I’ve seen a lot of discussion lately about the number of points the HomeExchange network gives away to new members. Points-based exchanges are a way of house swapping that enables more flexibility than the traditional home swap. This type of system of home exchange points is analogous to an economic system. And as with any currency, it’s important to keep the right amount in circulation. You need enough points to keep them circulating, but not so many points that no one needs to earn more.
To get started, points must be added into the system. If no one has any, no one can earn any. That much is obvious. And as new members join, more points need to be added. You can’t have a system with 10,000 points circulating grow from 10,000 members to 50,000 members without adding more points in. The points will become too scarce. But you also don’t want a system with 10,000 members and 100,000 points. That means everyone has, on average, 10,000 points. No need to earn points by hosting when you have so many. But that’s a bit of an oversimplification because home exchange isn’t really about points, they’re just a placeholder for exchanges.
Why points overabundance matters
Home Exchange is fundamentally about swapping your home for someone else’s home. This is most commonly done with a direct swap. You come to my place while I go to yours. Points are introduced to the system as a placeholder when this simultaneous exchange isn’t convenient. I really want to stay in your home in Chicago in September, and you’ll be out of town during my visit. So I give you some points to stay in your home, and you can spend those points at another time to stay somewhere else.
If all members are only using points when they can’t find a simultaneous swap, and are open to hosting guests whenever their home is available, the number of points in the system won’t really matter. But hosting requires some work and some expense (cleaning, preparing the house, etc.). So people might decide they don’t want to host if they have enough points. And fewer hosts means fewer places to use points.
Optimizing the sign up bonus
HomeExchange gives points to everyone for signing up and completing their profile. This is a simple way to keep adding points into the system as new members join. But giving new members too many points creates a problem.
Think of it this way: If you are given 5000 points just for signing up with HomeExchange, and swaps generally “cost” 150 points per night, you’ve got 33 free nights. There’s not much incentive for you to host guests to earn more points. At least not until you’ve used up your 33 days of free lodging.
In reality they’re not giving out 5000 points. But they are giving out 1150 points for signing up. And another 100 for providing proof of your address and identity. If you get 10 friends to create accounts and send a message, you receive another 1250 free points. That’s 2500 free points without hosting anyone. That works out to 17 free nights in a lot of nice homes.
Last year there was a post on Quora asking “Which are the cheapest home rental solutions in France?” David Bucci, the Marketing Manager at GuesttoGuest (the company now called HomeExchange) responded on April 25, 2018:
“The cheapest way to find a vacation home in France is through the GuestToGuest website. It’s like a home exchange website, but you can also travel without having to host anyone at your own home. You can basically do a 1 week vacation and spend on average around 25EUR/trip.
“The company was founded in France and the largest selection of available homes can be found in France. All you need to do is sign up, fill out your profile, earn the complimentary GuestPoints, and use those GuestPoints to travel to another member’s home. No hosting required, until you finish all of your GuestPoints and you need to earn more.”
This response has since been deleted by Bucci, who continues in this marketing role at HomeExchange. He responded to member questions in a private Facebook group explaining that incentivizing members to try out home exchange by giving them some free points has proven effective at getting people to become dedicated house swappers. That first trial gets them hooked. And I think there’s some truth to this statement. We all know how hard it is to convince our family and friends (or even our spouses!) to try out house swapping. But after that first exchange they’re usually impressed and come back for more.
Still, with free points up front, people can game the system for free stays without ever hosting. This devalues the points members have earned by hosting. It’s hard to find a place to stay in some popular destinations. If people are using their free points to stay there and then never hosting, options are fewer for everyone else. Basically competition to spend points goes up, because there are more points in the system but there aren’t more hosts offering homes where you can spend points.
How many points is right number in a system like HomeExchange?
I’m sure economists could come up with good answers to this question. I’m not an economist, but I think the answer should probably be based on the average number of days that members host guests. For example, let’s say HomeExchange calculates that people host (for points) on average 10 days a year. And they find that the points value of a home averages 150 per night. Then the optimal number of points per person would be 10*150 = 1500.
