By Bob Carden June 3 at 7:58 PM washingtonpost.com
HomeAway.com, the online vacation rental site, has riled customers with a change in practices that some say has made the getaways of their renters more expensive.
At issue is a new “service fee” that HomeAway imposed in February on renters who book through the company’s site. The move has infuriated property owners, some of whom pay HomeAway thousands of dollars each year to list on the site. They say HomeAway, which owns VRBO.com and VacationRentals.com, is using its market power to hit renters with excessive fees.
“I was blindsided by the fees,” says Ivan Arnold, a Los Angeles-based investor who lists five homes on VRBO.com. Arnold is the lead plaintiff is a class-action lawsuit filed against HomeAway in March, claiming fraud and breach of contract. Arnold claims the service fee has “had a devastating effect on inquiries and bookings. We already pay them to list; they shouldn’t go after our renters as well.”
Arnold paid $1,848 as a subscription fee to list one of his properties on the site for 12 months, according to court documents.
The booking fees came after a change in ownership late last year when travel giant Expedia bought HomeAway for $3.9 billion, a move that positioned the company to compete more aggressively with Airbnb, another short-term lodging website.
The new owner added the booking charge, levied on all renters of HomeAway sites. The fee is 5 to 9 percent of the rental cost and can add hundreds of dollars onto the price of a vacation rental. Some renters have balked.
By April, the backlash over the fees had hit HomeAway headquarters in Austin, Tex. Tom Hale, chief operating officer, left the company after slightly more than a year in the job. He had become the public face of change, and homeowners had focused their anger on him.
“We appreciate his contributions over the years,” a company spokesman said, declining to comment further on his departure.
HomeAway vigorously defends the fees and plans to use most of the money for marketing, says Jordan Hoefar, corporate communications manager for HomeAway. He adds that booking on HomeAway’s system is safe and secure and should give travelers peace of mind.
“Our book-with-confidence guarantee protects travelers against fraud, double bookings,” Hoefar says. “We guarantee the vacation experience.”
Controlling the process
Its critics say HomeAway is trying to limit owner-renter interaction in order to control the entire rental process.
“I have seen a dramatic drop-off in bookings,” says Larry Grossmann, a Missouri investor who owns four condos in Gulf Shores, Ala. “Renters are angry with the fees.”
In recent years, two basic revenue models for short-term rental companies have emerged. HomeAway’s rival, Airbnb, allows the homeowner to list a property for free. In exchange, Airbnb controls the booking process and does not permit the homeowner and prospective renter to communicate outside Airbnb until the payment is made. Airbnb takes a percentage of the rental (between 6 and 12 percent) and distributes the rental proceeds to the homeowner once the tenant checks in.
HomeAway’s model has always been the opposite. Homeowners pay a listing fee, and the service has been free to renters, who contact the owners directly. They then agree to a price and can either make the transaction among themselves or use HomeAway’s online booking service. This approach allowed homeowners and renters to get to know each other before committing to rent.
“We like to talk to the [prospective] tenants before we rent,” says Eric Karla, owner of a cabin at Sonora Pass near Yosemite, Calif. “We can vet them. We like to know who is going to be staying in our places. We cannot do that with Airbnb.”
Many homeowners said the original HomeAway model worked well. Homeowners could find tenants at a fraction of what property managers or Realtors charged, and they controlled the whole rental process. It was similar to a nicely designed classified ad site. You post your house, someone sees it, contacts you, rents the house. Clean, simple, profitable for all.
(Full disclosure: I list a property on VRBO and have always been happy with the results. I’ve yet to see a large drop in bookings, though this is not my rental season. I do not use HomeAway’s online payment system and am not a party to the lawsuit.)