Takeaways from Phocuswright 2015: Payments in the Home-Rental Industry

Our first-time at the Phocuswright Conference was a success. We exhibited, we mingled and we soaked up the insights being shared by this year’s speakers.

As an event dedicated to “travel innovation,” the discussions that stuck with us centered on the innovations in alternate lodging, namely home-sharing and vacation rentals.

Throughout the event, the poster children of this industry, Homeaway and Airbnb, helped to illustrate just how far alternate accommodations have come, from one in 10 U.S. travelers in 2011 to one in four in 2014 choosing this accommodation type, according to Phocuswright.

This uptick is due in part to travelers’ interest in unique accommodations that provide an authentic, local experience. Travelers are also emboldened by a transparent social platform that display rates and reviews and are comfortably choosing to stay with locals in an international destination.

The economics cannot be ignored either.  Platforms like Airbnb and Homeaway allow homeowners to rent part or all of their homes as travel accommodations, monetizing a resource into an extra income stream. The indirect benefits to hyperlocal communities is notable too, if one looks at the $1.15 Billion economic benefit that Airbnb brought to New York City in 2014 alone.

As these online rental platforms catapult the “rental-by-owner” trend to new heights, homeowners in emerging markets such as South America, Africa and Eastern Europe are signing their properties up in droves. 

Examining the Rental Payout Process: Choice at What Cost?
This rising global popularity brings up the question, how are these platform handling payments to their increasingly global homeowners? The answer: disparately.

While these platforms offer recipients (homeowners) several choices in how to receive payments, there are several costly fees and timing factors associated with each option. Take Airbnb for example, which offers homeowners five payment choices:  ACH/direct deposit, bank transfer or international wire, PayPal, Western Union and prepaid debit card.

As we have seen in other industries, options such as ACH and international wires can take several days or weeks to settle; Airbnb states 3-7 business days and also include fees from local banks receiving funds in foreign currencies.  eWallets like Paypal do cut down on the receipt time for homeowners but are 1) not an available option globally and 2) act as an intermediary between receiver and their funds.

Finally, Western Union and prepaid cards each include several transaction fees that cut into the bottom line of the platform and the receiver. Prepaid cards for example can charge cardholders $1.75 per ATM withdrawals in the US and $3.15 per withdrawal outside the US, as well as 3% foreign transaction fee.

As industry leaders like Airbnb and Homeaway scale up to offer site users corporate travel bookings and local experiences, streamlining these payment options will prove critical to match growing participation and inventory. Additionally, as new and niche rental platforms look to diversify the alternate lodging space, managing payment options and associated costs will be crucial to growth.

Transpay offers online booking sites and marketplaces a cost-effective and simple platform to send mass payments. With the largest, independent direct-to-bank network, we are able to support payments in more than 120 countries, in local currencies, sent directly to recipient’s bank accounts.

If you attended the 2015 Phocuswright Conference and would like to keep in touch, please sign our guestbook.