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Small-time landlords around the world are attempting to build small empires of vacation rental properties. Many of these people live quite far from the homes they manage – often outside the region or even the country – but they handle everything using simple smartphone apps. Many locals accuse these prospectors of exploitation. These prospectors are quicky to buy properties online, often without ever seeing them in person, and offering prices well beyond market value. This squeezes out local homebuyers, especially those looking to purchase their first home, so there is growing political opposition to this practice. It also poses a risky investment: when times are good, like they are now, people can generate small fortunes. But governments can set restrictions on nightly rentals to protect housing affordability (many throughout the world have done this). Likewise, natural disasters like wildfires or floods can wipe out all tourist interest for months, if not years. So long as the getting is good, there are companies like HomeAway that are ready to facilitate vacation rentals by owners.

A home away from home

HomeAway is based in Austin, Texas and operates an online vacation rental property marketplace that enables property owners to list their properties for rental to vacation travellers. As the company stresses, the vast majority of its userbase is comprised of regular homeowners, not prospectors. Although the company has gone through many acquisitions all over the world, it still sticks to its core values: people want more quality time with the people we love. Our focus is on the importance of connection and the joy that celebrating meaningful moments together brings. Since listing its first properties in 2005 as VRBO (which was subsequently acquired by HomeAway), the company has grown into a global brand with a selection of over 2 million homes all over the world. With its HQ in Austin, Texas, HomeAway has operated as a subsidiary of the Expedia Group since 2015. The company has over 1,000 employees, annual revenue of 446 million USD, 510 million USD in total funding, and a presence in over 190 countries. It is safe to say that they are a major player in a very crowded market.

An Evolving Business Model

Early on, HomeAway operated on subscription fees. These were typically under 500 USD annually, but property owners could purchase paid listings to get better placement and attract more potential visitors. As the company grew, however, their business model had to evolve with the ever-changing short-term rental market. From 2016 onward, HomeAway introduced a service fee for those booking the property, a fee that ranges form 6-12%. The more expensive the rental property, the lower the booking fee. Property owners dislike the fee because it makes a potential renter less likely to book. Renters dislike it because it makes the entire process more expensive. That said, the company had to institute the fee in order to offer better customer service, including 24/7 customer support and enhanced mobile and site features.

Although short-term rental platforms such as HomeAway have been around for over a decade, their effects on housing markets are not fully understood. A 2021 Carnegie Mellon University study found that short-term rental platforms have caused a larger reduction in affordable housing units than any other income level of rental housing. With rents and inflation currently outpacing wage gains, we expect HomeAway and its competitors to face uphill battle in the coming years. That said, with an annual revenue of 446 million USD, they are already very high up the mountain.