Tuesday, June 29, 2010

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.


MayFly said...

This segment of the market fascinates me; the one key aspect that I've never got my head around is how the stock is managed?

In many cases the same holiday rental property can be listed on numerous distribution platforms (let's say Stayz and an independant RE Agents site). I guess we could also include the owners and their family & friends as another legitimate source of occupancy that crops up from time to time.

My point here is; how does one offer this single piece of stock on 3 seperate sales channels in a live inventory environment? From my perspective (assuming none of the 3 sales channels mentioned above have any data interfaces), such properties can never be offered on a "live inventory" style system.

Based upon what I've read here, I figure these types of holiday rental are a significant part of the market, and the commissions from the sale of such, a fair chunk of revenue estimates. Yet they can only ever be sold on a "request" basis unless one site has exclusivity.

Apart from being an online brochure for the holiday lettings; can these sites ever meet the "confirmed at point of sale" expectations of the online consumer?

Tim Hughes said...

@MayFly - thanks for detailed comment. Appreciate it. The challenge of live vs non-live is the greatest challenge for this sector. The player that can build a fast and effective system for inventory management will be the winner

KJ-B said...

Good points MayFly. However you may not be taking account the fact that in Australia many holiday properties are managed by agents. YesBookit is the bookings management system of choice and is used by the leading holiday letting agents. As such it already manages well over 10,000 properties, each with true and accurate real time availability and all bookable online with certainty.

As the leading booking management system YesBookit also feeds properties and availability data to Rent-a-Home, TeakaBreak, TotalTravel and Stayz. This enable the consumer to search in those sites based on accurate availability, and make bookings directly into the agent’s YesBookit system.

Cheers KJ-B MD Midac/YesBookit