iStopOver and PlanetEye will seal a merger in the coming weeks after securing a $3 million venture funding from JLA Ventures and GrowthWorks Commercialization Fund.

The two Toronto, Canada-based travel online travel startups will operate under the iStopover brand name with PlanetEye CEO Jonah Sigel becoming president and CEO of the new company.

PlanetEye started out life as a consumer-facing, travel guide and content site, respected for the proprietary mapping technology from Microsoft it used within the site.

The company has morphed over the past 18 months to focus on providing web technology and travel content to third parties.

iStopOver is an accommodation rental website which also creates individual rental platforms for major sporting events, such as the recent FIFA World Cup 2010 in South Africa.

More details are expected in the coming weeks about the new company’s wider strategy but the funding will be directed at expanding the technology in the company and boosting the sales and development programme.

TLabs Showcase focus on startups featuring UK-based accommodation rental service Onefinestay.

Who and what are you (including personnel and backgrounds)?

Onefinestay.com is London’s first “unhotel”. Guests can live like a local in a London home for a few days while the owner is out of town, while owners earn a hassle-free income. onefinestay offers a new category of accommodation that is spacious, characterful and better value than a hotel.

The company was founded by three serial entrepreneurs with property management, logistics, investment and technology experience.

• Greg Marsh (CEO) was previously on the investment team with venture capital firm Index Ventures. Prior to that he had management roles, most recently as product manager, at GF-X. He has an MA from Cambridge, and an MBA with high distinction from Harvard Business School, where he was a Fulbright Scholar and graduated top of his class. He also works with Amnesty International where he’s an elected member of the charity’s Finance and Audit Committee.
• Demetrios Zoppos (COO) has previously held leadership roles at several businesses, including a property management company. He was the operations director and managing director of GF-X, the leading trading exchange for airfreight capacity, which raised £50 million and was acquired by Descartes. He was a former consultant at McKinsey & Co. He has an MA first 1st class honours in Economics from Cambridge and an MPA from Harvard’s Kennedy School where he was a Fulbright Scholar.
• Tim Davey (head of technology) was co-founder and CTO of SnapTalent, a web recruitment ad marketplace based in San Francisco, which raised funds from Y Combinator and other leading investors. He has seven years of graphic design, web application and open source software development experience. Tim has a BA in theoretical physics from Imperial College.

What financial support did you have to launch the business?

The company raised some money from friends & family prior to launch.

What problem are you trying to solve?

We are creating more accommodation in an overcrowded city, but using the resources we already have: people’s homes.

Instead of building more hotels on space we don’t have, we are meeting the demand for city accommodation while offering a more characterful experience for those who are bored of staying in hotels.

For people who are often away from their homes, we deliver extra income on their greatest asset. Because we handle everything from marketing to insurance, cleaning to maintenance, they enjoy the benefits of that income without the inconvenience of short letting or trying to find their own house guests while they’re out of town.

A million UK households have bought second homes over the last decade. This means tens of thousands of central properties stand empty for weeks on end. For owners of those homes, onefinestay offers an ingenious and safe ‘turn-key’ solution, providing cash without hassle.

Describe the business, core products and services?

For guests, our services provide an alternative to a traditional hotel. Nobody wants to be a tourist, so our homes come with recommendations from the people who live in them.

We’re on call 24/7 for anything a guest needs, and provide all guests with our 5* hotel linen, fluffy white towels and toiletries from The White Company. Room service and concierge services are set to roll out over the coming months.

We want guests to live like a local while they’re in London. We lend them an iPhone which we to make local calls and get info about the area and the home.

We put small barcode labels on things like paintings or set-top boxes. You press the scan button in our app, point the phone at the barcode, and a short video plays automatically of the host explaining the history of the painting, for instance, or how to use the TV.

Who are your key customers and users at launch?

Our guests are sophisticated travellers who can afford a boutique hotel, but seek a more unique experience. We appeal particularly to regular business travellers to London, professional couples seeking a unique way to experience the city, or for families with children,

Our hosts are occupants of distinctive homes who spend time away from town, but lack the time to handle the complexities of managing their property while they’re away.

