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Homeowners Susan and Bob Frank with their vacation rental property.
Homeowners Susan and Bob Frank with their vacation rental property in North Topsail, N.C.

In 2005, Susan and Bob Frank built their dream retirement home in North Topsail, N.C., a popular vacation spot known for its soft sand beaches. They planned to rent out the house, affectionately called the Flip Flop Inn, until they were ready to leave their home in Raleigh, N.C., and retire.

Initially unsatisfied with a rental company, they began listing and marketing their home on VRBO (Vacation Rentals By Owner). Susan Frank signed up for a Gold subscription with VRBO, which, at the time, advertised as a rental site for homeowners only. Rental agencies were not allowed.

In 2006, Austin, Texas-based vacation rental network HomeAway acquired VRBO. Susan and Bob Frank were dismayed to learn that rental agencies would be allowed on the site but were still satisfied, overall, with the 20 or so rental inquiries they received each year.

However, when Bellevue, Wash.-based online travel giant Expedia purchased HomeAway for $3.9 billion in December, the Franks say everything changed.

“My inquiries — they just tanked,” Susan Frank said.

The Franks aren’t alone. Homeowners in regions across the U.S. say they’ve been impacted negatively by recent changes at HomeAway — including a different approach to displaying search results for rentals, and a new structure for charging travelers and homeowners for the service.

Expedia is seeking to improve HomeAway’s underlying economics, going toe-to-toe with industry juggernaut Airbnb and staking its claim in the booming “sharing economy.” But in the process, homeowners say, the company is risking the loyalty of the people whose rental properties form the foundation of the site.

New approach under Expedia

One of the biggest changes is the introduction of a traveler’s fee — also referred to as a “service fee.” Travelers who book through the HomeAway checkout process are now charged a fee that averages between 4 percent and 9 percent of the rental amount, not exceeding $499, the company says. Airbnb charges a similar fee.

HomeAway says revenue from the fee will be invested in brand marketing and product development, ultimately improving the service. But some homeowners are upset with the change, saying the structure is not what they signed up for when they started using the service.

In another switch, HomeAway search results now prioritize what’s called “Best Match,” an algorithm that considers how frequently a homeowner’s calendar is updated, how often they convert inquiries into bookings, quality of photos, and how closely the listing matches the traveler’s preferences. The site also introduced a “Book With Confidence” guarantee, promising to refund customers who book or pay via HomeAway if a listing is fraudulent or misrepresented.

Expedia CEO Dara Khosrowshahi.
Expedia CEO Dara Khosrowshahi.

In the past, sites like VRBO relied on tiered annual homeowner subscriptions for revenue, rather than fees from travelers. Annual subscribers (including Classic, Bronze, Silver, Gold, and Platinum) were given priority in search results, based on the tiered level their subscription.

In Expedia’s first quarter earnings report last week, CEO Dara Khosrowshahi announced that HomeAway’s multi-level subscriptions would be slowly phased out. Instead, homeowners will be able to list their properties using one annual subscription at a flat rate of $349 if the owner enables online booking and $499 if he or she does not. Homeowners can also list properties for free and pay a percentage of each booking facilitated through HomeAway.

“The rules of the marketplace are changing,” said Khosrowshahi. “They will be a bit more favorable to travelers and travel preferences so the owners who are updating their calendars, who have great reviews, the owners who have terrific pictures and who put up pricing and are online bookable will tend to get more share in our marketplace.”

HomeAway and Expedia say the impetus for the new focus on conversions, over subscriptions, is to meet travelers’ expectations and increase revenue. But the changes are causing friction among many homeowners. A petition to remove the traveler’s fee has 1,070 supporters as of May 4 and a Facebook group called Say No to VRBO Service Fee has 2,422 followers.

“I feel like the ‘Vacation Rental By Owner’ is not important to them anymore and that they would rather work with property managers who don’t have a personal interest in the success and quality of the rental and guest relationship,” said a homeowner in Hawaii, who asked not to be identified by name because she’s still using HomeAway. “Where once I felt like HomeAway was working for me, now I feel like they are forcing me to work for them.”

Ivan Arnold, a HomeAway subscriber since 2013, cites many of the same concerns. He is suing HomeAway over its new service fee, accusing the site of “bait and switch tactics which have materially damaged Plaintiff and hundreds of thousands of other vacation home owners and managers.” Arnold claims that HomeAway “consistently represented that it would not charge fees to consumers,” a promise that led homeowners to enter into year-long contracts with the company.

The proposed class action suit was filed March 15 in U.S. District Court in Austin, Texas. HomeAway declined to comment for this story due to the ongoing litigation.

