Terms of the deal have not been disclosed except to say that £2 million had been invested in the business by seed capital investors and management up to the acquisition by @Leisure, which has purchased 100% of the company.

@Leisure already owns a string of holiday rental brands including Belvilla, online portal Casamundo and Euro Relais.

Pureholidayhomes was launched just two years ago and brings a portfolio of more than 25,000 properties to @Leisure’s 300,000 strong portfolio of holiday homes, hotels and holiday parks.

The holiday rental market has seen a lot of activity in recent years with HomeAway‘s steady purchase of a string of companies including Realholidays and Second Porch just over a year ago and Homelidays in 2009, OwnersDirect in 2007 and HolidayRentals in 2005.

TripAdvisor has also been gaining ground in the sector with its acquisition of FlipKey in 2008 and HolidayLettings in June 2010.

The reviews giant also announced partnerships in November with a number of holiday rental specialists across the globe including Switzerland-based Interhome and Spain’s TopRural.

A recent report from research firm PhocusWright valued the European holiday rental market at €20 billion in 2010 with predictions for modest growth in the next two years.

Or, at least that’s what HomeAway [the noun] hopes.

HomeAway has a new national ad campaign in the US, advising people to “HomeAway” for family togetherness. A one-minute video clip sings the praises of vacation rentals under the theme “Let’s stay together,” and points out at one juncture, “This is why you HomeAway.”

Or book your vacation rental on HomeAway sites, that is.

Of course, you can always “VRBO,” which is a variable way of HomeAway-ing, but this isn’t covered in the video.

HomeAway licensed the rights to Al Green’s 1972 tune, “Let’s Stay Together,” to make the new video, with the ad campaign debuting January 15 during the 69th Annual Golden Globe Awards.

The ads will appear in select US markets and nationally on cable.

You will notice that the video takes a very positive tone about the advantages of vacation rentals — a tack that contrasts sharply with previous campaigns trashing hotels.

It seems, for different reasons, that several companies are opting for more upbeat messages this year.

TripAdvisor recently abandoned its annual Dirtiest Hotels campaigns.

Here’s the new HomeAway video:

GSD&M, an Austin, Texas, ad agency, created the campaign, which will cover print, digital, TV and social media.

UPDATE: Despite the new ad campaign, HomeAway will be taking a pass this year and won’t be advertising for a third year in a row in the Super Bowl February 5. HomeAway had advertised in the previous two and promoted the advantages of vacation rentals over horrific hotels.

Matt Cohen, HomeAway’s senior director of brand marketing, explains that the game — HomeAway’s, that is — is different now. Cohen states:

“HomeAway will not be advertising in the Super Bowl this year. While visibility during the Super Bowl was the right decision for building our brand as a start-up, HomeAway – now an established player in the travel category – is today focused on building a long-term platform and campaign that focuses on what our business and category is about, which is celebrating togetherness and the shared experience families and groups can only have at a vacation home rental.”

I have learned many things as a chronicler of the digital media industry over the last decade plus.

But one of the definitive items is this: you will always be proven wrong about any prognostication on Yahoo, not because what you said wasn’t the path Yahoo took, but that it didn’t take any.

Unless of course Yahoo’s procrastination was your prognostication.

With a brand new CEO now at the helm, Yahoo’s choice on running-while-standing-still has run out. That much is sure.

Besides the industry-mystifying choice of ex-PayPal president Scott Thomson, there’s a lot of movement on disposing off its Asian stakes, part of its “trying to unlock the value” of its assets.

And it looks like it is happening soon: now there’s a M&A wish-list as part of “a tax-efficient asset swap with Alibaba and Softbank,” according to a report in Bloomberg this week.

The list includes the likes of WebMD, Weather Channel and AutoTrader. Previously, other names like Hulu and Bankrate have also been thrown around.

All which seem very random, only being considered because their size may fit what all parties need in terms of size of transaction to close the swap-deal. And that they’re conveniently part-owned by private-equity firms, all of which happen to want to part-buy Yahoo as well.

But let’s step back a bit. What does Yahoo want to be when it, well, gets born again?

Nostalgia

Back in 2005, when Yahoo was trying to reinvent itself under Terry Semel, I suggested that it buy Martha Stewart Living Omnimedia — back when Martha mattered — as a way to double down on women’s media and lifestyle play, a huge market, and more importantly, a unifying plan.

We all know how that and subsequent attempts went.

With the Asian sell-offs, it will have around $10 billion or more in cash, and why not use it for transformative acquisitions to help build around a theme? What could that theme be, large enough for Yahoo to continue to be one of the largest Internet players in the world?

Here’re my humble suggestion for Yahoo: start by redefining yourself as the “people-powered listings business”.

And it won’t be a stretch: after all, Yahoo started as a listings layer on top of the web, with its directory service, which curated everything interesting to “surf” at that time.

Why not go back to that theme, and stretch it to the users?

What that means is instead of investing everything in expensive original content (which it needs to do in certain verticals like news, sports, finance, if only as a glue that holds everything else together) or tech (a losing battle in face of Google, Facebook, take-you-pick-startup), use your users to help build the next version of Yahoo.

Let them curate the real world, through reviews and ratings of these listings. This isn’t a small vertical business, this is a huge intelligence layer over the world that Yahoo, with its money and users, can piece together better than almost anyone can.

And there’s a perfect and newly independent giant waiting for Yahoo (or anyone else, for that matter) to start with: TripAdvisor, fresh from its spinoff from Expedia.

User generated opportunity

TripAdvisor is about a $630 million (2011 estimates) revenue business, about $3.5 billion market cap, top-line revenue growth of over 30% over the past several quarters and at least 50 percent operating margin, so those numbers themselves paint a big story.

It has a huge repository of user-gen content that actually works and leads to transactional and advertising
opportunities, and has a big worldwide footprint and potential.

It also plays into the two biggest growth “sectors” for anyone in digital: mobile and social, and TripAdvisor, in its own messy way, has done a lot in both.

Of course there’s the small matter of trying to convince Barry Diller, who continues to be TripAdvisor (and indeed Expedia’s) largest shareholder, but when has Diller ever shied away from a large M&A deal?

Another adjacent, people-powered listings business is Yelp, smaller than TripAdvisor, and private, and Elevation Partners, its major private equity shareholder, would be happy to do a deal, anything that will make its much-panned portfolio and exits look better.

Yelp’s numbers are less readily available, but it is viewing an IPO, according to a November report by WSJ.

Revenue estimates for Yelp are around $100 million in 2012, and the IPO is expected to value it anywhere between $1 billion to $2 billion. Yelp is TripAdvisor’s cousin, with potential to be joined at the hip when put together with TripAdvisor, exact same philosophy in the transaction+advertising mix.

An expansion on that theme would include listings (and resulting transactions) businesses which could use that reviews layer added to them: HomeAway in the TripAdvisor-adjacent vacation rentals business, and OpenTable with its Yelp-adjacency.

Further down the line, real-estate listings business could be added to the mix, which would make companies like Trulia and Zillow attractive targets for Yahoo.