What they most value is having the home returned to them in just the state it was left – or maybe even a little bit cleaner!

Did you have customers validate your idea before investors?

Definitely! One of the great things about our business is that unlike a hotel, we don’t have to build the whole thing all at once and cross our fingers that people will like it.

Rather, right from the start we have been actively evolving our service based on feedback from guests and hosts.

What is the business AND revenue model, strategy for profitability?

We’re a bit like a hotel in that guests pay us a deposit to guarantee their booking, and we then take the balance of payment by credit cards when they arrive.

With hosts, we agree a fair rate, which is usually similar to the long let rental value of their home, and take care of all of the hassle.

We’ll reach profitability when we have enough hosts and enough guests!

SWOT analysis – strengths, weaknesses, opportunities and threats?

Strengths:

• We hearing from guests and hosts that they regard our service as something new which differs from what others are offering. Guests tell us they greatly value the opportunity to live like a local, in the comfort of a home, and with the services of a hotel. Hosts tell us they value the convenience of the service.

Weaknesses:

• We’re a start-up with limited resources and far too much to do! Having too much demand is a high class problem—but it’s still a problem. So hiring great people to scale up our service, finding great new homes in London, and ensuring guests have a fabulous stay is a juggling act!

Opportunities:

• We want to see an unhotel in every major world city. We think it can be a whole new category of accommodation.

Threats:

• We keep our eye on several other companies who we think might start to do what we’re doing. But our business is a bit like an iceberg and we think that many potential competitors will be put off when they realise what needs to happen below the surface to make it all work!

Who advised you your idea isn’t going to be successful and why didn’t you listen to them?

From the very start, people have loved the concept, but some have been scared of the logistics complexities. When Greg first thought up the idea, one of his close friends asked him, “are you really sure you want to run a hotel?”

What gave him the confidence to take the plunge was the commitment of his two co-founders, Demetrios and Tim, who bring engineering prowess, technical ability, property management experience, and logistics expertise.

What is your success metric 12 months from now?

12 months from now we want enough homes and enough guests to be comfortable profitable in London. We want to have an even broader range of guest services launched and ready. And perhaps even another little unhotel on the way…

NB: TLabs Showcase is part of the wider TLabs project from Tnooz.

NB: This is a guest post by Pedro Colaco, president and CEO of GuestCentric Systems.

Due to the recent economic downfall guests are searching for alternative accommodation products for their leisure travel.

Vacation rentals are capitalizing on this trend and finding ways to reinvent their offer and look for new online distribution channels.

Firstly, there are now important distribution sites like Homeaway to sell their units.

Secondly, vacation rental owners and managers finally understood that having their own website and a reliable ecommerce system with social marketing tools can help them grow their business.

These two aspects, coupled with consumers’ willingness to accept lower levels of service, are now turning vacation rentals into real alternatives to hotels for leisure travelers. But what aspects of the environment are influencing the shift to vacation rentals?

1. Guest search is intensifying

Industry studies show that the overwhelming majority of travelers (up to 80%) select their accommodation through the Internet and over 50% end up booking online.

In addition, online search is intensifying and consumers are searching tens of sites for experiences outside the “normal” hotel before booking.

New accommodation products are emerging with an experience and budget orientation: vacation rentals, design hostels and couch surfing are now all valid accommodation alternatives for leisure travelers.

2. Specialized distribution networks are being established

Searching for and booking vacation rentals online has been difficult to date. Mostly, vacation rentals have been rented out via intermediaries and word-of-mouth.

But, since HomeAway acquired VRBO in 2006, the vacation rental online distribution business has grown very rapidly as an alternative to traditional mediation agent.

HomeAway.com has been the unifying force that has taken a highly fragmented and localized business and made it easy for consumers to search for vacation rentals on a global scale.

This rapid adoption of distribution sites is similar to the adoption of online travel agents like Expedia as a preferred tool to search for and book hotels in the late 1990’s and early 2000’s and is the foundation of establishing e-commerce and distribution networks for vacation rentals.

