Sonder is Transforming the Short-Term Rental Market

By leasing and managing every property, Sonder is reinventing the hospitality model and quickly catching up with Marriott and Hilton.

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Need to Know

  • After raising $360 million in capital, hotel-apartment provider Sonder is redefining the hospitality industry.
  • Sonder directly leases and manages all of its rental properties and is expected to generate $250 million in revenue this year.
  • The goal is for Sonder to meet the middle ground between hotel and Airbnb by focusing on tech-enabled convenience.
  • Sonder has reported occupancy rates of 77%, slightly higher than the 75.8% of Hilton.

Analysis

Sonder CEO Francis Davidson believes hospitality is the next industry to be completely transformed. At a recent short-term rental conference, Davidson shared his company’s plans to redefine the industry.  

“Our aim is to be the next-generation Marriott or Hilton and not simply be a trend or a short-term rental operator but rather to rethink the entire hospitality business from a consumer perspective,” Davidson said. “We think there could be a globally recognized brand that operates hotels and apartments and villas and any accommodation category.” 

With 10,000 units in over 26 cities, Sonder is already on its way. The company also operates 26 hotels with 70 more under negotiation. The Montreal-founded company describes itself as a “tech-enabled hospitality company.” 

Essentially, Sonder will lease a space, kit it out, and then “run it as efficiently as possible to squeeze out a profit.” The use of technology has been a key differentiator by allowing them to eliminate unnecessary expenses and use that additional capital to open more properties. 

Part apartment-rental, part hotel, Sonder offers a more consistent and streamlined experience than you may find with Airbnb. But similar to Airbnb, many of Sonder’s units come with full kitchen and living room accessibility. 

But unlike Airbnb, most of Sonder’s units are hotel-licensed, meaning they must comply with hotel safety codes and pay hotel taxes, eliminating any awkward moments that may come up when staying in a city or building where Airbnb isn’t recognized or approved of. 

While traditional hotels such as Hilton and Marriott continue to push back against industry disruptors by innovating in tech themselves, Davidson is confident Sonder can take them on. He affirms that Sonder’s two to three-year head start will help them maintain their lead ahead of similar competitors.  

The Sonder CEO also intends to learn from office rental firm WeWork’s mistakes by remembering that “profitability is extremely important.” 

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