Noted travel-tech investment firm Thayer Ventures has led a $30 million Series B round into Life House, a technology-driven lifestyle hotel company founded in 2017.
Additional investors include Tiger Global, JLL Spark and Sound Ventures and the company’s prior investors, Global Founders Capital, Comcast Ventures and Trinity Ventures. Strategic investors participating include David Hamamoto, former chair of Morgans Hotel Group, and Jim Ketai, founder of Bedrock Detroit.
New York-based Life House, one of PhocusWire’s Hot 25 Startups for 2020, manages boutique hotels under the Life House brand using software it has developed to automate tasks such as financial accounting and reporting, pricing management, reservations and staff management. The company also sells its technology as a white-label solution for independent hotel owners and says that product can
drive a 40% increase in profitability without a re-branding or renovation.
Thayer Ventures managing partner Chris Hemmeter says Life House has created a “new and exciting” accommodation option to meet the needs of travelers that want a more social experience than can be offered in a private accommodation but who want something more unique and locally-rooted than a large hotel.
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“What [founder and CEO] Rami [Zeidan] has done, which I think is so brilliant, is he has developed a true lifestyle design perspective - and I think his properties show that - so there’s a real soul to the concept of Life House, there’s a real brand in development there,” Hemmeter says.
“But he’s also taken a step back and completely redesigned the way a hotel operates. In some ways it is almost a hybrid that lives between the highly automated structure that you see in the many alternative accommodation operators and then the traditional structures of a hotel business.
“If you come into this market of small hotels and say there’s
a huge opportunity to capture demand, and we have the brand to do that and we’ve
got this end-to-end, fully integrated tech stack that, all things being equal, will
deliver two times the net operating income that you’d get from a traditional
model - I think there’s going to be a lot of owners, either new investors who
are buying small hotels or owners who have existing hotels, who will be interested
in following through on that conversation.”
Life House currently manages five
hotels, two under the Life House brand, and will have 10 branded
properties by this summer and 25 by early next year. It says its technology solutions are delivering 40% increases in revenue and as much as 45% reductions in operating costs and achieving more than 65% of bookings direct on its website.
The
company initially is focused on small hotels - its largest property has 132 rooms - where founder and CEO Rami Zeidan
says “consumers are underserved, and software is a big crux of the equation to
solve the problem.” But with this new investment, Zeidan says the company will
launch new brands in other price segments - at least one by the end of 2020 - and
will reach profitability in the next two years.
And while the focus on bringing updated technology and
design to small, underserved properties is comparable to the strategy of
India-based OYO, Hemmeter says that’s where the similarities end.
“In my view, the big difference between OYO and Life House is
basically capital strategy,” he says.
“OYO goes into a beat-up old motel that’s just dying and they
say we’ll fix it up for you ... in exchange for a five-year management contract.
They are using investor equity, the massive cash balance that they have, to then
do what can almost be considered these odd five-year, non-recourse loans
against these properties, and the payback scheme is the management contract. That’s
really different, and it’s great as long as you have a huge balance sheet with a
relatively low cost of capital to play that game.”
Hemmeter continues: “Life House is different in that they are coming in and
saying we are an asset-light company. We know what kind of refurb this hotel needs and what results will be in terms of performance, how we can then maximize - with a
management strategy, a direct booking strategy, a reporting strategy - performance
of the underlying asset.
"But the owner is making an independent decision on what to do with their asset, finding the capital to refresh it and then buying the software - which is Life House - to run the playbook.”