I'm interested both as an investor and as a dad to a severely food-allergic son. Why? We need kitchen facilities when we travel as a family. Most hotel rooms don't offer full kitchens, and those that do charge presidential-suite-type rates to get access to these decked-out pads. I'd be stuck -- pay through the nose for more than we need, or figure out a staycation that won’t bore the kids. HomeAway relieves me of this unattractive choice.
Here's how I see the company sustaining a competitive advantage:
- Scale. As of March 31, HomeAway had more than 560,000 paid listings on its global portfolio of vacation-rental sites. More than 9.5 million monthly visitors browsed its listings last year, the company says in its S-1. My own tests showed multiple options in various parts of the globe, including a luxury condo nearby Fool HQ in Old Town Alexandria, Va. Scale of this magnitude draws in users, which in turns draws in advertisers and property owners. It's a virtuous cycle that fosters growth.
- Usability and connectedness. Using either text or map-based search tools, users can find rental properties just about anywhere in the world and, in some cases, can rent for just one night. Enabling simplicity in this manner -- and creating an attractive marketplace for owners -- has allowed HomeAway to grow revenue 39.6% and free cash flow 59.1% last year.
To be fair, condo and hotel operators have been offering time-sharing plans for about as long as I can remember. Hilton pitches us membership in its Grand Vacations Club at least once quarterly, while Marriott International
Yet as an industry, time-share spending has dropped almost 40% since 2008 -- from $9.7 billion to roughly $6 billion, USA Today reported in January. By contrast, HomeAway says that vacation rentals accounted for $85 billion in rental income in 2010 and could see significant growth as rentals become easier to find and book. I agree.
HomeAway is disrupting an industry that's already proved ripe for disruption. Call it a potential Rule Breaker at work, one that interests me a lot more than the flavor-of-the-month social-media stocks that have flooded the market in recent months.
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