Expedia, Priceline Move in on Airbnb

Summary

WSJ Your Money Briefing – Episode Summary

Episode Title: Expedia, Priceline Move in on Airbnb
Date: July 24, 2017
Host: Charlie Turner
Guest: Chris Kirkham, Wall Street Journal Reporter

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Overview

This episode of WSJ Your Money Briefing examines the evolving landscape of the short-term home rental market, focusing on how online travel giants Expedia and Priceline are expanding their private accommodation inventories to compete with industry leader Airbnb. The discussion covers the transformation of home rentals from an informal, owner-driven market to a streamlined, mainstream, and increasingly commoditized business, as well as the strategies, challenges, and competition among these key players.

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Key Discussion Points & Insights

1. The Rise of the Private Accommodation Market

• Industry Exploding: The market for short-term home rentals has grown rapidly, surpassing the growth rate of traditional hotels since 2015.
• Commoditization: Companies like Expedia and Priceline are working to make home rentals as instantly bookable and frictionless as hotel bookings.
  • Chris Kirkham (01:13):
    "I think what they're really trying to do is bring this kind of industry basically into the mainstream and get it in front basically anyone who's searching on the web for a place to stay when they're traveling."

2. Evolution from Informal to Mainstream (01:13 – 04:20)

• Historic Model: Renting out homes was traditionally informal, with more direct, personal connections between owners and renters.
  • Owners often wanted to vet guests—a difference from hotels’ impersonal process.
  • Owners may desire to know if the guests are “a family of four or…a bachelor party that's going to rent their house out and trash it.” (Chris Kirkham, 03:34)
• Shift to Instant Booking: Online platforms aim to streamline the process, making these private accommodations instantly bookable, which creates new challenges for owners reluctant to forgo screening guests.

3. Competitive Moves by Expedia and Priceline (04:20 – 06:30)

• Expedia’s Strategy:

  • Acquired HomeAway in 2015 (which had previously acquired VRBO).
  • Shifted from a paid listing/ad model to a booking platform model.
    • "Expedia, in 2015, they purchased HomeAway...It was sort of a model, historically, where people listed their homes and the owners paid a fee. So it's sort of like, almost like a paid Craigslist." (Chris Kirkham, 04:37)
  • Now boasts about 1.4 million bookable properties.
  • Retains some owner-guest interaction before booking for certain listings.

• Priceline/Booking.com’s Strategy:

  • Booking.com (Priceline’s main portal for vacation rentals) is especially popular in Europe and growing in the U.S.
  • All new vacation rentals on Booking.com are required to be instantly bookable, with no owner pre-screening.
    • "Booking.com...their policy is all instant book." (Chris Kirkham, 06:19)

4. Airbnb’s Position and Response (06:31 – 07:17)

• Market Leadership: Still the dominant platform for private accommodations.
• Increasing Instant Book Options: To stay competitive, Airbnb has added more instant booking properties.
• Loyalty Among Hosts:
  • Airbnb claims its hosts tend to be loyal and primarily list only on Airbnb rather than across multiple platforms.
    • "Most of the people who list on their site don't list on any of these other sites, but...they're loyal to Airbnb." (Chris Kirkham, 06:53)
  • The durability of this loyalty as competition heats up remains to be seen.

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Notable Quotes & Memorable Moments

• On the industry’s transformation:
  “It's definitely a fast-growing segment of travel and...as it's growing, you're really starting to see it sort of evolve from more of just sort of a mom and pop... to being kind of a commodity like a hotel, where you can instantly book it.”
  — Chris Kirkham (02:24-02:43)

• On owner hesitation:
  “A lot of owners are sort of resistant to the idea that...they would sort of book their property sight unseen to someone that they don't know and maybe they don't have control over their actions.”
  — Chris Kirkham (03:46)

• On Booking.com’s instant booking:
  “The interesting thing about Priceline is they require that all of the new vacation rentals that are added to booking.com be instantly bookable.”
  — Chris Kirkham (06:14)

• On Airbnb Host Loyalty:
  “Most of the people who list on their site don’t list on any of these other sites…but they’re loyal to Airbnb.”
  — Chris Kirkham (06:53)

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Key Timestamps

• 00:39 – 01:13
  Introduction to the episode topic and guest.
• 01:13 – 02:24
  The evolution of the home rental industry; efforts to mainstream and digitize.
• 02:24 – 04:20
  Comparing growth rates; the push for instant bookings; challenges for property owners.
• 04:20 – 06:30
  Specific strategies of Expedia (HomeAway) and Priceline (Booking.com).
• 06:30 – 07:17
  Airbnb’s dominant position and strategy moving forward.

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Tone and Style

The conversation is straightforward, analytical, and informative. Both host and guest use clear, accessible language to break down business strategies and market shifts, with Chris Kirkham providing nuanced insights into industry challenges and competitive dynamics. The episode avoids jargon, making it easy for listeners to follow market trends and implications for travelers and property owners alike.

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This summary delivers a comprehensive view of the competition heating up in the short-term rental industry, offering listeners valuable context on how major online travel platforms are vying for dominance and how their strategies may change the experience for both travelers and property owners.

