Staying at a real home away from home

— -- Golden Valley is a picturesque rural area of southwestern North Carolina that isn't on a state road map. About five times each day, though, potential vacationers contact Bob Singer about renting a house or cabin he manages there.

Singer's small company, which managed one cabin seven years ago and now manages 10 homes with views of the Blue Ridge Mountains, is part of a vacation rental industry that's growing rapidly, both at popular and obscure destinations.

"The Internet is the only way I could make a buck," says Singer, who pays $3,000 annually to list the 10 properties at Rentalo.com.

The Internet is doing for vacation rentals what eBay ebay and similar online marketplaces have done for merchandise sellers. For not much money, owners can now display via the Web their vacation properties to a worldwide audience of potential renters.

As a result, big-money investors are rushing to exploit the Web. Some are moving to consolidate listings and make money by conducting the rental transaction, brokering the deal or managing the property.

In one sure sign of the industry boom, big online travel agencies such as Expedia expe, Travelocity and Hotels.com, which once offered only hotel rooms, are displaying vacation home rentals as a lodging choice.

Big-name companies such as Barry Diller's IAC iaci and Wyndham Worldwide wyn, the leader in marketing and managing vacation rentals in Europe, are moving aggressively into the business. HomeAway, a well-financed start-up launched in 2005, aims to consolidate vacation rental websites and make itself a nationally recognized brand.

The Web has unleashed "the next growth wave" in the once-sleepy business of vacation rentals, says Steve Reich, an executive at LeisureLink, a vacation property marketing firm. "The Internet made the vacation rental inventory more searchable and less dependent on word of mouth and print ads," says Reich.

Travelers are benefitting from more choices and better websites, including some with video tours of each property. They're also demanding and getting a higher degree of assurance that the vacation property they rent meets expected standards, and that they won't be fleeced.

And owners of second homes, such as Joe Morgan, are reaping the benefits of greater exposure on the Web. Morgan, a Tampa anesthesiologist who owns a five-bedroom house managed by Singer, had planned to sell it. The general downturn in the real estate market prompted Morgan to hold onto the new house. He's been so successful renting it that he no longer plans to sell. And he's now planning to build a second rental home in North Carolina. "We've been absolutely thrilled, so far," he says.

The target of all the activity are travelers such as Kathleen Jurkovich of Minneapolis. She plans to rent a vacation house in New Mexico because she loved a house in Santa Barbara, Calif., she rented for her family through a rental website three years ago.

"It was completely as advertised and had a beautiful patio on a cliff overlooking the ocean and the Channel Islands," she says.

On the rise

Estimates about the size of the vacation rental market in the USA vary. One of the more expansive estimates, from HomeAway, says it generates $63 billion in revenue annually, or nearly half as much as the hotel industry.

And it's growing. Vacation rental management companies expect to manage 12% more rental homes this year than in 2006, according to a survey of 129 companies by the Vacation Rental Managers Association.

Pedro Mandoki, who manages more than 300 vacation rental condos, says hotel companies are behind much of the growth.

In resort areas such as the Florida Panhandle, some hotels are being torn down and replaced with condo rental units. Most big chains, Mandoki says, are increasing the number of hotels that offer what he calls "mixed product" — hotel rooms and condos. The condos are individually owned and are rented out when owners aren't using them.

The rental inventory is also growing because of a boom in vacation home sales, which have been largely unaffected by a downturn in the real estate business. Sales of vacation homes rose nearly 5% to a record 1.07 million last year, and 18% of buyers said they bought them to rent to others, according to an April survey by the National Association of Realtors.

Experts view their industry as a huge untapped marketplace. "The vacation rental industry is the ultimate cottage industry, with millions of owners out there," says Brian Sharples, CEO of HomeAway, which lists about 95,000 condos and homes for rent on the Web. (USA TODAY has a contractual agreement with HomeAway that makes its listings available at USATODAY.com.)

The vacation rental business will grow so rapidly, Sharples predicts, that travelers in five years will routinely consider a condo or house instead of a hotel room when going to a destination that gives them a choice.

Sharples says the industry offers a better product than a hotel room. Condos and houses have more space, including fully equipped kitchens. Condos and houses also have more amenities, such as stereo equipment, barbecue grills and laundry facilities.

Howard Nusbaum, president of American Resort Development Association, a vacation property trade group, agrees. "Eating pizza in a hotel bed is not fun," he says.

Park Brady, CEO of ResortQuest, which manages 9,000 condos and homes for rent in the mainland USA, says such an environment better suits a growing trend of "intergenerational" travel, which includes family reunions and baby boomers who vacation with children and grandchildren.

