Thursday - tweeting about Stayz, Fairfax, Occupancy and Vacation rentals in OZ

Tomorrow (Thursday 21 July) I will be at a press event for the Stayz Group (called a holiday rental summit). That is the collectioPublish Postn of companies that Fairfax (media coy) have put together that allow booking of vacation rentals, holiday homes and short lets. Will be tweeting from 830am-1030 or so (Australian eastern time) under the hastag #stayz

For background on the sector check out these posts. More on this interesting sector soon

• Fairfax buys Occupancy.com - owns online vacation rental market in Australia
• Australian Online Market for Short-Lets and Holiday Rentals: Interview with Occupancy.com joint-CEO Justin Butterworth Part 1
• Australian Online Market for Short-Lets and Holiday Rentals: Interview with Occupancy.com joint-CEO Justin Butterworth Part 2

Tnooz: HomeAway, Home and Away and the links between online travel and teen angst

HomeAway is the largest vacation rental site in the world. Home and Away is one of Australia's longest running soap operas and a launch pad for plastic surgeons, vampire hunters and psychotic clowns. What do they have in common? Check out my latest Tnooz post "HomeAway and the real life Home and Away soap opera" to find out.

BOOT will be at No Vacancy in Sydney March 23

The BOOT will be joining hundreds at the No Vacancy Conference in Sydney on March 23 (Dockside, Darling Harbour).

Speakers I am looking forward to include:

• Glenn Fogel of Priceline.com;
• Rachel Argaman of Toga;
• Simon McGrath of Accor APAC;
• Justin Butterworth of Occupancy and (separately) Kirsty Shaw of Stayz; and
• An OTA panel with Johan Svanstrom of Hotels.com, Robbie Cooke of Wotif and John Feenaghty of Quickbeds.com.

UPDATE - note after the Fairfax and Occupancy deal, Justin and Kirsty will be replaced David Anderson (MD Transaction Division of Fairfax Division)

Full list of speakers here.

Tickets still available here. 200 have already signed up to join (list of attendees as at March 7 here). Let me know if you are going to be there.

Fairfax buys Occupancy.com - owns online vacation rental market in Australia

News out this morning that vacation rental and short let group Occupancy.com has been bought by media company Fairfax. Occupancy will now be combined with Stayz.com to form the clear and unambiguous number one in the vacation rental/short let online market in Australia. According to the SMH the sale was for $29.1mm. The Australian says this is made up of $17.9mm in cash and $11.2mm in shares in the combined entity. The shareholders of Occupancy will retain 10% of the shares in the combined group. Does this mean the combined entity is valued at $112mm??? (will need to investigate).

Sites in the combined group will include Stayz, Rentahome and Takeabreak. Early news is that it will be combined with the NZ businesses for Fairfax holidayhomes.co.nz and Bookit.co.nz. Not sure what it means for Travelbug.

This is a big move.The Combined Stayz and Occupancy likely have 60-66% of the market for online vacation rental and short lets in Australia. With Yahoo7's TotalTravel second and Realholidays (subsidiary of Real Estate.com.au) a very distant third.

I will do more analysis later - hopefully including an interview with someone at Occupancy. For background:

• 1999 Rentahome launched by founder Justin Butterworth (now co-CEO of Occupancy - new role to be confirmed);
  
• 2001 Stayz launched by Chris Sharkey and others;
  
• 2003 Takeabreak founded by Paul Young and Craig Davis (now co-CEO of Occupancy - new role to be confirmed);
• Dec 2005 Fairfax bought Stayz for $12.7mm;
• 2006 Stayz attempts to expand the business by launching Hotelz. It did not succeed given the crowded market and Hotelz was dropped;
• Aug 2008 - Fairfax claim Stayz doing more than $100mm in year in transactions values . They value Stayz at $36mm;
• Jan 2010 Fairfax subsidiary Trademe buys online booking software provider Bookit. They have software that makes it easier for independent properties to get online;
  
