Author: Sean Toobi
The BRB Bottomline:
Despite the decreasing demand for hotel lodging amid COVID-19, the home exchange domain is a new and unique method of vacationing that can change the way we seek travel opportunities in the twenty-first century.
With the advent of COVD-19 and short-term travel restrictions, the travel and tourism industry has been struggling to maintain growth. From 2019 to 2020, the United States travel and tourism market’s total revenue is projected to decrease from nearly $156M to $112M1. Although consumer preferences are shifting away from vacations to lavish hotels, a new sector of the hospitality industry is generating increasing popularity:
Otherwise known as “home swapping,” this type of lodging entails an agreement among two parties to offer each other homestays for a given amount of time. Compared to typical hotel lodging, home exchanges provide a unique value proposition of being a form of barter, since no monetary exchange occurs, and offering an opportunity for greater cultural immersion. Home swapping can be done across all forms of residence, from houses and cottages to boats and recreational vehicles.
The global home exchange market is saturated with a few dominant players. One of the biggest companies in the space, HomeExchange.com offers around 450,000 listings across 187 countries. However, the vast majority of the market is filled with smaller players that target niche markets. These companies specialize in specific types of exchanges located in certain countries. Regardless of their relative market share, companies in this space build their revenue models on subscription plans, which help sustain user acquisition and retention.
Contemporary market trends within the travel and tourism industry align with the uniqueness of the home exchange domain. According to a report by Statista, the majority of travelers in the US believe that there are not enough sustainable travel options available in 20202. As domestic travel becomes more popular throughout the United States and across the globe, home exchange platforms are positioned to provide an opportunity for travelers that is both economical and gratifying. Although hotel occupancy rates in the United States dropped from 66% in 2019 to 42% in 2020, the number of Airbnb users increased from 41.1 to 43.3 million and is projected to continue consistently growing. This reflects the piquing interest in homestays among travelers, which goes hand-in-hand with future expectations of growth within the home exchanges sector. In fact, the home exchanges industry is expected to reach $4.91B by 2027 at a CAGR of 2.10% from 2020 to 20273.
As consumers are beginning to seek more personalized and safe travel options, home exchanges provide an exciting opportunity for travelers to enjoy vacationing in this era of COVID-19. Although most companies in this sector are privately owned, angels and VCs alike should be aware of investment opportunities among emerging companies within the home exchange domain. Home exchange platforms have the potential to disrupt the online vacation rental market and redefine travel and tourism in the twenty-first century.
Sean is a sophomore at UC Berkeley intending to double major in Business Administration and Data Science. He is passionate about early-stage growth companies and the Israeli business ecosystem. Beyond being the Senior Investing Columnist for BRB, Sean serves as the Vice President of Fund for TAMID @ Berkeley, where he teaches curriculum on financial literacy. When he is not playing IM basketball or hiking up the Berkeley Fire Trails, Sean loves to engage in online stock market games, compete in Fantasy Sports leagues, and create music.