Colin Nagy, head of strategy at FFNY, a global advertising agency, writes this opinion column for Skift on hospitality, innovation, and business travel. On Experience dissects customer-centric experiences and innovation across hospitality, aviation, and beyond. You can read all of his columns here.
There’s been lots of activity in homesharing as of late, notably Marriott’s entry into the space. But one of the most intriguing yet challenging market opportunities is at the highest end. Second-property homeowners who have a million-dollar-plus vacation place often seek more mobility.
The need is simple: There’s buyer’s remorse that comes a few years in when the second home not only becomes a burden but also limits geographic flexibility for downtime. Plunk down on that beautiful Aspen home and, well, you’d better be sure you like Aspen for your getaways — bad snow seasons and all.
While premium homes have long traded on the likes of Airbnb and Vrbo and through specialized marketplaces, another entrant has been quietly amassing a community of well-heeled second homeowners, with the average home value clocking in around $2.4 million. Without a lot of fanfare and largely through word of mouth, ThirdHome has grown to 11,022 homes and counting in 92 countries. The company predicts four times the number of homes in its network by 2021, based on its current growth.
Founder and CEO Wade Shealy started the company in 2010 after a career in real estate with just a few friends and clients because he wanted to see more of the world beyond his luxury property in Hilton Head, South Carolina.
The moat that makes ThirdHome different? You have to own a high-end second home to be on the exchange platform.
ThirdHome’s value proposition is this: a deep level of trust baked into the business model, a community of peers who also own high-end second homes, and the flexibility that it gives property holders to parlay their ownership into the ability to travel to other places. This flexibility, which ThirdHome describes as “geographic liquidity,” enables users to put select nights in their homes within a pool of nights, with the ability to shop from homes and stays in the network.
Eighty percent of ThirdHome’s homeshare revenue comes from a weekly fee on homes that are exchanged that the company calls an “exchange fee,” averaging from $500 to $600 a week, with another 20 percent of homeshare revenue coming from upgraded memberships that allow greater time windows and flexibility.
Shealy says the inherent appeal is exclusivity, plus the trust and reciprocity that comes with affluent homeowners putting their property in the network. “We use terms like ‘guest’ and ‘host,’ not the words ‘rental’ or ‘renters.’ The perception is renting is something you don’t take care of as well,” said Shealy.
Homeshare as Social Network
Guests translate the nights they offer in their home onto the platform for “keys,” which are nights redeemable at other ThirdHome properties around the world. When someone shows interest in a property, a member of the staff brokers a direct introduction. There’s a back-and-forth, often developing much deeper than the volley of messages shared on the Airbnb platform. This host-to-host interaction is part of the secret sauce, the company says, and has actually led to friendships and actual business deals. Their customers are successful, and there’s high value in this peer-to-peer group speaking freely to one another.
Also, the idea of maintaining a good name in the community goes a long way. According to Shealy, “guests are reviewed by the host and vice versa,” and people can be asked to leave the club. Shealy points to a time where he personally intervened with a badly behaved member of European royalty. He pleaded with Shealy to not kick him out and agreed to corrective measures and a hefty deposit to stay in.
“It’s a social experience and goes back to the earliest days of hospitality,” said Shealy, noting that “word of mouth and peer reputation counts for everything.”
As a result, guests feel there is some built-in quality assurance to homes allowed on the platform, and they like staying with hosts from similar social strata. In addition, the cost of being able to access other luxury homes with a bit of “equity” from your existing home is cost-effective.
One very active member, with 30-plus trips via the platform, is Charles Stoopack, a doctor who owns a home in Vail. Stoopack has been a member for just over four years, and he suggested he loved the idea of being able to house larger, extended family on vacation as opposed to the several expensive rooms it would take at a comparable five-star. Plus, he told me, “instead of a heavy bar tab, you can open up a bottle of something nice in the living room.”
Another guest, Bruce Kink, a member for eight years who owns a luxury real estate firm, told me the quality of the community is what made him an active user: “The fact that each of us has luxury properties to put into the pool means there are high expectations on the service parameters we desire…There’s a comfortable and safe feeling when traveling abroad.”
He also cited community activities as a reason he’s a member. ThirdHome is starting to branch out from homeshares into experiences: Members who meet on the platform are now going on ThirdHome-curated excursions as part of its Adventures initiative, which includes small group luxury tours hosted by a celebrity or a specialist, or niche itineraries with insider access.
Kink highlights his recent nine-day motorcycle trip with other members as an example, suggesting that a real-life social network has emerged out of the transactions on the site. As a recent Skift Research report noted, travelers are taking travel to a new level, seeking out hyperlocal, transformative experiences. ThirdHome’s offerings fit well with this trend and its target affluent demograph.
Another revenue stream launched last year is the more traditional rentals, where homeowners on the exchange can offer their properties to the public, with ThirdHome doing the vetting, background checks, etc. This much smaller sector of the company’s enterprise came about from exchange-member demand and comprises around 800 homes, noted Shealy.
ThirdHome is an interesting asset-light play: It has provided the framework and technology, and importantly, it has built a real-life affluent community via referrals. The company has skirted the regulatory issues that have plagued Airbnb due to the fact that no actual money is changing hands between homeowners. Moreover there’s a revenue model that can scale.
The challenge for the brand will be not only maintaining the consistency and quality of execution as it grows but also managing the continuous onboarding of new properties while stewarding the manners and behaviors that have made the platform seem to stick with users so far. The best peer-to-peer marketplaces are built from a foundation of trust — not just paying lip service but truly living and breathing the ethos — and making this a predictable and scalable model for sustainable growth. If you can crack this nut, there is defensible space in a fast-growing category.