• 2010 Rentahome and Takeabreak merge to become Occupancy.com;
• 2010 - the BOOT estimates the vacation rental/short let online market in Australia to $455mm per year; and
  
• March 2011 - Fairfax announces the merger of Occupancy and Stayz.com

Still to find out:

• Who will do what in the new company? Note Kirsty Shaw used to be the GM of Stayz. Now her Linkedin profile says Director Strategy and operations - Transactions Division at Fairfax Digital (though the linkedin dates say this change has been in place for more than a year);
• What will happen to each of the three brands?;
  
• Where does this fit with other travel assets like Travelbug in Nz; and
• Will the 10% ownership by founders of Occupany and the restructure at Fairfax itself mean anything in terms of the massive cross promotion that Stayz gets from Fairfax sites?
  

Australian Online Market for Short-Lets and Holiday Rentals: Interview with Occupancy.com joint-CEO Justin Butterworth Part 2

A deal merging two of Australia's online short let/holiday rental distribution companies to form Occupancy.com has prompted a series of posts here are the BOOT. In part 1 of this series I shared with you my discussions with Occupancy co-CEO Justin Butterworth (pictured) on the size and mechanics of the market. In this part 2 I will share my conversation with Butterworth on the merger deal itself and what’s next for the sector.

The deal

The deal to merge TakeABreak and rentahome.com.au, two of the four main players in the Australian holiday rental accommodation market, was hatched in Nov 2009 and signed in December. Butterworth is not talking how much but has admitted that the deal was all share deal (no capital raising). An assessment was made between the two companies as to relative size and grow rates to determine how much of the combined entity each would get (again not disclosed). Rentahome has maintained its office in Sydney's Moore Park and Butterworth's co-CEO Craig Davis will stay in the TakeABreak office in Canberra.

They have completely integrated the back end systems to allow for on inventory platform system to cover all 20,000 properties. The interest twist to their integration is that they have maintained the different login screens and supplier interfaces. Different inputs but one system. Butterworth told me that there was less than a 10% overlap between the two brands. The limited cross over was because Renathome had focused on the short let metro market whereas TakeABreak was focused more on regional and rural holiday accom.

SEO rankings drove the deal as much as inventory. Butterworth told me that SEO marketing is the “cornerstone of the business”. He told me that cross linking between the two brands is expected to drive a 30% uplift in SEO traffic for the combined group. Once the email lists are deduped he expects the combined group of subscribers to be greater than 400,000.

What’s next for the company and industry

This deal has not generated the press that it probably deserved. Though the bulk of the booking value and revenue remains with the properties, my calculations on the online short let/holiday rental market size show that Occupancy number 2 in terms of bookings generation in a battle that includes subsidiaries of Fairfax, News Corp and Yahoo7!. The specific challenge for Occupancy will be to achieve number one spot in the face of this competition.

For the whole of the online short let/holiday rental sector there are three general challenges:

1. Live vs non-live: Consumers are looking for instant confirmation when they book online. Occupancy is the online one of the majors that offers live inventory but only on a proportion of its properties (Butterworth is not saying what percentage). It is clear that this is a challenge for all the players;
2. Product certainty when no uniform standards: Star rating systems in the hotel sector are constantly open for criticism for bias and lack of uniformity. The position is much worse in the short-let/holiday rental sector. There is no uniform independent service that customers can go to for comparing the quality of different properties. Butterworth and Occupancy are trying to deal with this through their Rental Guarantee. This outlines the checks that they do on a property. It provides a validation on the details in the description matching the property but the industry is still missing an easy mechanism for property comparison (hence challenge 3); and
3. Building profiling and recommendation engines: you would have seen me write often on the future of online travel being around targeted and individuated recommendations (my EveryYou concept). This is particularly the case for a sector like this where there is such a variety of product is some many secondary rural and regional destinations. The challenge is to be build a combination of technology and human solutions to help guide people to the right properties and destinations.

That all said, the variety and uniqueness of the product offerings within the short-let/holiday rental sectors goes a long way to compensate for theses challenges and is the reason for the growth of a health intermediary market in Australia.

