This is old news, but good news that I hadn’t previously read until today. Maybe you missed it too? The vacation home market is still a good - big - bet!
Vacation Rental Site Raises $250 Million
HomeAway, the largest online vacation rental marketplace, announced Tuesday that it has raised $250 million in venture capital, an extraordinarily large amount of money for an Internet company. The new round, which is the biggest a tech company has raised since 2000, brings the four-year-old start-up’s total venture funding to $405 million.
The Web site connects vacation homeowners in the United States and Western Europe with travelers who want to rent their homes. It is the dominant vacation rental site thanks to its strategy of snapping up competitors. In four years, the company has made 10 acquisitions, including two similar Web sites in Britain, one in Germany, one in France and two in the United States: VRBO and VacationRentals.com.
The site, which charges $300 a year for a homeowner to list a property, has 325,000 paid listings and visitors have used it to book between 225,000 and 300,000 vacations each month, according to the company. The average homeowner earns $20,000 a year in rental income through the site, said Brian Sharples, its chief executive and founder.
The travel industry has been hit hard by the recession, as people shy away from spending money on discretionary expenditures like vacations. Visits to travel Web sites are down 3 percent from a year ago, according to comScore Media Metrix.
But Mr. Sharples insisted that people will be more likely to rent vacation homes, which are cheaper than hotels. He might be right: traffic to HomeAway is up 58 percent from last October and the average homeowner on the site has been getting more queries than a year ago. Still, travelers are much less likely to go somewhere to which they have to fly instead of drive, Mr. Sharples said. “Hawaii and the Caribbean are suffering at the expense of local markets,” he said. “People are still taking vacations, but a lot of people are taking them closer to home.”
The economic crisis has also left more people stuck with second homes they can’t afford and can’t sell. A few years ago, he said, the site was growing quickly because sales of vacation homes were booming. “Now it’s growing because all those people who bought those vacation homes are looking for ways to pay for them,” he said.
A handful of start-ups compete with HomeAway (though the company might just buy them, too — Mr. Sharples said he plans to spend some of the $250 million he raised on more acquisitions.) Big travel sites are also getting into the business. Orbitz has a vacation rental section, powered by Zonder, and TripAdvisor, owned by Expedia, has invested in FlipKey, a vacation home review site.
HomeAway, based in Austin, Tex., is profitable and will bring in just under $100 million in sales this year, Mr. Sharples said. In addition to acquisitions, it will spend its new money on marketing. So far, most customers have learned about the site from friends, but HomeAway has just hired its first chief marketing officer and advertising agency.
The new funds will help pay off HomeAway’s $88 million in debt and buy back shares from employees who would like some extra money, since it is unlikely the company could go public for a few more years, given the current state of the markets, Mr. Sharples said.
The fund-raising round is the largest a technology company has raised since November 2000, when MetroPCS, which went public in 2007, raised $350 million. HomeAway’s latest round was led by a new investor, Technology Crossover Ventures, which invested $175 million. Existing investors Institutional Venture Partners and Redpoint Ventures also participated in the round. HomeAway has raised money in the past from Trident Capital and Austin Ventures, which is the largest shareholder.
Early investors’ stakes were diluted by this huge new round, but Mr. Sharples said they made the decision that it was worth it because the company was valued at a very strong price. He did not say what that price was, but it was around $500 million in November 2006, when HomeAway raised its last big round of $160 million.
To make the investment worthwhile for the venture capitalists, HomeAway will have to eventually sell itself for a high price or raise a lot of money in the public markets. “Everybody believes that’s very doable,” Mr. Sharples said. The company has lots of room to grow, he said — there are between 3 million and 4 million homes for rent in the United States and Europe, and HomeAway lists only 325,000 of them. The vacation rental marketplace in the United States is valued at $24 billion, according to travel industry research firm PhoCusWright, and the market in Western Europe is about the same size, according to research firm Illuminas.
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