But some in the business don't see vacation properties becoming a competitor for hotels. "They're two different product types," says Edward Kinney, vice president of Marriott Vacation Club International, a division of Maryland-based Marriott International mar. "We see the vacation rentals as a complement — not a competition — to hotels."

Like the vacation sales divisions of other big hotel chains, Marriott Vacation Club sells time shares in condominiums, maintains the condos and uses its website and travel agents to rent the properties when they're not being used by time share owners. Time share owners typically buy the right to stay at a condo for a specific week or more.

Marriott Vacation Club and two other Marriott brands, Horizons and Grand Residences by Marriott, maintain 9,600 condos throughout the world. They vary in size from studio to three bedrooms.

Scott Berman, a hotel and leisure travel expert at PricewaterhouseCoopers, says vacation rentals are "a very viable option" for consumers — particularly those with families — "looking for oversize accommodations." But he doesn't believe vacation rentals pose a competitive threat to hotels.

New kid on the block

The vacation rental industry is a relatively recent phenomenon. It got off the ground in the 1970s when condos were built in ski and coastal resort areas and got a push in the 1980s when condo time share ownership was introduced. In 1998, 11 companies that managed vacation rentals in resort areas combined into a national company called ResortQuest, and more than $60 million was raised in a public stock offering. With more than 2,000 employees and about 18,000 rental units, ResortQuest stood atop the industry.

But a travel slowdown after the 2001 terrorist hijackings hit the company hard, and it was sold for $177 million to Gaylord Entertainment get, which owns the Grand Ole Opry and four hotels with convention facilities.

This year, Gaylord sold ResortQuest's Hawaii business, which manages 5,000 rental units, to Diller's IAC for $109 million. Gaylord sold ResortQuest's mainland USA business, which manages 9,000 rental units, to investors, including Brady, for $35 million.

Brady was an original founder of ResortQuest and has ambitious growth plans. This month, he will roll out a program that will allow local management companies to market their rentals on the ResortQuest website. Within a year, Brady says, ResortQuest will have 100 new rental locations on its website.

In August, Wyndham Worldwide's RCI entered the U.S. market by launching a website called Endless Vacation Rentals (evrentals.com). The site primarily lists condos of timeshare owners, but the company plans to expand its listings to include home and other condo rentals.

"We're seeing the emergence of an industry that can provide a reliable rental product to the consumer," says Wyndham Worldwide CEO Steve Holmes.

Growth potential

Despite recent growth, those involved in the vacation rental industry recognize they have a long way to go to fully realize the potential of their product.

Travelers such as Stan Kotowski are unlikely to take the sales pitch. He says he has no interest in a condo or a house rental because you must make beds, cook and clean. "These are some of the things you are going on vacation to get away from," says the marketing director of a company in Plainsboro, N.J. "The hotel room, on the other hand, has maid service, room service and a concierge."

Kotowski's view is one of several obstacles. Many travelers distrust vacation rental operators or consider the property overpriced. And some are unaware that they have the option.

Rick Fisher, a former Expedia executive who now runs vacation rental trade shows, says the number of vacation rental units "is exploding," and their popularity with renters is growing. But "the majority of consumers know nothing" about vacation rentals.

Hotels.com, which surveyed 1,600 consumers last year, found they don't book vacation rentals because they assume they're expensive. Rental experts say many consumers also believe a rental requires a one-week stay or has limited availability. But many rentals, they say, are cheaper than a hotel room, have no length-of-stay requirement and are often available. HomeAway says its research shows that, on average, vacation rentals cost 50% to 80% less per square foot than hotels, even in popular destinations such as Orlando and Phoenix.

On HomeAway's website, for example, a two-bedroom house with a pool in Scottsdale, Ariz., costs $1,950 per week for a Dec. 1 check-in. Less than a mile away at the JW Marriott Resort & Spa, rooms for that week were sold out, and the cheapest rate quoted to USA TODAY was $4,403 for a one-bedroom suite. For a week in November, JW Marriott quoted a room rate of $1,953.

In some cases, the vacation rental industry is starting to address some practices that have kept it from growing, including rentals that have been listed on the Internet but don't exist. HomeAway recently instituted a "confidence guarantee" that pays renters up to $5,000 if a rental property does not exist.

Endless Vacation Rentals says it inspects and rates the quality of its rentals, adding some predictability for potential renters. It also offers a full refund up to three days before arrival for canceling a booking, and has a toll-free number for customer concerns.

Holmes, Wyndham Worldwide's CEO, says about one of five European vacationers rent a condo or house, and it will take "about a decade" for Americans to reach that ratio. He's confident that many consumers will soon know the RCI and Endless Vacation Rentals names. "Not many people heard of Google goog 10 years ago," he says.