Are Customers Selling Away from HomeAway?

I wish to indulge you with my personal experience trying to rent a home from HomeAway (AWAY). During the summer, I travel to the Hamptons with a group of friends. This year we wanted to do something special — rent a home and split the costs. We were thinking maybe $500 to $700 per person for a weekend. I priced one house at $1000 per room, with two people per room, either in a full/queen bed or two twins.

This sounded like a great idea — we could all party together, cook, hang out at the pool, laugh. But HomeAway doesn’t make it that easy to book a home. Everytime I tried to rent a home, I was never able to get a sale through. Either the screen said Contact the Owner, or the days I wanted were already booked.

I contacted owners. All but one were booked up for the summer. And honestly, if I have to contact the owner anyway, what’s stopping the owner from taking the booking themselves, and selling away from HomeAway to avoid paying AWAY an additional fee?

I did a search again this morning, just to make sure what I am saying is correct, here’s the house. There’s a Book it Now tab on the right, but each weekend during July and August is taken. What should I do? There are buttons to let me either email the owner or call the owner. Put me in direct contact with the owner and I could book direct with them. Still, I’ve been down this road before, it didn’t lead to getting a house. 

Maybe the Hamptons are different, with higher demand, but it doesn’t seem like AWAY is bringing in the dollars like Booking.com, which I booked a room this year with. With Booking I found the room I wanted, put in my credit card info and got it. I’m guessing Booking made 15% on the $1500 or so we spent. That’s real money. HomeAway seems to be just gathering listing fees.

One Year Chart

Now let’s focus on the numbers. A little while back HomeAway changed from a pay-for-listing revenue system to pay-per-booking, where the owners put properties on the site for free and pay only when it is booked. This program has causes a surge in listings,  and to me it seems like bookings are taking a hit too. Now HomeAway is more like a newspaper classified section.

At the same time profits are falling. At first the excuse was the company needed time to transition to the new model. To me it looks like homeowners are selling away from HomeAway and the company isn’t getting booking fees.

Fair Value

Still — even with all that — the stock’s got a P/E of 50. Whew. Now this is a young up-and-coming company, with solid sales growth of 33% last quarter. But 50 times earnings is a lot for this stock.

Sharek’s Take

HomeAway has too many issues. Profit growth is negative and the P/E of 50 is way too high. It’s also tough for me to get a booking through. Still, this is a company I will continue to watch because sales are growing robustly, but I don’t think I’ll be booking AWAY into client portfolios anytime soon.