A global web layer

All of this also helps Yahoo forge a path independent of the other better-positioned internet giants like Google and Facebook and even similarly-troubled ones like AOL.

Almost all of these and smaller startup players are better at tech, Yahoo will never win that game in Silicon Valley or outside.

And every large media and every tech-trying-to-be-media company will continue to build content assets, and chip away at the media ad dollars, with the resultant downward ad pricing pressures that all of us are aware of.

This plan leverages its user base, still the second largest in the world, to build its future.

It allows Yahoo to be the utility layer of the world, a daily use across all forms of digital delivery, online and mobile, and at the nexus of every large internet trend: be a platform, and leverage local, social and mobile (there, I finally used that buzz phrase!).

It can continue to focus on content assets that build on top of those listings and reviews assets, as a loyalty driver.

NB: This is a guest article by Rafat Ali, an entrepreneur, journalist and founder of paidContent. Ali is currently working on his new still-in-development-startup Skift, a travel intelligence company.

NB2: Disclosure – Ali is a shareholder in Yahoo.

NB3: Image via Shutterstock.

In a blog post, Kayak notes notes that Sharples, co-founder and CEO of HomeAway, led the vacation rental business as HomeAway “raised $405 million in private funding, acquired 17 websites, and in June 2011, the company underwent a successful IPO.” 

Meanwhile, Kayak, which likely is considering a replacement for some of its search technology given Google’s acquisition of ITA Software, filed an S-1 statement in November 2010, but hasn’t carried out an IPO to date.

Sharples does not replace anyone on the Kayak board and joins chairman Terry Jones (Essential Ideas) and directors Joel Cutler (General Catalyst Partners), Michael Moritz (Sequoia Capital) , Hendrik Nelis (Accel Partners) and Gregory Stanger (Chegg Inc.), as well as Kayak co-founders Steve Hafner and Paul English.

“Brian’s industry knowledge makes him a valuable asset to our board, and we’re looking to adding his guidance and leadership,” Hafner says.

Kayak notes that Sharples is “an expert in technology brand strategy,” having “counseled” Apple, Microsoft and Dell.

Kayak apparently is looking for some counseling, although it has some experienced advisors on its board already.

Since its 2004 founding, Kayak has raised about $196 million in funding, and is looking for an IPO or other strategic transaction to pay off investors and to fuel the extension of its global growth.

Does bringing in Sharples signal cooperation between travel metasearch engine Kayak and vacation-rental listing site HomeAway or is the move designed, as Kayak says, merely to tap into Sharples’ experience?

Will Kayak launch a vacation rentals tab possibly featuring inventory for HomeAway?

That’s not at all difficult to envision, but it’s not necessarily in the cards as a result of Sharples’ arrival.

HomeAway is looking to increase its distribution, of course, and has partnerships with Gogobot and affiliate relationships.

Google Ventures invested in HomeAway, and Google chairman Eric Schmidt put some money into Gogobot so perhaps cozy investment and board relationships do indeed lead to strategic cooperation.

And, Kayak has done some minimal experimentation with offering vacation rentals.

For example, if you conduct a Kayak hotel search for San Francisco January 17 to January 22, you’ll see a vacation rental filter in the left-hand column, and if you winnow the results for vacation rentals only, you’ll see the following offerings from owners. Pricing isn’t posted online and you have to call the property or visit their websites to initiate the booking process.

The “vacation-rental listings” have been in place for an extended period, are very limited and some are shown merely because they have the word “apartments” in their descriptions or names.

Further strategic cooperation is possible between Kayak and HomeAway, but not a foregone conclusion.

There is a healthy amount of respect at Kayak for HomeAway and Sharples, and the two companies even are believed to have had an institutional investor in common.

Meanwhile, the move is not merely a benefit to Kayak; after all, Kayak is an established travel brand and HomeAway gets additional street cred from the new ties, as well.

The relationship doesn’t hurt Kayak, either.

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

I’m Brian Egan, co-founder and CEO of Evolve, a new online service that acts as a sales, marketing and service team for vacation rental owners.

We take the hassle (and quite a few of the costs) out of getting a home marketed and booked – creating great listings, reaching the largest network of travelers, and offering seamless booking experience, including full traveler support.

There are no upfront costs to joining our service and we only charge our owners a risk-free 10% booking fee.

We’re just coming out of a two-month beta, but it’s already clear that there’s a big market for our service. In addition to homeowners who were renting on their own or working with a local property manager, we’re excited to see a lot of owners who had not rented before because they viewed the process as intimidating.

The $24 billion US vacation rental market is becoming more complex and competitive, it can be a lot for an owner to take on by themselves.

My background is in travel and vacation rentals. I was one of the first 10 employees at Exclusive Resorts – where I helped build it from a startup into the high-profile luxury destination club it is today. Prior to joining Exclusive Resorts, I was a startup & VC lawyer at Gunderson Dettmer in Silicon Valley.

My co-founder, Adam Sherry, is the COO of Evolve. He was Employee #1 at Exclusive Resorts, where he pioneered a sales process and team that produced over $1 billion in membership sales over 8 years.

What financial support did you have to launch the business?

We closed on $530,000 in seed financing in May of 2011. Our angel investors include entrepreneurs, executives and investors with backgrounds in travel, financial services and technology/consumer web.

What problem are you trying to solve?

Managing the vacation rental marketing and booking process is not easy. Vacation rental has become more popular, and with that we’ve started to see travelers expecting more in terms of communication and service.

Online marketing strategies and prompt response to traveler inquiries are no longer exceptions to the rule, they are required.

Many owners feel trapped. They are forced to choose between the hassle and guesswork of managing this process on their own, against the expense and inconsistent performance of full service property management.

Not surprisingly, this gap in the market has kept quite a few homeowners from renting out their homes at all.

We built Evolve to fill this gap and – quite simply – to make it easier to rent out a vacation home. And of course, part of helping homeowners means helping their traveler guests.

If we provide travelers with great service, for no extra charge, they’ll be more likely to book our homes. And that means more rental income for our homeowners.

Everyone comes out ahead.

Describe the business, core products and services?

Think of us as a vacation rental owner’s personal online marketing, sales and service team. We handle every facet of the marketing and booking process:

Producing high quality listings that really tell the story of a home, including attention-grabbing, SEO-friendly headlines and copy, competitive pricing and promotions, and stunning photography.

We are constantly evaluating listing performance and A/B testing tweaks across our network to ensure we’re getting the most out of a listing.

Reaching the largest possible network of travelers, including placement on Evolve’s site along with the largest vacation rental sites like VRBO, HomeAway, FlipKey and TripAdvisor, as well as promotion via Evolve’s database communications, social media and online marketing campaigns – all at Evolve’s cost.

Creating a seamless booking process, including providing proactive, friendly traveler service, updated availability calendars, click-through rental agreements and credit card acceptance to make it as easy for a traveler to rent one of owner’s homes as it is to rent a hotel room.

