can usually be gleaned from the related conference calls. For those interested in the online travel industry, HomeAway (NASDAQ:AWAY) provided some useful information on last week's earnings call on the developing marketplace for vacation rentals. The sector is starting to cross over into the traditional online travel industry with a pilot test with Expedia (NASDAQ:EXPE), and the company is starting to face tough competition from TripAdvisor (NASDAQ:TRIP).
With the vacation rental market starting to be integrated with the more traditional vacation planning marketplaces, enormous opportunity presents itself to the company that can grab the most listings to become the dominant market leader. One way to grab the most listings is to generate more bookings per listing than competitors, and the Expedia deal promises to help in that area. Three numbers provided in the earnings call shouldn't be missed by investors.
Signing up Expedia
The initial test of 12,000 properties on Expedia will add a new source of customers for vacation rentals that typically focus on hotels for vacation plans. The pilot is expected to launch early next year with properties throughout the U.S. and Mexico. With a successful test, the service could eventually be launched to include all of the 775,000 properties on the HomeAway sites.
Expedia offers access to several leading travel websites, including Expedia.com, Hotels.com, and Hotwire. The typical customer for these online travel sites doesn't consider using vacation rentals. With Hotels.com offering sites in more than 60 countries, the potential exists to expand this partnership beyond North America. The average HomeAway subscriber only gets 10 bookings per year with an average booking of approximately $1,300. The company has plenty of runway for increasing bookings on existing listings.
Bought 8,000 New Zealand listings
HomeAway announced that it bought a 55% stake in Bookabach to add 8,000 listings in New Zealand and around the region. The key to this relatively small purchase is adding more exposure to a rapidly expanding Asia Pacific market. In addition to the Bookabach website focused on New Zealand, it also provides access to Bookastay that offers vacation rentals in Australia.
The interesting number is the vast 8,000 listings from a relatively small country. New Zealand ranks considerably smaller than most developed nations with only 4.4 million residents as of 2012. It isn't even 2% of the population of the U.S. that reached 313.9 million in 2012.
Drop in ASPs
HomeAway was very honest that average selling prices, or ASPs, will decline going forward. The company has several valid reasons, but declining revenues per user or listing is typically a negative sign to investors of competitive threats. The third quarter ASP was $390, a 15.7% increase over the $337 from last year.
One of the prime reasons listed for the expected declining ASP in the fourth quarter is a geographic expansion to places that have lower rates. While this would be a valid reason for lower ASPs and ultimately lead to higher revenues, the biggest concern is the growing presence of TripAdvisor in the vacation rental space that could push down listing fees.
In the recent quarterly call, TripAdivsor noted reaching 500,000 vacation rental listings. More importantly, the company is focused on the pay-for-bookings plan over subscriptions. Interestingly, HomeAway recently launched the concept to attract new listings that were likely moving over to TripAdvisors site FlipKey.com. While the move could be good for property owners and managers, it might lead to lower fees for HomeAway.
The vacation rental space appears to be under-monetized currently with HomeAway only completing 10 bookings a year per listing. Not to mention that the vast listings of a small rental service in New Zealand suggests a much larger global opportunity. The company has made an interesting push into more mainstream listings of vacation rentals via the pilot test with Expedia. Success of this partnership could help increase bookings per listing and eventually the ASP. It could also help hold off the growing competitive threat of TripAdvisor.
Mark Holder and Stone Fox Capital Advisors, LLC have no positions in any stocks mentioned. The Motley Fool recommends HomeAway and TripAdvisor. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.