From software to platforms to property managers, investors have flooded the short-term rental category, seeking to participate in travelers’ embrace of a hotel alternative.
Urban property managers have been especially popular, and here, Sonder stands out for its scale.
Just a few months ago, Sonder announced a $210 million Series D investment round, bringing its total capital raised to nearly $400 million and pushing its valuation over $1 billion.
Alongside the fundraising announcement, Sonder published its investor deck, providing a window into the business.
The deck also describes an incredibly well-run business. Sonder has been an execution machine.
But the document also makes a bull case for other short-term rental PMs. Much of Sonder’s success is attributable to the underlying characteristics of short-term rental category, not a unique approach Sonder developed.
The deck also provides property managers with a road map for new initiatives to grow their businesses.
Many of the tools that drive Sonder’s operations are commercially available to any PM. By analyzing Sonder’s business drivers, other short-term rental PMs can replicate their growth and performance.
Emulating Sonder’s approach drives revenue per unit
In just one year, Sonder increased its contribution margin per unit from $6,284 to $9,206 (+46%!).
While the deck is vague on specific components of revenue growth, revenue management has played a central role.
When demand is high, Sonder increases rates, adds minimum stay requirements, and limits distribution through expensive channels.
On low demand nights, Sonder shifts to focus on occupancy and drives market share through aggressive price and promotionals. Success in this discipline requires accurate market data to anticipate market conditions and the know-how to adjust to the market.
For other PMs, revenue management presents a compelling opportunity; Transparent’s 2018 study of European PMs found half of all operators change prices no more than once a month.
Yet resources are readily available to help other PMs match Sonder’s approach; market data is available, applications like Pricelabs automate price setting and revenue management courses teach the discipline.
Read more here.
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