3. Professional website design and high quality pictures are affordable

A successful online business starts with a website that transmits quality, professionalism and credibility through professional design and good pictures.

With today’s technology it is extremely easy for vacation rentals to have a professional website that:

• Communicates their property’s unique look and experience to web visitors.
• Is quick and easy to setup, avoiding long and complex web design “projects”.
• Can be kept updated without external involvement.
• Provides a pay-as-you-go model, so that upfront investment is minimized.

When setting up a website, images are paramount, as they are the second factor right behind pricing in terms of influencing the choice of property to stay in.

With the proliferation of digital cameras, it is now extremely easy even for amateur photographers to create good pictures that provide renters with the experience at the property.

4.Ecommerce solutions are readily available

82% of hotel guests prefer to book directly at the website of the property if they can get a good price and a trustworthy experience.

While vacation rentals are not experiencing this level of direct business yet, industry studies show that direct rental business is increasing at good pace, and it is expected that the same behavior as for hotels will apply.

If you tie these results with the rate of growth of online bookings in 2009/10, then now is the perfect time for vacation rentals to capitalize on the online opportunity.

A powerful ecommerce offer enables properties to maintain good levels of occupancy rates and decrease distribution costs.

5. Social engagement is the new word-of-mouth

The use of social media like Facebook and Twitter has changed the way people communicate, forever. Word-of-mouth is now amplified by millions.

This creates the perfect opportunity for vacation rentals to overcome the SNAD (significantly not as described) curse, as positive reviews of a property distributed by a network of friends can generate immediate referral business.

Satisfied customers will always provide and share good reviews and comments about their stay. Hence, no matter the size of the property it is very important to have direct communication with guests in order to promote and sell their units and understand their needs.

This will reflect on an increase in people that follow the property and create a snowball effect on the property’s brand. New technologies simplify this social interaction and provide the necessary information to create strategic viral marketing campaigns to increase market share.

Conclusion

Guest search is intensifying and alternative accommodation products like vacation rentals are becoming mainstream options for leisure travelers due to their willingness to accept lower levels of service.

Vacation rentals are capitalizing on this trend and behaving like mini-hotels by looking for new online distribution channels, establishing their own websites, e-commerce systems and leveraging social media to overcome the SNAD (significantly not as described) curse, and create referral business.

By adopting this strategy, vacation rentals are becoming mini-hotels that can compete for business and improve occupancy rates and profitability and weather difficult economic times.

NB: This is a guest post by Pedro Colaco, president and CEO of GuestCentric Systems. More information and case studies.

Holiday rental specialist HomeAway has brushed itself down quickly after disappointing news over rental policy in New York and is now pushing London as a vacation hotspot.

Late last week, HomeAway and TripAdvisor saw New York governor David Paterson (with the support of NYC mayor Michael Bloomberg) sign into law a measure to ban vacation rentals of less than 30 days in some city buildings – an issue both companies are opposed to.

HomeAway co-founder and chief strategy and development officer, Carl Shepherd, urged others looking to protect important revenue streams to write to Paterson.

But the apparent failure of the opposition campaign – the only leeway appearing to be a stay of execution until mid-2011 – hasn’t dampened strategy too much at HomeAway.

The company has switched its attention 3,000 miles across the Atlantic Ocean to London, which happens to have a burgeoning property rental scene and the small matter of the Olympics Games in 2012.

In an announcement today, HomeAway claims the average owner stands to make around £4,500 if they rent a property for the entire 16-day extravaganza, assuming prices double to coincide with the event.

The company currently has 500 properties in the UK capital and is predicting an increase in the number of listings by around 100%, based on experience in South Africa for the World Cup tournament this year when the site experienced a significant increase in residents renting out properties.

The Olympics has the “potential to earn millions in rental income” for Londoners, says UK general manager Tim Boughton.

Unless local government officials introduce similar legislation, of course…

In that regard, Carl Shepherd, HomeAway’s chief strategy and development officer, says he thinks the New York action is less a bellweather than a testament to the power of the New York City hotel lobby, which pushed the bill.

