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
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:
- 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
is between $1.5-2 billion a year and growing 15-30% (depending on the research firm); Australia
- 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
- The Holiday Rental sector: After this deal there are now four major players in
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. Australia
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
Top down – start with the size of the total market and work downwards
We started with the
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.
Bookings Generated For Listed Properties
At NoVacancy told us they were generating 160k bookings per year (assuming $1,000 per booking). In 2008 told us $100mm
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%.
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!)
Assume top 3 have 80% of the market
Total bottom up estimate
Combining the top down and bottom up approaches gives us an online short let/holiday rental market size in
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
A very smart move by the founders of both companies to merge, as it will streamline the work load for property owners and the combined traffic from merger will ensure that they remain relevant with property owners
News & Fairfax entered into a distribution deal for carsguide.com.au & drive.com.au so that dealerships will be able to have a single point of contact for both sites and their combined business would mean that they could remain relevant to advertisers who are used to spending disproportionally on Carsales.com.au
Good luck to both companies as its great to see independent businesses taking risks to get an edge.
@Craig - nice one - thanks
Post a Comment