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Sonder takes Airbnb aesthetic to hotels in NY, London and elsewhere

Washington

IN the past year, hotel chains and home-sharing sites have started encroaching on one another's turf. Airbnb advertises hotel rooms on its platform and Marriott International recently launched a home-stay offering.

The latest player to blur the lines is short-term rental startup Sonder. The San Francisco-based hospitality company is expanding beyond its network of custom-designed vacation apartments, signing leases with 17 off-the-beaten-path, mom-and-pop style hotels in New York, London, Dublin and other cities in recent months - and is negotiating an additional 40 properties.

Sonder targets the sweet spot between a home and a hotel, merging the vibe of an Airbnb in a hip neighborhood with the convenience of a hotel's 24/7 concierge and professionally cleaned sheets. Sonder advertises its units on Airbnb and Expedia's Vrbo, complying with local rules and regulations in the 21 cities where it operates.

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After raising US$225 million in a funding round in July, valuing the company at more than US$1 billion, Sonder decided to veer away from its traditional short-term rental model and elbow its way into the hotel industry.

Co-founder and chief executive officer Francis Davidson said Sonder will be raking in more revenue than Marriott by 2025. That won't be easy: the world's largest hotel company had revenue of US$21 billion last year and manages more than one million rooms.

By contrast, Sonder has 10,000 listings, albeit five times as many as it did a year ago. Moreover, its business model has some unwelcome parallels. Leasing space under long-term deals for short-term stays is what led WeWork Cos to accumulate a pile of debt, which generated investor blowback and ultimately forced the postponement of its public market debut.

"We have seen how bad the reception was for WeWork doing leases and how it eats into profitability, especially in the initial phase when the company signs all these leases," said Bloomberg Intelligence analyst Mandeep Singh.

"The question is, what is it technologically that differentiates them from hotel chains - why would anybody pick a Sonder over a hotel?"

Mr Davidson said Sonder can charge 20 per cent less than a four-star hotel, using technology to reduce costs and provide guests with a seamless on-app check-in, keyless entry and a mobile concierge.

"Our big edge over hotels is that their model hasn't evolved in the last 40 years," he said, adding that Sonder's units are typically found in neighbourhoods that major hotels don't usually occupy.

The company has taken over old hat factories, police stables and small historic hotels like Philadelphia Queen Hotel, The Abbey Hotel in Miami or the Flatiron Hotel in New York. WP