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I'm curious -- VRBO could easily pivot and handle transactions themselves, directly. Instead they've chosen to offer optional insurance: In general it is true

by raghus 16y ago

I'm curious -- VRBO could easily pivot and handle transactions themselves, directly. Instead they've chosen to offer optional insurance: In general it is true that BigCo X could do function/feature/integrate Y and totally kill Startup Z - but it doesn't happen all that much.

nupark 16y ago
In general it is true that BigCo X could do function/feature/integrate Y and totally kill Startup Z - but it doesn't happen all that much. I asked why they haven't done it. You haven't really addressed that -- you're attacking a strawman. I'm simply curious as to why VRBO's parent company hasn't decided to handle bookings directly. VRBO already supports transaction processing -- they use it to sell the listings. They also went to all the effort of providing a consumer insurance service. Why didn't they add support for processing the booking transaction directly and guarantee it as a matter of course? My guess is that because to do so would wading into a regulatory quagmire, and as an established company (rather than a disruptive startup), they have more to lose. Maybe Airbnb knows this, too, but is hoping to get away with it anyway -- at least long enough to either change the regulatory environment, or see their exit and leave the problem to someone else (see: napster) ... .. but I could be wrong, so I asked the person who has the details :)
- kerryfalk 16y ago
  I could be wrong, but I suspect this is actually a problem with processing the transaction itself. Processing in the way that AirBnB does is typically frowned upon within the card processing industry from what I've discovered. The processors and the banks have the power and can shut a merchant off if they determine that they're not playing by the card association's rules. The method that AirBnB employs is referred to as Third Party Payment Aggregation. They're processing payment on behalf of the hosts. Venturing into this territory for an established company would likely cause a lot of pain. They might need to establish a relationship with a different processor and/or bank who would support the model. If they were to switch without first talking to the bank and processor they would likely be shut down quickly for violating the terms of their agreement. So it's not as simple as a relatively minor product pivot for VRBO. A smaller startup can risk a lot more by carefully walking the line of what the bank/processor/association will accept. But they're still at risk, I believe. Unless maybe they have found some way to mitigate much of the risk (I can think of one or two that would be possible after building brand recognition), I'm not sure. So I think you're right with your last paragraph but I think it has more to do with Credit Card regulation than hotel regulation... but I don't know anything about operating a hotel.
  - picnicman 16y ago
    I own a hotel in Rome and operate a vacation rental site in Europe and although I don't if this actually concerns them or not, you are totally right. In France and Italy, for example, if you take the money, you cannot claim to just be a marketplace like craigslist. He who takes the money holds a different kind of a legal responsibility that maybe is avoidable in the US, but is hard (if not impossible) to justify here. I think big companies don't want to get involved in the tax and legal implications. That said, I don't understand why airbnb and their financial supports are not more concerned about this. Either they have a great legal department backing up their model or they are naive to how different the business environment is in Europe than in the US.

by raghus 16y ago

nupark 16y ago

In general it is true that BigCo X could do function/feature/integrate Y and totally kill Startup Z - but it doesn't happen all that much. I asked why they haven't done it. You haven't really addressed that -- you're attacking a strawman. I'm simply curious as to why VRBO's parent company hasn't decided to handle bookings directly. VRBO already supports transaction processing -- they use it to sell the listings. They also went to all the effort of providing a consumer insurance service. Why didn't they add support for processing the booking transaction directly and guarantee it as a matter of course? My guess is that because to do so would wading into a regulatory quagmire, and as an established company (rather than a disruptive startup), they have more to lose. Maybe Airbnb knows this, too, but is hoping to get away with it anyway -- at least long enough to either change the regulatory environment, or see their exit and leave the problem to someone else (see: napster) ... .. but I could be wrong, so I asked the person who has the details :)

kerryfalk 16y ago
I could be wrong, but I suspect this is actually a problem with processing the transaction itself. Processing in the way that AirBnB does is typically frowned upon within the card processing industry from what I've discovered. The processors and the banks have the power and can shut a merchant off if they determine that they're not playing by the card association's rules. The method that AirBnB employs is referred to as Third Party Payment Aggregation. They're processing payment on behalf of the hosts. Venturing into this territory for an established company would likely cause a lot of pain. They might need to establish a relationship with a different processor and/or bank who would support the model. If they were to switch without first talking to the bank and processor they would likely be shut down quickly for violating the terms of their agreement. So it's not as simple as a relatively minor product pivot for VRBO. A smaller startup can risk a lot more by carefully walking the line of what the bank/processor/association will accept. But they're still at risk, I believe. Unless maybe they have found some way to mitigate much of the risk (I can think of one or two that would be possible after building brand recognition), I'm not sure. So I think you're right with your last paragraph but I think it has more to do with Credit Card regulation than hotel regulation... but I don't know anything about operating a hotel.
- picnicman 16y ago
  I own a hotel in Rome and operate a vacation rental site in Europe and although I don't if this actually concerns them or not, you are totally right. In France and Italy, for example, if you take the money, you cannot claim to just be a marketplace like craigslist. He who takes the money holds a different kind of a legal responsibility that maybe is avoidable in the US, but is hard (if not impossible) to justify here. I think big companies don't want to get involved in the tax and legal implications. That said, I don't understand why airbnb and their financial supports are not more concerned about this. Either they have a great legal department backing up their model or they are naive to how different the business environment is in Europe than in the US.