Australian Online Market for Short-Lets and Holiday Rentals: Interview with Occupancy.com joint-CEO Justin Butterworth Part 1

A war is brewing in the alternative accommodation sector in Australia. It is a war that generates a lot less press and pundit attention than the OTA and online hotel battles that consume so much of my time. But the battle for supremacy in online distribution of holiday homes, short term rentals and B&Bs is getting exciting. The latest salvo was the announcement that online corporate/short term rental specialist rentahome.com.au and holiday rental merchant TakeABreak merged to form Occupancy.com.

I had lunch recently with former rentahome.com.au boss and now Occupancy joint-CEO Justin Butterworth (pictured)to talk through the deal, the market and what's next for the online accommodation industry. In part 1 of this post I will share with you our discussions on the online market for short-let/holiday rentals in Australia. In part 2 we will look into the deal and what’s next.

The online short let/holiday rental market

It is a gross but reasonable generalisation that the online accom market is broken up into three sectors. Three sectors that overlap in sharing customers and suppliers but are distinct enough in their offering to be treated differently:

1. Mainstream Online Hotels Market: Led by Wotif but with HotelClub/Orbtizdisclosure), Expedia, Agoda/Bookings and Chain supplier direct sites making for a very competitive business. Online hotels market in Australia is between $1.5-2 billion a year and growing 15-30% (depending on the research firm);
2. The Holiday Park market (please don't call us trailer parks, you wont like us when we are angry): This market is dominated by supplier sites. Big4 is an example. Late to online we have heard claims of 25% of the business is online but no research on market size; and
3. The Holiday Rental sector: After this deal there are now four major players in Australia competing in a $500mm market (see below). The newly formed Occupancy group, the Fairfax owned Stayz . the Realestate.com.au (REA.AX) owned Realholidays.com.au and (at the listing level) the Yahoo7! owned TotalTravel.com.

The short let/holiday rental market is dramatically fragmented compared to the hotel market – goes without saying. Butterworth mentioned that a BIS Shrapnel report on the Holiday Home market in Australia which estimated 500,000 holiday home properties in Australia. Around 200,000 of those are available for regular short let. The rest being private holiday homes that are not regularly rented out.

Butterworth and I tried to figure out the size of online short let/holiday rental market. From our lunch time back of the envelope work we put the size of the Australia online holiday rental/short let market at between $450-500mm. This makes it a quarter to a third the size of the online hotel market. I have arrived at this number through combining two calculation methods – top down and bottom up.

Top down – start with the size of the total market and work downwards

We started with the 200,000 in available stock and assumed an average weekly rent of $1,000 and occupancy at 50%. This sets the full market size based on inventory story is $5.2 billion. Butterworth thought that around 10% of the market is online making a market for short let/holiday rentals of around $500 million.

Bottom up – start with the bookings generated/referred by the major players and work up

Here is what we know about the top players. I had to make a series of assumptions but I think the range is reasonable.

Player	Bookings Generated For Listed Properties	Source/Calculation
Stayz.com.au (Fairfax)	$160mm	At NoVacancy told us they were generating 160k bookings per year (assuming $1,000 per booking). In 2008 told us $100mm
Occupancy	$150mm	Occupancy joint-CEO told me they are generating $300mm in enquiries to properties per year but is not disclosing the percentage that are confirmed. Will assume 50%.
Realholidays.com.au (REA/News)	$45mm	Real holidays is 1% of REA’s AU revenue (pdf). AU revenue ~$150mm per year (pdf). Therefore Realholidays revenue $1.5m per year. If this was a hotel business, $1.5mm in revenue would mean $15mm in bookings generated. Sounds low so times 3. In 2009 claimed 359 paid subscribers and 22,304 listings (pdf)
Others including TotalTravel (Yahoo7!)	$90mm	Assume top 3 have 80% of the market
Total bottom up estimate	$455mm

Combining the top down and bottom up approaches gives us an online short let/holiday rental market size in Australia of $450-500. With the merger putting Occupancy.com’ estimated $150mm year putting them at #2 in the market to Stayz’s $160mm but not by much. Butterworth told me that Hitwise traffic data would put Stayz further ahead of Occupancy than my booking estimates would argue. He believes that Stayz has a lower conversion rates from enquiries. This would make sense as Stayz is likely to get much more unqualified traffic than Occupancy due to the referral of traffic from Fairfax Digital properties.