My calculation means there aren’t points sitting idle in the system. 1500 is the number of points that are in circulation each year. You probably need a few more points than that, as travel is not evenly distributed throughout the year in all parts of the country. But that seems like a good starting point to me.
Any economists or other experts have thoughts on the best way to optimize this sort of system?
Hello,
I am new to homeexchange and appreciate the point system. Yes, I earned 1250 points without hosting. But I’m in a non-touristy area. I have no reviews hosted or hostee and there is no incentive for someone to choose my home of another (except that I can sleep 12+). This will give me an opportunity to not only visit and fall in love with home exchange but, will also allow me to get a much needed review and exchange (1) under my belt so that people know I am legit. So far I have not turned anyone down, left messages unopened or even had a single inquiry. I believe this is simply due to the fact that we are not in a high demand area. So having this points opportunity is an excellent way to enrichen my hosting listing thereby bringing attention to my limited audience.
I have just searched for a home on Cape Cod for this fall and came up with one with one week available in October. I then did a 50km search around Ogunquit, ME and found nothing. I have over 6,000 GPs with no incentive to want to make my cottage in FL available to the many requests I get. We have a serious problem and I am interested in how members might get this addressed by homeexchange.com
Here are some thoughts on the economics of point systems. I think the GuestPoint (GP) system is promising but badly designed. I’ll start with some essential characteristics of a currency system like this.
First, the points need to come into existence in some way. If no one has any GPs, no one can start earning them by offering their homes. This is also the case if there are too few points circulating. If the user base grows and more people want to spend and earn, new GPs must be created to allow the economy to keep flowing. So the question is not if HomeExchange should give away GPs, but how it should do so.
Second, since GPs aren’t “backed” by something which has a clear value, its value is inherently unstable. The points would be backed, for example, if you could buy and sell them for a fixed amount in dollars (in which case it is clear what the value of a point is). Since it’s hard to buy GPs and you can’t sell them, the value of GPs is whatever people currently are willing to trade for it. That usually implies either of two things:
1) Prices respond to changes in supply and demand, leading to inflation or deflation of GPs. When there is an increase of people who want to rent homes with GP (or a decrease of people of offer homes for GP), homeowners will charge more, and the value of a GP goes down. When there is an increase of people who want to offer homes for GP, homeowners need to charge less to find buyers, and the value of a GP goes up.
2) Prices do not respond to changes in supply and demand (for example because HomeExchange puts a cap on the amount of GPs you can charge per night). In that case, if there is an increase in people who want to spend GPs, many of them will not be able to find a place to spend them, because they have more GPs than sellers are able to take.
I think that 2) is most undesirable, so HomeExchange should aim for 1) and try to keep the value of GPs as stable as possible. Following economic theory, they should do so by controlling the supply of GPs, creating and destroying them. However, that’s much harder to do with GPs than with money in a large economy. HomeExchange would need to continuously adjust the supply of GPs to changes in its economy.
Also note that, given the first point I made above, GPs need to be brought into existence, meaning that some inflation is unavoidable. Bringing GPs into existence means that prices will rise and that the people who receive the newly created GPs get an unearned benefit (as is currently the case with new users). So new users receive a benefit at the expense of old users who have already earned GPs, whose value declines.
A possibly fairer way to bring GPs into existence is by awarding them to both parties of exchanges, reciprocal as well as GP exchanges. In that case everyone benefits to the extent that they actually use the system. To reduce the supply of GPs, HomeExchange could introduce GP fees to transactions. Whenever you spend GPs, HomeExchange would deduct a certain percentage and destroy these GPs.
Having said all this, I urge everyone to be very careful with these kind of corporate currencies. Normally companies that provide financial services need to adhere to lots of regulations subject to enormous fines. HomeExchange is essentially providing a financial service but it is probably not scrutinized by regulators at all. You have no idea what they are doing behind the scenes. They could be giving themselves lots of GPs or selling more GPs than they say. If you choose to use the system, it would be wise to spend the GPs you’ve earned as quickly as possible, to protect yourself against unexpected inflation.