Transcript

[Chris Kirkham]

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[Charlie Turner]

Welcome to your Money Matters. I'm Charlie Turner in New York. Airbnb has seen its business for short term home rentals explode and a couple of online travel giants want a piece of the action. Okay, a big piece. Expedia and Priceline are the kings when it comes to online hotel bookings. But now the two companies are boosting their inventory of home rental options that can be booked similarly to a hot with just a few clicks. Joining us from Los Angeles is Wall Street Journal reporter Chris Kirkham. Chris, Priceline and Expedia want a piece of what's called the private accommodation market, isn't that right?

[Chris Kirkham]

That's right. This is sort of an industry that if you think about it, has really always existed. People have always rented out their homes or second homes kind of on an ad hoc basis. But I think what they're really trying to do is bring this kind of industry basically into the mainstream and get it in front basically anyone who's searching on the web for a place to stay when they're traveling. And so I think the idea is sort of the evolution of this home rental industry and sort of ways to wire it up and get sort of the booking ability just make it easier for customers to book these properties online. Right. And so that, that's sort of basically what they're trying to do. And I think it's an interesting transition because I think you have a lot different opinions from people who own these properties on sort of the pluses and minuses of being on sites like Airbnb or Expedia or booking.com, which is Pricelines property or Priceline site that tends to focus on these rentals.

[Charlie Turner]

This private accommodation market, it's growing a lot faster than the hotel industry, isn't

[Chris Kirkham]

it, at this point? It is, yeah. It has been growing since 2015 at a faster rate than the hotel industry. And the hotel industry in terms of revenue has been doing very well too. So, yeah, it's definitely a sort of fast growing segment of travel and So I think as it's growing, you're really starting to see it sort of evolve from more of just sort of a mom and pop. Maybe you found their listing online and you called them to see if you could book in this case. Now, I think one of the big things these online travel companies like Expedia and Priceline are trying to do are basically make these properties so that they're essentially instantly bookable, which is sort of the big difference. For a long time in this vacation rental industry. And hotels, you know, hotels for a long time, you've been able to essentially find the hotel, select the room you want, you check, you see the rate, and then you book it and then that's it. You pay for it then. Or maybe you pay a deposit and then pay for it later. With these home rental market, historically, it's always sort of been a little more informal, a little more, you know, personal, frankly. I mean, the owners may want to talk to the people who are, who are staying there, get a sense of, you know, this is a family of four or is this a bachelor party that's, that's going to rent their house out and trash it. That has sort of always been a characteristic of this home rental market. And I think now as, as there's this push to move more of these properties into being kind of a commodity like a hotel, where you can instantly book it. You know, I mean, it creates some challenges because I think a lot of owners are sort of resistant to the idea that, you know, that they would sort of book their property sight unseen to someone that they don't know and maybe they don't have control over their actions. So it's an interesting, interesting time to be an owner of one of these properties.

[Charlie Turner]

I'm speaking with Chris Kirkham of the Wall Street Journal and you're listening to youo Money Matters. Thanks for listening, everyone. Chris, Airbnb is still the leader in private accommodations. What exactly are Expedia and Priceline doing to try and, and cut into Airbnb's piece of the pie?

[Chris Kirkham]

Expedia, in 2015, they purchased HomeAway, which was a company that had sort of evolved in a similar way to Airbnb, but it was less of a booking platform. It was more kind of an advertising platform for vacation properties or second homes. VRBO, which a lot of people have heard of, HomeAway had purchased them prior to Expedia's acquisition of HomeAway. It was sort of a model, historically, where people listed their homes and the owners paid a fee. So it's sort of like, almost like a paid Craigslist. And then the biggest transition has been these sites are now moving more to becoming a booking platform as opposed to a listing platform. So instead of the owner pays to list their property on the site and leave their phone number and then people can call them directly instead. Most of the transactions are now happening through HomeAway. So Expedia purchase HomeAway, which gave them a big inventory of. I think they've got about 1.4 million online bookable properties now. And then booking.com, which is Priceline's sort of main portal, I guess, for these vacation rentals. They also have hotels and tons of other kinds of properties as well. But booking.com is very popular in Europe, becoming more popular in the U.S. and this is sort of their main vacation rental platform. And the interesting thing about Priceline is they require that all of the new vacation rentals that are added to booking.com be instantly bookable. So Expedia, some of the HomeAway properties still require a little bit of a back and forth with guests and owners, whereas booking.com their policy is all instant book.

[Charlie Turner]

Is Airbnb worried?

[Chris Kirkham]

Airbnb, I think, I think they are feeling pretty confident right now. I mean, they have a lot of listings and they've also increased their instant book listings as well. I think one thing that Airbnb often notes is that they feel like they're grabbing a part of the market that is really their own. They tend to argue that most of the people who list on their site don't list on any of these other sites, but it's that it's just sort of they're loyal to Airbnb. So, you know, that'll be really interesting to watch kind of as this continues to develop to see if there is a certain degree of loyalty to any one of these sites or if people are, you know, listing sort of on all of them. Just get in front of as many eyeballs as possible.

[Charlie Turner]

Wall Street Journal reporter Chris Kirkham, thank you very much for joining us.

[Chris Kirkham]

Thank you.

[Charlie Turner]

And that's yous Money Matters. I'm Charlie Turner at the Wall Street Journal.

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