For all this, we charge only a 10% booking fee. It’s risk-free – we only make money when our owner’s make money.

That’s it. No cancellation penalties, no hidden charges, and unlike some services, we don’t charge travelers.

We bring all this together to make it easier to be a vacation rental owner. All of the benefits, none of the hassle and at a risk-free cost that pays for itself in additional income earned and time saved.

Who are your key customers and users at launch?

We’ve been in private beta for two months now and we’ve been thrilled with the response. We had a handful of owners join the network pre-launch and we were able to generate bookings for them, and revenue for us, in our first week of operation.

Since then we’ve doubled the number of homes on our site, and our gross bookings, every month.

Did you have customers validate your idea before investors?

As a starting point, we’ve spent a combined 15 years in the industry talking to thousands of homeowners and travelers, as well as developers, property managers and other players in the vacation rental ecosystem.

So we had a pretty good base of knowledge and an intuitive sense of the opportunities in the industry.

Even with our background, we vetted the Evolve model with homeowners and travelers prior to raising money. For that matter, we continue to rely on the market as our sounding board on a daily basis for ideas big and small.

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

There are no upfront costs to join the Evolve network and no cancellation penalties. Homeowners simply pay a risk-free booking fee of 10% when the property is successfully rented.

We wanted to align ourselves as closely as possible with homeowners – we believe a strictly pay-for-performance model is the best way to do that.

SWOT analysis – strengths, weaknesses, opportunities and threats?

Strengths:

• Deep industry knowledge definitely gives us an edge. We’re passionate about the travel and vacation rental market, we’ve got a long history of delivering exceptional customer service, and we truly want to help grow this market and allow owners to earn more income from their properties. We also come to the table with a lot of experience scaling teams and processes from the earliest stages of a startup and understanding how to build the foundation of a high-growth company.

Weaknesses:

• We’ve only been in beta for two months, so our inventory needs to grow to meet high traveler demand.

Opportunities:

• The US vacation rental market is around $24 billlion, and yet most vacation homes are sitting empty each month, not being rented out. That means there is a huge untapped inventory, literally millions of homes, sitting on the sidelines waiting to be discovered. Also, Americans are increasingly seeking out vacation home rentals as a more economical and enjoyable alternative to hotels. Our model makes it easy to move from owning a second home to owning a vacation rental – which will translate into new income possibilities for homeowners and (by default) travel options for vacationers.

Threats:

• We expect increased competition around this model. We saw the same thing at Exclusive Resorts, it’s the hallmark of a successful company. You probably don’t have a very interesting company if no one wants to compete with with you. Competition is a good thing for our company and for the vacation rental market as a whole. The easier it becomes to join the vacation rental market as an owner or traveler, the more the market will grow and the larger the opportunity for all of us.

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

We came across a few people who didn’t get it, but we didn’t listen to them because they didn’t own vacation rentals and had no real understanding of our customers.

We were very confident that we had clearly defined a pain-point and that we had designed a pain-killer.

We’ve been through this process before – if you aren’t being told “no” as a startup on a regular basis, you’re not trying hard enough.

What is your success metric 12 months from now?

We want to end 2012 with hundreds (and possibly thousands) of happy homeowners who are earning more money, paying less in fees and enjoying the experience of owning a vacation rental more than ever.

Here is a clip:

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

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

I’m Elia Wallen, and I’m an entrepreneur with a passion for real estate and property management.

After experiencing some success in the temporary housing industry, I aspired to offer a service that would be able to assist anyone in the world with an internet connection and a rental property.

In August of 2011, ShortTermHousing was launched. My core team includes a former Sony developer, a former GE marketer, and host of other amazing people who contribute daily to our success.

What financial support did you have to launch the business?

We are self-funded. The business that I started in 2006 supports Short Term Housing.

This is a huge advantage for us. Instead of investors telling us what to do to turn a profit, we control the vision of our site.

What problem are you trying to solve?

Why are people paying to post properties online? That’s what we were wondering when we took a look at the top property listing websites, which charge a posting fee, or take a % on the backend.

• AirBnB takes a percentage of the rental rate
• HomeAway/VRBO charges a posting fee
• Craigslist offers free listings, but has no reservation system

We created Short Term Housing to offer a free place to post properties while also giving consumers an online reservation system to book instantly online.

Describe the business, core products and services?

ShortTermHousing offers a free place for property owners to post and rent their place. Potential renters can reserve a home or apartment as conveniently as they would a hotel room on Kayak or Expedia.

Who are your key customers and users at launch?

We launched in August with zero properties, and zero users. Every day since launch, people have found our site and posted properties.

We are excited about the momentum and we hope the growth continues. We are focused on all property owners who want to rent their place, and all travelers who need a place to stay.

Did you have customers validate your idea before investors?

This site has been in my thoughts for a very long time.

Because of the nature of my other businesses (past and current) I’ve been fortunate enough to gather a lot of feedback from individual property owners from many different parts of the country. I’ve recognized the need for this for a while.

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

Build it and they will come… We started with a passion for putting people into properties, and never lost sight of our drive to build something that was simple, powerful, and painless.

We still refine the site daily trying to remove every possible rough edge.

We will never make people pay to list their property, and we don’t have plans to take a % off the transaction.

Our intent is for the site and the service to create a brand that’s valuable to strategic partners. Through these partnerships we’ll generate revenue and synergistic strength.

SWOT analysis: strengths, weaknesses, opportunities and threats?

Strengths:

• The site’s free site for landlords and tenants with many advanced features including, reservation management, Google maps, street views, payment controls, reviews, local feature listings, etc.

Weaknesses:

• Chicken or egg, we need properties to bring users, at the same time we need users to bring more listings.

Opportunities:

• Scalability, enormous audience, premium web features for free.

Threats:

• Just getting started in an established industry. David vs. Goliath

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

When I started looking at the market research it was apparent this was not going to be easy.

Many of my “advisor” friends were skeptical because of the competitive landscape and other free services out there (craigslist), but I knew that if we built it correctly the market would respond.

What is your success metric 12 months from now?

We want to grow our property listings by 200% and generate more site awareness. Success for us will be achieved when we become one of the industry leaders for the vacation/short term housing industry.

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

Gray, who was HomeAway’s third employee in 2004 and most recently served as senior director of North America marketing, replaces Alex de Belloy, who held the title of senior vice president, North America, and is leaving the company.

Brent Bellm, HomeAway’s chief operating officer, tied Belloy’s departure to the December 26 expiration of HomeAway’s IPO lock-up period. Some 180 days after HomeAway’s IPO, directors, executive officers and the selling stockholders were to become free to sell or dispose of their shares.

“As any company enters the end of its lock-up period, some turnover is expected from its longest-tenured employees,” Bellm says. “In this particular instance, Alexis de Belloy provided us several months advance warning of his career plans.”

HomeAway found de Belloy’s replacement internally.

“HomeAway has a wealth of internal talent and did not need to consider outside recruiting,” Bellm says. “Jon Gray was selected from several strong internal candidates, and we had plenty of time to transition fully with Alexis’s support.”