[…] think this criticism is more of an issue with networks giving away points for free to new members. It’s possible to sign up for a membership, “earn” a bunch of […]
The one issue that had not been addressed in the article is that a member who plans to leave a “points” site for whatever reason usually spends the points they’ve been given before they depart so that the points continue to circulate in the system. And each new member gets points to start out with so the proportion of guest points per member in the system increases as time goes by and they are worth less … simple inflation. I don’t know when Homeexchange.com will reach that stage but the only way to solve the problem seems to be to eventually decrease the number of points given to new listings which will ultimately take away much of the incentive to join. A catch 22. The balloon system worked because not everyone received a balloon and there were fewer of them.
That’s a very good point Betty. It feels like a waste to quit with points in your account, so many people will try to spend down the accounts before leaving the network. And I think you’re right that in practice this leads to more people trying to spend points over time. I think the same problem could arise with balloons. It’s not about the structure (points vs. balloons) but how many are in play in the system.
I totally agree with all Dawn’s comments about the immorality of HomeExchange and Lovehomeswap giving away and lending points.
I wrote several times to the directors and even spoke to top Management at Lovehomeswap telling them they had no legal right to be giving away points which represent free nights of accommodation in our homes and those are not their assets to give away. They even charge clients for this.
The end result is ever more points chasing lesser available homes.
On Lovehomeswap where clients can fix their own points it has led to a steadily increasing inflation of points per night.
When I joined a few years ago the average night wears around 150 points now you see ever more homes at 250 and even upto 400 points per night.
It is a real shame that they use our homes with such disrespect.
The points system is really a great way of increasing the chances of securing an exchange but these are our homes not those HE or LHS to give away as part of their efforts to increase their revenue.
It is a not negligible part of the reason we often have to send 15 or more requests to have a chance to get a positive response.
They should close this immoral part of their system and concentrate on improving the weaknesses such as much better matching of the availability to the time demands thereby reducing the wasted requests and “no” responses.
.
Thanks for your thoughts Peter. I do want to respond to one thing here. I have always had to send 15 or more requests on any network (including those that don’t use points) to find a home exchange. I think this is just the nature of home swapping because members of these networks aren’t all available (or interested) to travel to any destination at any time. You may be right that an excess of guest points in the HomeExchange network system is requiring people to send even more requests than in the past. I don’t have any personal experience confirming this, but I’ve heard this suggested by some folks struggling to find exchanges for points.
Hey Dawn,
I run People Like Us home exchange, a free home exchange site that is dedicated to traditional home exchange. That is, we really care about sharing, friendship, kindness and generosity. We don’t want to become a great big rental system.
We are, right now, considering a form of tokens for home exchange. We always ask our members so I don’t yet know what the answer will be, but many people have asked for it. A lot of others don’t want it, mostly because they’ve seen what’s happened on other sites.
We’ll be guided by our members as always. If we do it, there won’t be any money involved. You won’t be able to buy points/tokens. We won’t rate homes differently from each other. We won’t be giving them out just for joining as I strongly feel that encourages people away from traditional home exchange and sends the wrong message.
On the positive side, I’m encouraged by members who say that such a system provides flexibility and assists members to find exchanges, particularly in places that may be a bit less popular than others. It means that you don’t have to find someone who wants to come to your place, who lives in a place that you want to go.
Seeding the system and keeping it at the right level of supply is a challenge that we too will face. I’d err on the side of keeping them rarer rather than having them so inflated that they are valueless.
Thanks for the article!
Hey Dawn. Clear and succinct, as usual. One problem you don’t mention. I have people coming via points who have never hosted. Yes, I get points but homeexchange is making money off my home. When everyone has skin in the game, that’s equitable. But those who free load are profiting the company without benefiting the members. I even saw a post on FB that home exchange uses points to compensate their free lancers!