Shares of vacation rental site Home Away just went IPO today and did well, up 48% from their offering price at the close. Vacation rental sites tap into a big industry ($85 billion in transactions). People are getting tired of staying in generic resorts when using people's homes can be cheaper, greener and more fun. HomeAway had 530,000 paid listings as of December 2010 and $170 million in revenue last year, up 40% from 2010. The company is not yet profitable, but operating cash flow has been growing as has free cash flow (operating cash before capital expenditures), which was $52 million in 2010, up 60% from the prior year. As long as listings keep rising and renewing at the 76% rate they do now, this will be a very nicely profitable business on a net basis fairly soon.
The IPO also shines a light on Airbnb, a smaller upstart that is growing even faster and should eventually knock heads with HomeAway. Airbnb connects travelers with places to stay, but its focus is broader than vacation rentals. It has rooms, couches, homes, islands, castles and an airplane sticking out of a tree). As Internet companies go, Airbnb is swinging at a huge market. Only a few Web startups arise every five years and capture mass imaginations and a big market at the same time. Google did it. So did Netflix and Zappos. Facebook, Twitter and Zynga are the "it" girls now. I think Airbnb has a shot at being in the next crop. Forbes tech reporter Brian Caulfield covered Airbnb's origin story in the magazine back in November.
Unlike HomeAway, people use Airbnb for all kinds of reasons having nothing to do with vacations. Its site is simple and well-designed, rich with photos, the customer service is good and it integrates tightly with Facebook. I've made a bunch of money renting out my apartment and I'm using it to stay here during the upcoming TED Global conference in Edinburgh for one-third the price of the hotel rooms reserved for attendees.
Airbnb CEO Brian Chesky is staring at some serious growth ahead. I sat down with him last week at their office in the Potrero Hill neighborhood of San Francisco. It houses 60-plus people today but there are vast swathes of space for hundreds more. Source: forbes.com; To continue reading 'Click Here'.