The transition occurs as HomeAway tells potential investors that “industry disruption provides numerous growth opportunities.”

Current plans for the company, which boasts of market-leading positions in the US, UK, Germany, France, Italy and Brazil, include developing a single network for its vacation-rental operations, and improving the user experience and its e-commerce capabilities.

Future plans call for the company to “go mainstream,” HomeAway says, as it hopes to make a big push to transition people who currently rent vacation homes offline into online renters.

And, in addition to expanding into ancillary products such as travel insurance, HomeAway hopes to make a major foray into online travel agency distribution.

The 2012 campaign, developed by Arnold Worldwide, will include national and regional TV spots, online display ads, a 3D Times Square builboard with the tagline “Cruising from New York,” as well as ads perched atop taxis and in elevators and subways.

The TV spots contrast the terror of alternative types of vacations with the pristine, breathtaking possibilities of cruising on Carnival Fun Ships, which are slated for $500 million in upgrades.

Here’s a preview of one of the commercials, which shows a couple gazing serenely at the sea onboard the Carnival Magic  or another Fun Ship and recalling last year’s vacation fiasco of getting attacked in their car by a bear and another ferocious four-legged creature, seemingly at a campground or national park.

You can view the video here.

Carnival apparently borrows from HomeAway’s playbook in the airing of its 2010 “Hotel Hell Vacation” Super Bowl ads, which showed the horrors of hotel stays versus the allures of vacation rentals. Here’s HomeAway’s “Hotel Hell Vacation” clip:

It’s interesting to juxtapose the peaceful, romantic portrait that Carnival’s 2012 campaign conjures with the Red Frog Rum Bar & Blue Iguana Tequila Bar video that currently is featured on Carnival’s YouTube channel.

It looks like Carnival is offering mixed marketing and advertising messages for differing demographics.

Cruise lines, of course, make much use of video and YouTube these days to attract new passengers. In the following video, P&O Cruises shows off a refurbishment of the Oriana, which returned to Southampton, UK, December 21:

The latest round brings the total invested in HouseTrip so far to almost $20 million since the company was formed in January 2010 in the UK.

Index Ventures ploughed in the first round in April this year and is leading – with Balderton – a consortium of other investors in the latest injection of capital.

The latest injection will be used for product development on the main website, boosting inventory and marketing, including expanding the site into other languages.

HouseTrip currently has around 55,000 properties on the site, just over half the number CEO Arnaud Bertrand was predicting would be included by the end of 2011 when Index made its first investment.

The company has in the past positioned itself as a competitor to the likes of HomeAway and other holiday rental platforms, by offering booking alongside listings.

But with the latest comes a new emphasis, as an “alternative to hotels”.

Bertrand says:

“At Housetrip, we strongly believe that apartments are a much better way to travel. Not only do apartments provide better value-for-money, they also enable guests to blend-in with their local environment – making their stay more authentic and memorable.”

The 55,000 properties on the system are currently listed in more than 350  destinations in 40 countries.

On the same day that media-company TripAdvisor announced partnerships with large vacation rental partners in Europe, using a listings and referral model, HomeAway CEO Brian Sharples said his company is ready with an inventory pipe for major online travel agencies, but a clash in business models is at play.

Sharples said HomeAway hopes to partner with OTAs over the next five years, but many of them view vacation rentals as cannibalizing their hotel sales.

“We stand there with a pipe,” Sharples said, adding, however, that the “models don’t line up.”

In that regard, Sharples said companies such as Expedia and Priceline may be used to earning 35% margins on merchant model hotel sales while vacation rental property owners might only be willing to pay 10%.

Still, it’s almost inevitable that major OTAs expand their role in vacation rentals, and although TripAdvisor is not an OTA,  its vacation rental partnerships announced today symbolize that a larger OTA foothold in the vacation rental market may happen a lot sooner than the five-year timeline that Sharples cited.

The OTAs, after all, have been happy to dump the merchant model for the retail model, with its tighter margins in Europe and Asia, where necessary, and some undoubtedly will show enough model flexibility to bring vacation rentals on board.

Sharples comments came Nov. 16 during an appearance at the PhoCusWright conference in Hollywood, Fla.

The CEO of the newly public HomeAway expressed some Airbnb envy — saying he wishes HomeAway had thought of the peer-to-peer home rental market — but wonders if Airbnb is really worth a $1 billion valuation.

Expressing respect for Airbnb, Sharples noted that Airbnb “created a market out of thin air” and was in a position to create a new model in being very much involved as an intermediary in the rental transaction.

But, HomeAway had to play by the existing rules when it was created in 2005, Sharples said.

Unlike Airbnb, HomeAway runs a listings business, encourages communication between customers and property owners, who handle the transaction with consumers themselves, and it is still done largely offline.

Sharples said many vacation home owners still prefer to book offline and conceded that demand for online booking from customers “is not as big as you think.”

Still, HomeAway has been busy enabling online booking between property owners and travelers.

Sharples said some people don’t understand the differences between HomeAway and Airbnb.

He noted that HomeAway largely deals with properties which are sec0nd homes while Airbnb’s customers are renting out rooms in their primary residences.

Airbnb renters “find underwear in the drawers and someone else’s toothpaste in the bathroom,” Sharples said.

And, Airbnb still must answer the question about the viability of the peer-to-peer market, Sharples indicated, asking how many owners of primary residences really want to rent out their properties or rooms to travelers.

Meanwhile, HomeAway is still focused on getting bigger.

Sharples said HomeAway indeed is a technology company, “but technology isn’t necessarily what wins the game in this business.”

Speaking of scaling the business, Sharples said HomeAway has acquired most of the major players of interest in emerging markets, and there are few remaining companies who have gained enough traction to merit HomeAway scooping them up.

“We will continue to do it,” Sharples said, referring to acquisitions, “but you will see less of it.”

The reviews giant has joined forces with Switzerland-based Interhome, Spain’s Toprural, Australia’s Stayz and France-based Akena Technologies which operates mediavacances.com.

TripAdvisor has been steadily building its holiday rental offering in the past few years with the acquisition of Flipkey in 2008 followed by the launch of the channel in 2009 and the acquisition of UK-based HolidayLettings in June last year.

These latest deals make TripAdvisor much more of a global contender and a greater rival to HomeAway which has made a string of acquisitions in the rental market in recent years.

The deals enable consumers to search across all partners with results presented in a single view on TripAdvisor.

Content from the four partners will bring Tripadvisor’s holiday rental listings to 200,000 including existing inventory from its Flipkey and HolidayLettings brands.

But, as the two parties work to launch a beta of the switch on VRMA’s Discover Vacation Homes site by the second quarter of 2012, one of the key questions is whether vacation rental powerhouse HomeAway will participate in the switch from a supply and distribution perspective and/or whether HomeAway will compete and work at loggerheads with this industry initiative?

For now, HomeAway is saying all the right things about the switch.