Much like online hotels, there are different models in the short let/holiday rental sector. The Stayz model is the listing model. Properties pay to be listed on the site. Occupancy.com operating on a booking fee model. Occupancy.com collects net rates and grosses up by the booking fee. Guests can process payment with Occupancy or pay the property direct (who remit booking fees to Occupancy.com). It is clear that the vast majority of the bookings are being paid offline with the property.

The market sizing proves that the online short let/holiday market in Australia is a substantive and growing market. The Occupancy merger puts a lot of pressure on Stayz as the combined volume has closed the gap to Stayz. But Fairfax, News Corp and Yahoo7! are tough competitors. I am looking forward to seeing how they respond. If the war wasn’t intense already, foreign players also have their eye on the market. US giant HomeAway (more on them here) have put up an Australian holding page at HomeAway.com.au – a clear indication of a push into the market. Expedia’s TripAdvisor have bought another holiday rental firm (Holiday Lettings) to add to Flipkey (already in their stable). No surprises. With a $500mm market to fight for, it is to be expected that many more companies will join Occupancy in this battle for short-let/holiday rental customers.

Over-heard at NoVacancy: tweets and chatter from No Vacancy hospitality conference 18 March 2010

Normally it is the end of the year that signals the conference season with TRAVELtech, WebInTravel and PhoCusWright following each other month by month starting in September (note - TRAVELtech is Aug 31 this year rather than usual Sept). But for the BOOT this year the season has started early with adtech, No Vacancy having just wrapped up and Eyefortravel TDS Asia coming up in Singapore on April 28 and 29.

Last week was my first year at No Vacancy. It is part of the same conference stable as Martin Kelly's SearchEngineRoom and TRAVELtech and is targeted at the hospitality industry - all channels - rather than being a purely online or technology conference. I (and others) tweeted our way through No Vacancy under the hashtag #novacancy. Not all of you are on twitter so here in this post are some of the top tweets and quotes I took away from No Vacancy. Here are the the most interesting tweets:

On the market general (Australian bias)

• 2009 hospitality market in Australia according to Dransfield."held up better than expected" "rates down 3%" "revpar down 8.2%". 2010 "good start, expect rate increases" but " lost 40% of capital globally" "another shock could come" They went on "Credit availability + bank conservatism means still shortage of capital" "has hit valuation "av hotel down 20% value"
• Travelclick" gds htl vol in 2009 46mm trans, to 2003 levels". Wonder how much corp bookg decline, how much OTA neg rate growth?

On Online Agents and Intermediaries

• Robbie Cook (Wotif CEO) said "60% of business is direct to site, then organic search, paid is a single digit % of the business". He went on to say that "Wotif saved $2.2mm in costs post travel.com.au business post acquisition."
• Yury Shar Hotelscombined said that "less than 10% of traffic comes from typing in URL direct" "59% of traffic affiliate. Paid 24%, rest organic search" Sam_Linder added in his tweet "@hotelscombined 2 mil visitors pm to 6 mil in last year. Affiliates is primary channel, 15,000 such as skyscanner in uk"
• Latest stats from stayz.com.au "22,400 properties, 270k newsletter subs, 160k bkings/ 650k nts in 2009 (+ 30%yoy)" also advertising revenue

On Hoteliers

• Starwood AsiaPac "2009 -2% in occupancy, -7% ADR for -9% RevPAR in Pacific" "online only channel to grow- branded faster than OTA"
• Starwood "2-3 years to get back to 2007 rate levels" to which robertkcole said "Sorry, Starwood's dreaming if they think it will only take 2-3 years for rates to return to 2007"
• Accor AsiaPac "Occ finished 2009 at 74%. Good but down from all time high in 2007" "price down 6%" revpar down 9%"
• Accor "Online up from 10% of sales in 2005 to 35% planned for 2010" "65% of online sales will be direct up from 50% in 2005"
• Accor "happy with 65% of online business being direct. Won't artificially cap 3rd party distribution or hold back inventory"