Some homeowners say the changes give rental agencies an unfair advantage over individual homeowners, who historically made up the core base of HomeAway sites.

But Expedia says its marketplace is flexible enough to accommodate individuals and agencies.

“The HomeAway team is very focused on making sure that they have a marketplace that individual owners can play in because those individual owners, those VRBO listings, are the heart and soul of HomeAway — and having a marketplace where, obviously, the professional PMs can operate in as well,” said Khosrowshahi on Expedia’s earnings call.

Competing with Airbnb

Expedia and HomeAway say the changes are necessary to adapt to consumers’ expectations and remain competitive in the rapidly evolving travel market.

Airbnb’s meteoric rise disrupted what’s known as the “alternative accommodations market,” and its competitors have struggled to keep up. Expedia’s purchase of HomeAway, part of a larger acquisition spree, is meant give the company a foothold in this market. Expedia also plans to start incorporating HomeAway listings on its flagship and sites,

HomeAway’s “take rate” before the latest changes lagged behind Airbnb, despite strong bookings, as shown in these charts from an Expedia financial presentation.

screenshot_1375 screenshot_1376

Expedia’s strategy in adding the service fee and focusing on bookings is to beat Airbnb at its own game. Expedia’s chief financial officer, Mark Okerstrom outlined plans to compete more aggressively with Airbnb in March, when the company moved key executive John Kim, Expedia’s longtime chief product officer, to HomeAway. HomeAway’s plan to shift its main revenue source from annual homeowner subscriptions to service fees is in line with Airbnb’s model.

“I think the players who are giving us the best inventory are gaining both booking share and audience share within our marketplace,” said Khosrowshahi. “… Every player’s going to make their own decision and I think that the supply partners who play well with us, who really provide a terrific experience for our customers over a long period of time, are going to gain share in our marketplace and we’ll build a terrific partnership with them over the long-term.”

Though it may seem semantic, the question of what constitutes “inventory” and what it means to be a “partner” has many homeowners fired up.

“HomeAway now refers to us as their ‘partners,'” said Susan Frank, the homeowner in North Topsail. “My definition of a partner is one who shares in wins as well as pays for losses, so wouldn’t that imply they should pay their share of our costs?”

Frank feels HomeAway’s shift from a site that facilitates owner-renter connections to a site that plays a more active role in rental listings is unfair to homeowners.

The ‘Wild West’ of the tech industry

This friction is the latest chapter in a broader narrative about the unwritten rules of the sharing economy. Lawmakers, businesses, and users are all grappling to define the customer, seller, product, manager, and employee in this new type of transaction. Does the power ultimately lie with the person who supplies the inventory or the company that provides the technology?

Many of these issues are being hammered out in the Seattle region, where Expedia is headquartered. The U.S. Chamber of Commerce is currently suing the City of Seattle over a recent law that allows Uber and Lyft drivers to unionize. Uber, for its part, says drivers aren’t employees but independent contractors using the company’s technology.

Airbnb, HomeAway’s main competitor, is also facing a slew of legal battles as legislators try to define and regulate the nascent, on-demand industry. The peer-to-peer home rentals site is negotiating regulatory issues, safety concerns, and push-back from cities over the impact it has on housing markets.

The on-demand sharing economy is the Wild West of the broader technology industry. Much of it is unexplored, lawless, and full of potential. Regulators are slow to keep up — allowing fast-moving startups like Uber and Airbnb to flourish.

Larisa Wells with her vacation rental home in Elkins, WV.
Larisa Wells with her vacation rental home in Elkins, WV.

The problem with relying on sharing economy technology to run a business — as many HomeAway owners are learning — is that the landscape is constantly changing. Larisa Wells, a homeowner who lists her properties on VRBO and Airbnb, recently launched a new website, at, to help homeowners cope with these issues.

“I am organizing owners to become less reliant upon the major listing sites, or at the very least to diversify so that one company can’t dramatically impact one’s business overnight like HomeAway has,” she said. “provides a place where owners can share their knowledge to shine a light behind the firewalls of the major listing companies, regain control through independence, and get back to the business of attracting and welcoming travelers to our vacation properties,” she said.

Many homeowners, including Susan and Bob Frank, have been migrating their listings to more traditional rental sites since the Expedia acquisition. They list their homes on and, both of which operate similarly to VRBO in its early days. But they say neither site has yielded any inquiries.

“I’m working right now with someone to build a new website,” said Susan Frank. “I’m going to have a Facebook page. I’m going in that direction. If I can get the rentals [HomeAway] will be history for me. I have no more trust in them. I’m never going to trust them again.”

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