Asked for its take on the Pegasus-VRMA agreement and prospects for the switch, HomeAway states: “We continue to work with VRMA to participate in the new switch product and have been very proactive in our efforts. A lot of work remains to be done in evaluating how best HomeAway integrates with the product both on the PMS (property management system) supply side and consumer distribution side of the business.”

But, one vacation rental analyst, who declined to be identified, says he doubts HomeAway, which is a VRMA member, will ever join the party.

After all, some of the largest vacation rental management companies already distribute through HomeAway and use its Instant Software andEscapia business management and distribution solutions, the analyst says.

And, HomeAway is busy working on these platforms as its distribution solution for the industry.

In its third quarter earnings call last month, Brian Sharples, HomeAway’s co-founder and CEO, noted that HomeAway owns the two largest property management platforms, and plans to open it up to competitors.

“We believe we will be the best ROI (return on investment) solution for property management,” Sharples said.

Sharples said that with 35% to 40% of vacation rentals in the U.S. coming from management companies, HomeAway’s share is lower than that and increasing that percentage is a priority.

While competitors such as Airbnb and the prospect of the government clamping down on  the taxation of vacation rentals pose potential threats to HomeAway, the analyst argues, VRMA’s vacation rental switch would not be in that category.

A second analyst describes HomeAway’s position this way: “They cannot afford to denigrate the initiative as many of their customers are VRMA members, and the property management market is very important to HomeAway. But the switch is a directly competing product and HomeAway can’t buy Pegasus to make it go away.”

Meanwhile, more details are emerging about how Pegasus Solutions and VRMA came to an agreement after the two parties had walked away six months ago.

Mike Montemurro, senior vice president of product strategy and support for Pegasus, says the company dropped its earlier insistence on volume guarantees from the VRMA and “took a more deliberate approach to build confidence and participation.” 

Launching the switch in phases, with the first being a beta on Discover Vacation Homes with a limited set of destinations, will give VRMA and Pegasus a chance to showcase the product to consumers and vacation rental managers, Montemurro.

“If we prove our worth and capture incremental business, it will prove its worth in the long run,” Montemurro says.

Subsequent phases will entail discussions with some of the “channels” that specialize in vacation rentals, and Pegasus also sees a potential distribution market in DMOs (destination management organizations) and meetings and conventions.

In the earlier talks, which broke down, “control” was an issue, Montemurro says.

Instead of Pegasus having the flexibility to strike out on its own if the switch doesn’t gain enough traction, Pegasus agreed “to stick with it for a period of time,” Montemurro says.

“Let’s go arm in arm and work through this and stick with each other to make this successful,” Montemurro says.

The vacation rental switch will be open to VRMA members and nonmembers, although members get “more favorable terms and conditions,” he adds.

Steve Trover, VRMA president, says the primary business model for the switch “will be a transactional percentage shared by participating parties.”

“In certain cases, where state laws require it, a fee-based model will have to be used,” Trover says.

When the talks broke down this summer, the VRMA initiated a new RFP (request for proposal) process in search of another vendor to build the switch.

That may have been enough to bring Pegasus, which has been footing the development costs, back to the table.

“After VRMA revisited the RFP process, Pegasus reached back out to us and we were able to work through our initial concerns to build a partnership for the joint development of this new interface,” Trover says.

He confirmed that no volume mandates will be at play.

“Our members will not have to commit to certain volumes,” Trover says. “We will encourage the participation of our membership by creating the right platform for them to do so. Members have expressed significant interest since we first announced the vacation rental switch and this interest in participating has continued to grow as the project has taken shape.”

Montemurro of Pegasus declined to detail whether any major vacation rental management companies, many of which already list their inventory on HomeAway sites, have committed to participate in the VRMA switch.

The VRMA and Pegasus would welcome HomeAway’s participation, Montemurro says, adding “I know they are evaluating it.”

“Beyond that, we’ll have to take their comments at face value,” Montemurro says.

In a Wall Street Journal inteview, HomeAway CEO Brian Sharples says the vacation rental company may wait for all of the dust to settle before considering its options to see if any company really makes a lot of money offering peer-to-peer apartment rentals. Says Sharples:

We would rather wait and see how it all shakes out. If a company emerges and makes a lot of money, maybe we would acquire one of those businesses. Based on Airbnb’s recent $1.3 billion valuation, it’s much too expensive for us to consider.

HomeAway, after all, has some big bucks at its disposal and has never been shy about making acquisitions.

Sharples says there’s only a 2% traffic overlap between HomeAway, which caters to families seeking vacation homes, and Airbnb, with its apartment rental clientele, and the inventory commonality is virtually nonexistent.

But it isn’t difficult to envision that the two leaders in their respective sectors could eventually butt heads.

“Could the two business models collide over the long term?” Sharples asks. “I think they could. We could choose to get into that space because we thought it was attractive. I just don’t know if it’s attractive.”

Sharples tells The Wall Street Journal, however, that he is aware that Airbnb may find the vacation rental market appealing and he wouldn’t be surprised to see Airbnb entering HomeAway’s arena.

But, he still expresses some skepticism about the financial viability of Airbnb’s core business.

In the big scheme of things, the peer-to-peer rental business may face some legal pressures, as well.

One former New York City cop has recently been making a living out of posing as a traveler and ratting out apartment tenants to their landlords when they illegally offer their dwellings for short-term rentals on Craigslist, the New York Post reports in an article headlined, “He’s the sublet stinger.”

As Sharples says, a lot of people will be interested in seeing how the peer-to-peer market shakes out and how it will intersect with the vacation rental industry.

The vacation rental company established pages where Vermont and Texas vacation rental owners could list their properties for free or discounted rates to help victims in each state.

As of a few days ago, the Texas page included some 140 vacation rentals and eight bed and breakfast inns in central Texas, and in Vermont about 51 vacation rentals were featured on the Vermont page, says a HomeAway spokesman.

HomeAway also established Texas Wildfires group and Vermont Vacation Rental Owners community pages for owners and evacuees to share news and advice.

Central to the scheme is a $50,000 reimbursement to a property owner as a result of theft or vandalism by a guest who booked the accommodation through Airbnb.

The guarantee (as Airbnb calls it) is currently available only to property owners in the US, Canada, Australia, UK, Germany, France, Italy, Spain, Portugal and Greece, with a promise that other countries will be added in due course.

Airbnb is also talking up a string of new tools on the main site clearly aimed at rebuilding some of the fast-disappearing confidence and reputation surrounding the brand.

The system now includes a 24-hour emergency hotline, redesigned profiles for owners, verification dashboard (carrying profiles of users and social connections), pre-arrival calling system.

Now while some will scoff at the idea that it took a serious incident (an owner had their apartment trashed and wrote a blog post about it) before Airbnb took action, introduction of the guarantee scheme and a string of new tools coming on board so quickly illustrates how quickly Airbnb has had to grow up.

Cynics will also note that such swift action came rather coincidentally as the company was busily trousering $112 million worth of capital from a string of luminaries in the investment community.

