When it comes to the acquisition game, Expedia Group CEO Mark Okerstrom is one of the travel industry's savviest players. It's fun to see him back at it, after a mostly quiet period of him settling into the company's top job.
Expedia Group said it had acquired two small startups — Pillow and ApartmentJet — which help owners of multifamily residential communities list and manage short-term rentals while complying with local regulations.
The companies did not disclose the terms of the deals. Pillow, a San Francisco-based startup, had raised $16 million in capital, including a $13.5 million Series A round last year led by venture capital firm Mayfield. ApartmentJet, a Chicago startup, had disclosed $1.2 million in funding, with Network Ventures and BlueTree as key backers.
Pillow offers online tools that enable multifamily building owners to access information about short-term rental guests and monitor which tenants are renting out which of their units. The company also helps resident hosts to comply with regulations, licenses, and taxes.
The startup, founded in 2013 originally as a property management service, pivoted a little over a year ago to residential service.
It has experimented with different commercial models. In one of these models, some tenants who have used Pillow have given a 10 percent cut of their short-term rental revenue to the landlord and a commission of approximately between 10 percent and 20 percent to Pillow.
ApartmentJet, founded in 2016, assists multifamily property owners and management companies in listing their apartments on their own to generate revenue from vacant units.
The startup offers add-on services, such as running background checks on potential guests and providing liability and damage coverage through third-party insurers. Several of the largest U.S. property management companies have trialed its offerings.
ApartmentJet has tried a few pricing models for its services. The recent cost of a set of its services was $10 per night, added to the nightly rate paid by guests.
The companies weren’t available for comment on their current and future pricing and product strategies.
Expedia M&A Revs Up
Expedia Group offers a wide swath of online travel booking options, including more than two million vacation rentals via the consumer brands in its HomeAway unit. But along the way, it has also collected an array of business-to-business services.
In a statement Thursday, the company said, “Acquiring Pillow and ApartmentJet will help unlock urban growth opportunities that, over time, will contribute to HomeAway’s ability to add an even broader selection of accommodations to its marketplace and marketplaces across Expedia Group brands.”
Pillow and ApartmentJet have worked with many distribution partners, such as Airbnb and FlipKey, over the past couple of years and Expedia Group hopes they continue those relationships, a spokesperson said.
“Expedia Group does not plan to move into the traditional property management space,” a spokesperson said. On another separate note, all employees at both companies will join Expedia Group.
During an interview at Skift Global Forum last month, Expedia Group CEO Mark Okerstrom said mergers and acquisitions will always be on the table for the company. “It’s part of our DNA,” he said.
Okerstrom — who noted on-stage that he had previously headed mergers and acquisitions for many years — didn’t take long to prove the point.
Competing With Airbnb
The rise of home-sharing services, such as Airbnb, HomeAway, Booking.com, and FlipKey, has been a boon for owners of single-family homes and multifamily properties looking to rent units. In the U.S. alone, property owners manage about 29 million apartment units, according to the National Multifamily Housing Council.
Expedia’s acquisitions of Pillow and ApartmentJet will enable it to follow in Airbnb’s footsteps and compete with Booking.com in trying to woo multi-unit residential property owners to offer short-term rental listings.
In 2016, Airbnb began to coax multi-family housing owners into permitting their residents to rent out their places in exchange for a cut the tenants’s rental revenue. By August 2018, the startup had signed up nearly 16,000 units worldwide to its Airbnb Friendly Buildings Program.
Expedia’s acquisition shows that its target market of properties is increasingly blurring with Airbnb’s.
In the early days, Airbnb focused on helping people to rent out their homes or apartments on a short-term basis, while HomeAway has emphasized whole home vacation rentals in resort destinations. In recent years, though, the companies have been targeting all aspects of the rental market. Expedia’s new acquisition of ApartmentJet, for example, has focused on short-term apartment rentals in urban core markets in major cities like Chicago, Austin, San Francisco, and Atlanta.
Yet all rental listing companies face hurdles. Home-sharing has been controversial among community dwellers who balk at an incursion of potentially noisy and disruptive visitors. Expedia is hoping that services like Pillow and ApartmentJet will mitigate those concerns by ensuring compliance with best practices, such as inviting only screened guests and housekeepers into residential communities.
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Photo credit: An example of a rental at a residential complex run by a multifamily property developer serviced by ApartmentJet. Expedia has acquired ApartmentJet and Pillow, two startups servicing property owners. ApartmentJet