Shepherd, a HomeAway co-founder, said the company has been in touch with New York City vacation-rental owners and “friendly competitors” since Paterson signed the bill and will formulate a plan within the next couple of days on how most effectively to get the law overturned.

HomeAway hit back quickly today after seeing TripAdvisor become a new and potentially powerful rival on the European stage as well as in its back yard of North America.

TripAdvisor snapped up UK-based HolidayLettings yesterday in an undisclosed deal.

HomeAway wasn’t asked to give a reaction to the acquisition (just some detail on where HolidayLettings stands alongside HomeAway-owned brand HolidayRentals), but it still sent a lengthy response, perhaps hinting that the Austin, Texas-based company is finally looking over its shoulder.

European president Petra Friedmann says:

“This move comes as no real surprise to anyone following the travel industry – and specifically the holiday rentals space, which we have been dominating over the past five years through rapid growth and acquisitions. Holiday rentals is one of the very few sectors that has experienced strong year on year growth – even during one of the worst recessions on record.”

HomeAway goes on to say how the company has seen annual revenue growth of 95% since it was formed in 2005 and can now boast half a million properties listed worldwide.

“To put that into context, that’s more rooms than the world’s leading hotel chain,” Friedmann says.

She ends:

“If the growth of HomeAway, the world’s leading holiday rental company is to be used as a barometer for the industry, our enquiry, traffic and listing figures suggest that investment in the holiday rentals space is a sound business strategy.”

It would be reasonable to expect any rhetoric from HomeAway in the coming months to consistently use the term “world’s leading holiday rental company”.

TripAdvisor has been in the rental game for a while (FlipKey acquisition in 2008 hinted at things to come), but it is the move into Europe – HomeAway’s extremely fertile region for growth in recent years – that indicates how seriously it is taking the sector.

Neverthless the signs were there earlier this year when TripAdvisor parent Expedia Inc waded in with what looked at the time to be a random comment from its CEO Dara Khosrowshahi.

He predicted HomeAway would go public in 2010 – a suggestion quickly denied by HomeAway.

As one figure close to the situation suggested yesterday: CEOs of Wall Street-listed companies do not make predictions about other companies unless they have a pretty good idea it is going to happen, or they are mischief-making and reminding people of the power they can wield.

Perhaps in this case it was the latter?

Clearly an important week in the holiday rental marketplace – as TripAdvisor snaps up HolidayLettings in the UK, HomeAway’s BedandBreakfast is rolling out across Europe.

The site is now available in French, Italian and Spanish and has already slipped into the HomeAway web interface used across the portfolio.

HomeAway purchased BedandBreakfast for an undisclosed fee just three months ago.

The site has have over 11,000 properties listed around the world and was the latest in a long line of acquisitions by the mothership in recent years, especially in Europe where the value of the sector is estimated to be close to $30 billion a year.

One difference between BedandBreakfast and much of remainder of the HomeAway portfolio (and, increasingly, TripAdvisor-owned sites) is that reservations can be made on the site rather than through the property owner.

The new European sites will be found at BedandBreakfast.fr, BedandBreakfastespanol.com, and BedandBreakfastitalian.it.

TripAdvisor is making a serious and its first move into the European holiday rental business this week after confirming the acquisition of UK business HolidayLettings.

The deal for what was the UK’s last remaining large independent holiday rentals business puts TripAdvisor on the road to becoming an intriguing rival to the dominant player in the sector, HomeAway.

Terms of the acquisition were not disclosed today.

The purchase of HolidayLettings is the first major acquisition for TripAdvisor in Europe for a number of years. It snapped up review site HolidayWatchdog in February 2008.

But the timing of the deal will not come as a surprise to HomeAway after seeing TripAdvisor buy US-based rental business FlipKey in 2008 and officially launching its vacation rental channel on the main site in 2009.

HolidayLettings was created in 1999 in Oxford, UK. It has since grown to include around 40,000 holiday homes listed in 166 countries around world, attracting 25 million visitors a year to the website.

The business will continue to be run as an independent site, TripAdvisor says.