Nevertheless, action is action and Airbnb will have gone some way to addressing the mounting concerns of recent weeks.

Perhaps one good move on the PR front is the appointment of ex-White House chief information officer Theresa Payton (of Command Consulting Group) to review the company’s security measures.

In terms of guarantee, clearly the devil with be in the detail. What happens when claims for wrecked apartments start flooding in (maybe Airbnb guests aren’t so cool after all), for example? What will be the oversight process?

The small print on the guarantee scheme says an owner can only be reimbursed for up to $50,000 in a calendar year, so multiple claims for the full or high price are just not going to happen, regardless of how often a property is damaged.

There is also the small matter of guarantees for guests – what happens, for example, if a guest is injured as a result of faulty equipment in a property (electrocution, falling fixtures or fittings, etc)?

At this stage Airbnb says it will only guarantee for the host. An official adds:

“However, guests can rest assured that our new 24 hour help line is available anytime at +1-855-424-7262. We know how important it is to talk to an actual person in an emergency, so when you need us, we’ll be here to help.”

That’s the picture that Airbnb paints of itself, as apartment/condo/vacation rental owners or renters use the website and its tools to offer their rooms for a night or two or three to travelers.

But authorities in the state of Iowa in the US disagree, and attorneys at its Secretary of State’s office plan to send a letter to Airbnb advising the company that it should register for the state’s seller of travel law.

The Iowa law “requires persons who market travel promotions in Iowa to register with the Secretary of State and post a $10,000 bond or alternative form of financial security, such as a letter of credit.”

The registration fee is $15 — well within Airbnb’s means considering its latest $112 million funding round — but if a court ever found that Airbnb failed to register and violated the Consumer Fraud Act, then Airbnb or any other company in similar straits could “be liable for a civil penalty of not less than three times the sum so received, as may be determined by the court…”

Failure to register 30 days after the fee is due is a “serious misdemeanor,” the law says.

Erin Rapp, a spokeswoman for the Iowa Secretary of State’s office, says attorneys reviewed how Airbnb operates. “We believe they are subject to the travel law if they transact business with Iowans,” she says.

Airbnb clearly lists Iowa properties and does business with state residents.

Several US states have seller of travel laws requiring registration, but the definitions of who must register vary widely.

For example, while Iowa believes Airbnb must register, authorities in California and Florida say Airbnb does not appear to fall within their requirements.

The California Attorney General’s office indicated that it doesn’t appear that Airbnb is a seller of travel as defined by California law and it is not registered.

The California law only applies to companies which arrange or advertise flights, sea transportation [ie. cruises or ferries], and/or ground transportation.

Airbnb doesn’t appear to provide or help arrange these kinds of services.

Al Anolik, a travel attorney in California, cautions that Airbnb would become subject to California registration if it expands into flights, ground or sea transportation or, arguably more likely, even if just decides to run advertisements for those services online or in newsletters.

He notes that a major supermarket chain had to register in California when it began offering coupons for flights.

Companies failing to register when they are required to do so in California are subject to civil and criminal penalties and “cease and desist” orders, Anolik says.

And, authorities in Florida say it does not appear that Airbnb would be required to register as a travel seller in that state because it doesn’t sell vacation packages.

Many of the states with registration laws gear them toward travel agencies, but Airbnb describes itself instead as a “neutral venue.”

“Our site is an online venue through which users find and learn about each other. Our site is merely a venue for users to learn about one another and, if they wish, arrange stays with one another. We are not involved in the actual face-to-face contact between users. As a result, we have no control over the conduct of users or the truth or accuracy of the information that users post on the site.”

But, unlike vacation rental giant  HomeAway, which gets most of its revenue from listing fees, Airbnb lists properties for “free”. However, Airbnb gets a cut of each rental transaction and collects service fees.

Do these fees resemble travel agency commissions?

Airbnb collects guests’ credit card information, holds 100% of the funds for guest stays until 24 to 48 hours after check-in, remits the funds to the host, and deducts 3% as its service fee for processing the guest’s reservation, according to its website. It also gets extra fees for additional, optional services, Airbnb says.

Airbnb, with its disruptive “person to person” marketplace, has been much in the news of late because of two reported incidents in which hosts’ homes were trashed by guests.

The company has been battered in social media and is introducing  a $50,000 Airbnb Guarantee for property damage in the event of vandalism.

In the interim, Airbnb says it currently processes damage claims from hosts and deducts payments to cover the losses from guests’ credit cards on file.

So Airbnb, some might argue, is going beyond being the mere provider of a marketplace. It processes credit card transactions, holds the funds until after check-in, deducts service fees and handles damage claims.

And, with new business models emerging for person-to-person commerce  – if that is indeed what it is — laws in US states and in other countries inevitably will evolve, as well, to regulate such practices.

In addition to seller of travel laws, some jurisdictions such as New York, outlaw vacation rentals of less than 30 days and this seemingly could be another legal obstacle to Airbnb’s business model.

Paris, too, is apparently cracking down on short-term apartment rentals.

And, what about the issue of subletting?

Many apartment leases ban subletting so how can renters list properties they don’t own on Airbnb?

Mark Pestronk, a travel attorney in Washington, DC, says website disclaimers could buffet Airbnb from liability claims on several fronts.

“The website terms and conditions could well disclaim all liability for damage to the apartment, as well as for the  apartment’s true owner’s decision not to allow a tenant to sublease or swap,” Pestronk says. “That would take care of Airbnb’s liability to the owner.”

Pestronk also thinks Airbnb would be immune to claims that it doesn’t adequately investigate hosts and guests.

“I know of no law or case imposing liability for failure to investigate the bona fides of a website user,” Pestronk says.

Clearly, Airbnb and other person-to-person providers of vacation home and even car rentals, could have a disruptive impact in the marketplace.

And, in the years to come, they could be a disruptive force in various countries’ regulatory rules of engagement, as well.

NB: Airbnb didn’t immediately respond to questions about the Iowa seller of travel law, other legal issues and an earlier request about its new guarantee system.

As I wrote recently, these new business models are certainly disrupting the conventional travel industry. But just because something is new, does it make it better? Was anything actually broken with the previous way of working?

So, lets compare a P2P approach versus how the conventional travel industry would approach the same problem:

1. Can you list a property that you don’t actually own?

With P2P it seems this is quite possible (See this story on Hacker News).

In the conventional travel industry the company that is principal would visit the supplier (yearly), even if overseas, and check that the property actually still exists.

At the same time, a basic heath and safety audit would be carried out as well as a check that the supplier is operating to best industry practice.

The traditional approach wins this one.

2. Who ensures that the product descriptions / images are correct?

With P2P the central website hasn’t any idea regarding the accuracy of the descriptions – well, not until a first customer reports back and comments via a review that all was not as described, by which time they will have had a poor customer experience.

In the traditional travel industry, descriptions/images are challenging to get right, too – however hotels/guest houses know they have to get this right and there are industry systems in place to distribute this content. It’s a fixed problem.