Other accom types

• 25-46% of bookings online at "freespirit" (a holiday park/caravan park company). If true for whole sector then parks online larger percentage than hotels

TRAVELtech: Stayz doing more than $100mm a year. Now valued at $36mm according to Fairfax

James Cassidy - the General Manager of Australian vacation rental listing site Stayz - put a rhetorical question to the Audience. Was it worth it for Fairfax Digital to buy Stayz.com.au?

Fairfax Digital Media bought Stayz back in 2005 for $12.7 million. Cassidy claims that if the same multiple at the time of acquisition were applied to current revenues then Stayz would now be worth $36mm. Here are some of the statistics he shared with us about the business:

• 2007 Transaction Value - $107mm (value off bookings generated for owner/listers);
• Grown from 9.000 properties to 23,000 properties; and
  
• site re-launch generated conversion improvements of 30-40%.

The other interesting comment was that Fairfax Digital had spent a lot of time building a network of links and cross referral points with other sites in the Fairfax Digital network (like newspaper Sydney Morning Herald and vertical classified sites like Domain.com.au). He admitted that this is not about traffic generation. In fact the traffic generation of from these links is very minimal. Instead the value was in the SEO consequences. The network of links from high traffic sites performing different but at least contextual activities is crtical to the SEO activities of Stayz. Cassidy is claiming 80% of the Stayz traffic comes from free/organic search. Supported dramatically by the link network effect of Fairfax Digital.

Assuming this is right it is an amazing story behind media group network effects. That internal banners and buttons and not what the network is about. Instead it is the html code driving links and search traffic. Sounds very close to some of the grey/blackish hat activities I have seen online from travel affiliate companies.

Book Review: 50 Great e-Businesses and the Minds Behind Them

Is turning into a bit of a book week here at the BOOT. Recently we had the launch of the Tips from the T-List book (download your copy here). Now I have (finally) found time to read and review a book sent to me some time ago called "50 Great e-Businesses and the Minds Behind Them" by Emily Ross and Angus Holland. Emily was kind enough to send me the book many months ago and I have been slow to get to it. But having read through it now I am very glad that I made the time and wish I had looked at it sooner.

The book aims is to provide start-up advice, management advice and tips on innovative thinking techniques through an analysis of the background and numbers behind top ecommerce companies and service providers. The challenge with attempts at writing profile books on online companies is that the stats and figures are out of date months before the book is published. Ross and Holland have managed this limitation very well by stressing the history and thinking behind each of the companies chosen rather than the numbers. This focuses your attention on the genuinely interesting stories behind successful companies and the entrepreneurial insight from key players rather than the temporal accuracy of the numbers.

For example in the entry on YouTube I was caught up in the story of the founders, fund raising and feature changes and therefore did not care that the intro lists the start-up costs as $3.5mm rather than the total amount raised by YouTube which was $11.5 ($3.5 first round, $8 in the second).

The second challenge in a book like this is to pick 50 companies. Holland and Ross also had to find a balance between Australian and International companies. That have met this challenge by using the word "Great" rather than "Best" to define the entrants. That lets them get away with some quirks such as including the small scale independent property service Stayz (that Fairfax bought for $12mm) on a list that includes super-heavy weights Google, eBay and Amazon and start-up A-list 2.0ers like Facebook, Digg and Twitter.

A number of travel players get a mention - Webjet, Stayz, Kayak (no Sidestep) and Wotif.

Book is well research, with Holland and Ross gaining access to inside knowledge on every company profiled. This made the story behind the companies profiled intriguing as well as being well written. You can get a copy here on Amazon "Available where all good books are sold".

Disclosure - was provided with a copy of the book at no charge but was not obliged to profile positively or at all.