Expedia buys HomeAway in sharing-economy move
Expedia buys HomeAway in sharing-economy move
05 NOVEMBER 2015 9:56 AM

Expedia announced the company’s second large acquisition of the year when officials said they are purchasing HomeAway for $3.9 billion.

REPORT FROM THE U.S.—Expedia CEO Dara Khosrowshahi said he saw how quickly the sharing economy was growing in lodging, and he knew the company needed to reach out and grab a piece of it. 
Executives did just that Wednesday with the $3.9-billion acquisition of vacation rental company HomeAway.
“We’ve been very clear that we think the next chapter of our growth is supply led. And we think HomeAway will accelerate that growth in the fastest-growing segment we see out there,” Khosrowshahi said.
“All of us have witnessed not just the incredible growth of the sharing economy but also the substantial growth of alternative lodging in particular,” Khosrowshahi said during a conference call with investors and analysts Wednesday afternoon. “Last year, according to Phocuswright, one in four U.S. travelers went to private accommodations for leisure travel.”
HomeAway already operates several vacation rental websites in the U.S. and abroad, including HomeAway.com, VRBO.com and VacationRentals.com. The company also has BedandBreakfast.com. Globally, the company has an estimated $14 billion to $16 billion in vacation rental bookings* for 2015 and 1.2 million whole-home rentals in 190 countries.
Khosrowshahi said the deal has still not closed but will be structured as a cash and stock deal with more than two-thirds of the $3.9 billion coming in the form of stock.
The move marks Expedia’s second large acquisition of 2015, after the company took control of rival Orbitz and seized control of 75% of the OTA market, with Priceline holding the majority of the balance.
Expedia and HomeAway already had a formalized relationship for the past two years after the companies formed a partnership allowing Expedia to list HomeAway properties. While that sort of cross pollination is expected to grow following the acquisition, Khosrowshahi said the newly acquired company will operate “relatively autonomously” and maintain its headquarters in Austin, Texas.
Listings appearing next to hotels 
The companies plan to cross pollinate offerings on each platform as HomeAway’s urban offerings grow, which would ultimately mean more alternative accommodations appearing next to traditional hotels in Expedia’s various platforms.
HomeAway CEO Brian Sharples said the company’s goal is to have a majority of bookings online by the end of 2016 en route to moving to a fully online platform.
HomeAway offers two kinds of key supply growth for Expedia: vacation rentals and whole-home rentals. Expedia plans to share existing inventory with HomeAway to help boost its presence in urban markets, and officials believe the size and clout of the larger organization will help HomeAway quickly gain more offerings of that kind. 
But Sharples said that doesn’t mean his company is being set up to compete in exactly the same way as some other sharing-economy businesses that focus on accommodations, such as Airbnb.
“You can think of this market split vacation versus urban and primary (homes) versus secondary,” Sharples said. “Most of what we do are secondary homes. … We’re not really in that homestay market today. I personally think we’ve got a huge opportunity with the business we’ve got.”
The acquisition is expected to be followed by a large marketing push for HomeAway, and the company projects an adjusted earnings before interest, taxes, depreciation and amortization of more than $350 million by 2018.
Brian McGill, an analyst with Janney Montgomery Scott, described that projection as “rather aggressive, given the competitive threat from Airbnb.”
The company also announced plans to introduce a “travelers service fee” in the second quarter of 2016 on online transactions in order to lower commission rates.
“We believe launching the service fee will be the best way forward in the marketplace,” Sharples said.

Correction, 6 November 2015: An earlier version of this story stated that HomeAway has an estimated 14 million to 16 million vacation rental bookings for 2015.

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