3. Will conventional travel websites wish to partner with P2P players?

Metasearch probably will want to work with P2P (as consumers tend to end up booking direct with suppliers anyway), but online travel agencies are probably less likely to integrate with P2P, primarily due to not wishing to mix an individual-provided service with a business-provided one.

This puts P2P at a disadvantage when working with the existing travel industry. At the moment the P2P players like to be seen as outside of the travel industry, so integration probably isn’t really a problem they are bothered about today.

However at the scale that some of these companies will need to work at in order to break even/attain scale suggested by their funding rounds, they will likely need to work with the conventional travel industry at some point because the industry has the necessary flow of travellers.

4. What are the protections against third party money laundering?

If anyone can list a property, does this introduce a money laundering risk?

The first defence against money laundering is “know your customer”. As a P2P marketplace you can have a situation where you neither know your customer nor your supplier.

In the conventional travel industry if you are transferring the money to a supplier that tends to be a business not an individual. Also tends to be a business you have regular contact with.

You might be money laundering (!) but at least you are not being used by a third party for money laundering without your knowledge…

5. Will P2P tour marketplaces lose their best performing suppliers?

There are 20+ tour guide P2P marketplaces. An individual selling via one of these marketplaces tends only to be bookable once on a particular day.

This approach is fine, but if that individual is in a popular destination they may be able to organise themselves to handle more than one booking a day.

Effectively they then become a tour operator rather than a tour guide. Tour operators (businesses) will have a different set of requirements both from a marketing and an operational perspective.

It actually could actually end up with a situation where a P2P tour marketplace loses their best performing suppliers as these suppliers “outgrow” the P2P platform.

Or perhaps an individual just doesn’t want to be running a tour every weekend but are happy to run a tour every couple of months.

Oddly, this builds a situation where the more successful the P2P tour marketplace is, the harder it will be to retain the individual nature of the suppliers (rather than working with specialist tour operators).

6. Do customers understand that they are buying from a person?

Some of these marketplaces take 100% of the booking revenue up front. In the customers mind this payment to the marketplace makes them believe they are booking with the marketplace.

When something goes wrong (eg. a customer turns up for a tour or accommodation and it isn’t ready, organised etc) the customer may as a result contact the marketplace for immediate resolution.

There will be little the marketplace can do as they don’t have any more knowledge or staff on the ground to fix the problem.

This can only end in a PR debacle as the customer will blame the marketplace yet the marketplace won’t have any capability to resolve it.

Interestingly, at least on eBay if a customer has a bad experience with an individual supplier, people are “trained” to know that it is an individual supplier they should be agitated with rather than eBay.

Also eBay does not have people turning up in the middle of the night at a distant destination and finding they don’t have any accommodation booked, so customer service does not need to handled in real time, 24 hours a day.

7. Are individuals permitted to rent their home/sell a tour?

In most countries the travel industry is a highly regulated industry. The regulation does tend to lock in existing industry structures and leave little room for business model innovation.

However, the rules are there and, until changed, they are the rules we all have to abide by.

For example, with accommodation rental, does the supplier have the right to rent their home? Does their home insurance cover sub-rental?

8. Will people providing accommodation/tours need to be insured?

If paying insurance becomes “necessary”, will that remove the fun, individualistic, accommodation? Will it remove all properties that are not permitted to be listed due to regulations/law, as they will be uninsurable etc?

Will individuals think twice about listing their property if they are prompted with a question about insurance (perhaps built into the listing side of the marketplace), as that will make them think about the downside?

9. Are the P2P marketplaces taking enough revenue share?

Take Airbnb – it takes about 10% or so. Is that sufficient to handle all the customer service questions that will be incoming? Is that sufficient for big customer facing marketing campaigns?

I expect there was a working assumption built into the business model that customer service would be handled directly by the individual property supplier, rather than the central marketplace. Not quite sure that that assumption will turn out to be correct.

Businesses on the other hand don’t mind paying a good % of revenue share, but only if it is a booking they would not otherwise have received.

10. What proportion of “bad” customer experiences are acceptable?

P2P is a high risk, high reward booking for a traveller. The products are mainly great – indeed much more attractive than those provided by the traditional travel industry. However with the great comes the occasional experience failure.

In the traditional travel industry products and services are carefully tuned. This means they are neither brilliant but equally they are never terrible either.

Will P2P marketplaces be able to handle the negative PR from a few poor customer experiences or will a few bad stories kill the concept?

Final question

P2P looks a really fun area to be innovating in within the travel industry. But will we still be talking about P2P in two years time?

Performance-based tiered listings already exist on HomeAway’s VRBO site and they are in beta on HomeAway.com, says Brian Sharples, HomeAway cofounder and CEO.

Sharples says vacation rental owners generally would have to pay triple the normal fees to get their listing to the top of the page.

The plan is to roll out the feature to HomeAway sites globally, although Sharples acknowledged that this will “take some time.”

In other new wrinkles, Sharples says HomeAway has leveraged its acquisition of Second Porch to enable vacation rental owners to launch an app from their owners’ dashboards which places a slideshow about their properties on their Facebook pages.

The slideshows link back to HomeAway and they will generate more traffic and customers, Sharples says.

“It’s just another distribution platform and another channel for us,” Sharples says.

And, in a bid to slowly transition to online booking instead of reliance on offline check payments, HomeAway has introduced ReservationManager on HomeAway.com and VRBO, Sharples says.

With ReservationManager, vacation rental owners pay 2.5 percent fees for Visa, MasterCard and Discover card processing and 1 percent fees for eCheck processing.

HomeAway has been built around listings’ fees, but Sharples says new business models are under discussion which may see some vacation rental owners paying a percentage of revenue for using ReservationManager.

He says revenue-based model might be especially appropriate for vacation rental owners who may wish to advertise their properties for several weeks only.

In other tweaks, HomeAway intends to expand its product base with insurance and property damage protection products, Sharples says.

His comments came today during HomeAway’s second quarter earnings call, its first since its IPO and becoming a public company.

For the second quarter, HomeAway’s net income fell 98% to nearly $2.2 million on almost $58.7 million in revenue, a nearly 41% jump.

HomeAway’s costs and expenses have risen sharply since the second quarter of 2010 as it invests in new products, increases sales and marketing, and continues a hiring binge.

During the conference call, HomeAway officials were especially exuberant about the company’s acquisition of realholidays.com.au.

The acquisition added a bevy of listings to the HomeAway portfolio and the Australia site’s lineup now has six times the number of listings as its closest competitor, Sharples says.

The round was financed by Andressen Horowitz, DST Global and General Catalyst and is over $20 million more than the $90 million secured by rival Wimdu in mid-June.

The latest round brings the total level of capital thrown into Airbnb so far to $119.8 million, illustrating the massive jump between the initial investment and the new support from Andressen et al.

Airbnb says the round will be used specifically to expand the business globally and capitalise on demand in countries outside of its home market of the US such as the UK, Germany, France and Brazil.

