Short-term rentals are more interesting than cookie-cutter chain hotel rooms. But the service quality can vary widely. So perhaps there is demand for short-term rentals that have consistent quality in service and amenities, such as reliable internet and clean bathrooms.
Say hi to Sonder -- a San Francisco Montreal-founded* startup aiming to thrive in a sector already entered by Onefinestay, Vacasa, and others. *Corrected, Thursday. Sorry.
Coming out of stealth mode today, Sonder is offering hotel-quality service at more than 500 second homes in the Boston, Chicago, Los Angeles, and San Diego, as well as in Montreal and Vancouver.
While the properties vary, Sonder standardizes the property management to make sure the free internet is working, the kitchens are well stocked, and the property as a whole is tastefully decorated and well-maintained.
Today Sonder announces that it has raised $10 million in a Series A investment round led by venture firm Spark Capital.
Also participating in the round are Thayer Ventures, Real Ventures, and BDC Capital. Sonder previously raised $5 million in a seed round.* CORRECTED 6:30amET. Sorry.
Nabeel Hyatt, partner at Spark Capital, wrote in a post on Medium about the funding:
"With AirBnB, Homeaway, and others we get the uniqueness we crave, but we also get highly variable quality. It’s like the hotel industry before Conrad Hilton’s revolution all over again when a traveler would arrive in a new hotel with no idea what to expect. New global brands arise with a new promise for a customer, and for the short-term rental market Sonder is aiming to be just that brand and product...."
"Hotels are optimized to operate in single locations, big huge buildings that never move, where a cleaning crew can go from room to room efficiently. In order for Sonder to operate they had to reinvent how a hotelier runs. They needed to build a new, data-driven, reflexive, software approach that is much more complex than a hotel's operations. They had to rethink what it would mean to build a global hotel company."
Sonder enables travelers to instantly book a mix of properties -- apartments, houses, condos, villas and lofts -- that don't have the hosts living on-site. Company representatives vet each property.
Here is a Q&A by Francis Davidson, Sonder CEO and co-founder.
What problem does your business solve?
Despite the explosive growth and $25 billion dollar valuation of Airbnb, only 16% of US consumers have experienced short-term rentals. Of consumers willing to try a short term rental, 40 percent say they still prefer hotels.
Given the better value, the larger space and the character - why aren't short term rentals the preferred accommodation choice?
The answer is that the dependability and security offered by the known hotel brands matters more for the majority of consumers.
The majority of travelers are wary of the sharing economy and this trend won’t change unless the industry elevates and standardizes the comfort, safety and convenience across all properties.
Sonder has achieved this. Our premise is that there's no need to choose between an authentic travel experience and dependable customer service and amenities. With Sonder, you can have both.
Names of founders, their management roles, and number of full-time paid staff?
a. Co-Founder & CEO, Francis Davidson
b. Co-Founder & COO , Lucas Pellan
c. More than 60 full-time employees
Funding arrangements?
a. The latest funding round brings our total capital raised to $15 million and will allow the company to focus on growth initiatives such as expanding into new cities, enhancing the guest experience and onboarding key new hires.
Revenue model?
a. Sonder has two revenue models:
■ Leased Model: Sonder leases properties from real estate investors for a fixed monthly price. Under this model, Sonder keeps everything on top of the rent.
■ For the Partnership Model, Sonder manages properties on behalf of a third party owner and takes a percentage of the revenue.
Why do you think the pain point you’re solving is painful enough that customers are willing to pay for your solution?
The majority of Americans are wary of the sharing economy and have not booked a short term rental. We believe Sonder’s emphasis on consistent comfort, security and amazing customer service will appeal to these traditional hotel customers and introduce short term rentals to millions of travelers interested in the “living-like-a-local” movement.
We also believe that Sonder will appeal to sharing economy devotees who love the authenticity of a home rental, but who want dependable customer service and standard amenities of the ideal host.
External validation?
a. Sonder has raised $15 million to date, an impressive number for a company still in stealth mode.
b. In 2014, Sonder (formerly Flatbook) was accepted into the FounderFuel program. After a successful Demo Day pitch, Flatbook raises a seed round of $3,000,000 - the largest seed round in the history of Quebec.
c. In 2016, Sonder quadrupled inventory and welcomed 5,000 new guests every month.
Here's a one-minute video pitch from Sonder:
Tnooz view:
OneFineStay is the most famous business in this category of serviced upscale second home rentals. Last spring the seven-year-old company was bought by AccorHotels for €148 million, and it has plans to scale into 40 new markets over the next five years.
Other competitors in this space include Vacasa, which raised $35 million this past spring.
But there's probably room in the market for another company that provides second homes that are artfully decorated, professionally cleaned, and supported by a virtual concierge.
Sonder's challenge here is less to Airbnb or HomeAway than it is to full-service hotels.
For a subset of travelers, the novelty of staying in a home has an appeal over staying in a standardized hotel room. What's more, ride-hailing apps, food-orering apps, and other concierge services are making the amenities of full-service hotels seem redundant or outmoded.
Startups like Sonder -- if they can master the logistical challenges -- may have room to thrive as niche, upscale plays. In the words of a company spokesperson, one future of lodging lies in a new business model called hometels, which combines the unique and differentiated experience of a home, with the trusted services and amenities of a hotel.