But the marketplace in the UK has changed in recent years with HomeAway snapping up HolidayRentals and OwnersDirect to spearhead its so far success and reasonably unchallenged push into Europe.

The other major rental brand in the UK is Villarenters, owned by Teletext Holidays.

A report from PhoCusWright in 2008 estimated the US vacation rental market to be worth around $25 billion a year. Unofficial estimates at the same time put Europe even higher.

Although HolidayLettings claims to be completely independent, two-thirds of the business was owned (until today) by RightMove, one of the UK’s largest property sales companies.

Vacation rental giant HomeAway has added a new revenue stream almost in the blink of an eye with the launch of a holiday home sales business.

The company today launched HomeAwayRealEstate.com, a portal for holiday home owners to also put their properties on the market to a potentially wide and willing audience.

The site is aimed at the North American and Caribbean marketplace initially, but is expected to be rolled out to other HomeAway territories (primarily Europe at the moment) in due course.

HomeAway will use a similar subscription model to its existing business – charging owners a fee to list their property on the service – rather than develop a new commission system based on sales.

CEO Brian Sharples is unwilling to say how much the marketplace is worth, except that “there is a global market for vacation home sales that is substantial”.

Understandably the company will utilise the rental end of the business to expose property owners and consumers to the new division.

A property’s rental history will also be displayed within any listing so prospective owners can size up prospective income from putting the property back on the rental market.

Sharples adds:

“We believe that these two businesses are closely related, as approximately 25% of new vacation home buyers will rent immediately, and approximately 10-15% of existing rental owners are looking to sell their properties at any point in time.”

The HomeAway boss recently responded to comments from Expedia CEO Dara Khosrowshahi regarding the future ownership of the business.

Sharples said there are no plans to put the company in public ownership despite Khosrowshahi claiming otherwise during a conference speech in February 2010.

HomeAway is plotting the next phase of its quest for world domination with a gradual rebranding of its sites around the globe.

Sites such as the UK’s Holiday Rentals, which was acquired by HomeAway in 2007, have seen a makeover in recent weeks to push the HomeAway branding to the forefront.

Other sites are expected to follow suit in the coming months as HomeAway slowly pulls all the acquired brands under one corporate roof.

Supporting the rebranding campaign in Europe will be a ongoing marketing campaign, possibly including what may be its first foray into TV advertising outside of the US.

HomeAway is a tough talker and says the enormous growth potential in the holiday rentals space is not being realised by other players in the industry – especially the online travel agencies.

Petra Friedmann, ex-general manager for Opodo France who was recently installed as president for HomeAway in Europe, says the European marketplace alone is now worth around £25-30 billion in annual rental revenue.

In the UK it is estimated to be £2-£4 billion a year, while a PhoCusWright report in 2008 plotted the US market at roughly $24 billion.

Friedmann, parroting HomeAway CEO and holiday rental evangelist Brian Sharples, believes the marketplace is only at the beginning of a major increase in accessibility, innovation and – most perhaps interestingly – acceptance by others as a credible part of the industry.

Web traffic across HomeAway’s global brands increased by 48% between September 2008 and September 2009. Revenue growth for the company is so far running at around 35-40% for 2009.

Friedmann says OTAs are not capable of turning their attention to the holiday rental market because “it is a completely different job”.

This may, of course, be a smokescreen to dissuade those from eyeing the obvious booty on offer from taking it too seriously.

[Friedmann admits that during her time at Opodo her team "looked at the rentals market"]

Interestingly, Sharples told me in 2008 that there was nothing to stop HomeAway from introducing its own OTA-merchant model.

When asked how this is working out, Friedmann says:

“We are doing tests with some property management owners. There is still some work to do to make it an intelligent solution because it is so much more complex.”

There, once again, the boundaries between the two disciplines are being drawn – this is our domain, you stick with yours.

But it seems incredible to many that with travel technology, distribution switches and software able to run complex tour operating platforms and airline reservation and bookings systems, online travel agencies and others are unable or unwilling to tap into such a burgeoning market.