The company couldn’t have chosen more high profile backers from the US web investment community, with Andressen counting Facebook, Foursquare, Groupon, Skype and Twitter on its portfolio, and General Catalyst supporting Kayak, ITA Software, Room 77 and Ostrovok.

Airbnb’s growth in the last 12 months has clearly caught the eye and praise not only of the tech press in the US but major players such as Andressen, with its general partner Jeff Jordan moved enough to compare the business to none other than online auction giant eBay.

“Airbnb’s explosive growth and passionate community of users reinforce the uniqueness of what they’re doing, and in the same way eBay redefined online shopping, Airbnb is redefining the way the world thinks about accommodations.”

DST Global’s Yuri Milner calls Airbnb a “transformational company”.

The numbers are certainly on Airbnb’s side. It claims to have booked two million room nights so far, captures 30 million page views every month and a “social connections” feature added to the site in May this year has already reached 54 million.

But while the company has managed to secure pages of gushing coverage from the US media, helped not least by securing the services of Hollywood celeb Ashton Kutcher as a board member, some of its tactics to attract new property owners have come under fire.

Airbnb admitted in June 2011 that a rogue group of contract sales people had used Craigslist to make unsolicited approaches to owners to persuade them to sign up to the service.

Away from the (somewhat justified) hype surrounding Airbnb, other companies operating in the vacation rental market will no doubt be absorbing today’s announcement with mixed feelings.

Big players with vast financial warchests for growth and additional resources is likely to concern many of the smaller players, but two significant rounds of investment in recent months (Airbnb and Wimdu) illustrate the enthusiasm in the finance community that private rentals is one of the hot sectors of the industry in the coming years, a trail blazed long before Airbnb by Homeaway and more recently by TripAdvisor.

Brian Chesky, co-founder and CEO of Airbnb says:

“Today is a watershed moment – both for Airbnb as a company and for our community – that will enable us to touch new markets and expand our vision to make the world’s most interesting and inspiring places accessible to our users.”

“We are not stopping on the switch,” says Connie Rheams, senior vice president of global strategic sales at Pegasus Solutions.

There had been high hopes among some in the vacation rental industry that a vacation rental switch developed by Pegasus at the behest of the VRMA, with its 600 property management company and associate members in North American, Mexico and the Caribbean, would do much to bring professionally managed vacation rentals online and distribute them widely via online travel agencies and other intermediaries.

A vacation rental switch might also serve to give owners and managers of professionally managed properties some distribution leverage against the seeming runaway train that is HomeAway, which simultaneously is trying to boost its own portfolio of professionally managed properties.

With the VRMA announcing last week that it is replacing Pegasus and seeking a new vendor to develop a vacation rental switch, Pegasus Solutions issued the following statement:

Pegasus believes in the opportunity and the need to create an online marketplace for vacation rentals.  This is what both consumers  and owners want.  We are going to do this and it’s unfortunate we could not come to terms with VRMA after a year of discussions.  VRMA has a great opportunity as an association to make this happen for their membership.  The standards for creating an online merchandising platform were largely agreed to but the commercial side proved difficult.

It is our hope VRMA will see that we have embraced the standards that we all agree are good for this new online marketplace and endorse the solution to the members. Rather than focusing on collective bargaining for commercial terms, VRMA can play a key role in driving the industry standards by providing a consolidated voice for their membership as other travel industry associations have done.  We know the professional managers need this solution and we will deliver it.

So, what do those references to “standards” and “collective bargaining for commercial terms” mean?

In separate interviews with Alex Risser, VRMA president, and Rheams of Pegasus Solutions, the two discussed some of the key issues and gaps in the negotiations.

One Contract or Many?

Risser and Rheams indicated that the VRMA sought to represent its vacation-rental-owner members and associates through one contract with Pegasus, which sought to have independent contacts with individual members.

Risser says the issue was one of control, with the VRMA not wishing to get into a situation where it might one day end up “standing on the sidelines.”

“We wanted to make sure, in controlling the switch, that we had the clout,” Risser says.

As with the Pegasus switch for the hotel industry, Rheams explains that if Pegasus provides a service to a company, it needs a contract with that company. Rheams says the VRMA may have downplayed the challenge if it had to assume the financial liabilities of all its members using the switch.

“I think the scope may have been bigger than a typical association might bite off,” Rheams says.

Performance Guarantees

Risser says the two sides couldn’t agree on required transaction volumes. “We didn’t have an experience base to set them,” Risser says.

And the VRMA feared that failure to meet certain threshholds would mean the contract would be cancelled and Pegasus would be able to market the vacation rental switch on its own, with the VRMA “taken out of the formula,” Risser says.

Rheams agreed with Risser that there was disagreement about minimum volume levels, which had to be established for the vacation rental switch to gain traction with online travel agencies and other distributors.

Standards

Much as the hotel industry did several years ago, the VRMA advocated standards about the way its properties should be marketed. Risser says this meant that intermediaries would have to show that these vacation rentals were professionally managed and displays would also include a VRMA seal of approval.

Rheams says Pegasus could attempt to push intermediaries to display vacation rentals according to these standards, but, at the end of the day, Pegasus Solutions and the vacation rental switch would be “a pipe” — a supplier of inventory — and wouldn’t be able to enforce the standards.

Transaction Fees

Risser says the VRMA supported a pricing model with “a minimum barrier of entry to participate.”

But, Rheams didn’t see fees as a major issue in the collapse of the talks. “The pricing model was not the issue at the end of the day,” Rheams says.

What’s Next?

So, where do things stand now? What’s next?

Rheams says Pegasus Solutions has two project managers dedicated to the vacation rental switch, and the company plans to move ahead on its own, using its existing sales force, to take the switch to market.

Whether Pegasus can do so without the VRMA and what allies Pegasus may find, remains to be seen.

Interestingly, Rheams says the switch can be marketed to professionally managed properties and to vacation rentals by owner, as well, giving the switch more potential.

Some people have argued that is doubtful that Pegasus would have done much work on the switch without first coming to an agreement with the VRMA, especially because Pegasus was footing all of the development costs.

But, Rheams was having none of that.

“We are well on our way in terms of delivering this product,” Rheams says, adding that Pegasus performed due diligence with OTAs and others. “There is a tremendous amount of work that has been done to ensure we are delivering a relevant product.”

Rheams adds: “We would definitely still welcome a deal with VRMA as long as it’s a deal we think makes sense.”

Meanwhile, Risser said last week that the VRMA had viewed Pegasus as “an excellent option,” although the two parties couldn’t come to terms.

The VRMA has put out a Request for Letter of Interest [pdf] and hopes to announce a new developer of its vacation rental switch at its October conference in Orlando.

Risser says 6-8 companies had responded a year ago to the initial RFLOI and that two companies have expressed interest now that a new request has been issued.

Asked whether the VRMA now finds itself starting the switch project from scratch, Risser says the association has learned a lot and has a “clear understanding” of the technology.

“We are much farther along than back on day one,” Risser says.

And, Risser says he doesn’t rule out new discussions with Pegasus.

“We admire and respect them,” Risser says. “There are no burned bridges.”