A few startups receiving funding this week deserve props for trying to shake up travel. Life House is targeting a brand gap left by major hotel groups in some markets. ByHours raised funding for letting guests book stays of as little as three hours at partner hotels. Stasher offers a network of rentable storage spaces for travelers' bags.
Travel Startup Funding This Week
Each week we round up travel startups that have recently received or announced funding. Please email Senior Travel Tech Editor Sean O’Neill at [email protected] if you have funding news.
This week, travel startups announced more than $45 million in funding.
On Monday, Lufthansa Group said it had made a minority investment in TripActions, the corporate travel management service. The German airline group invested via its digital business unit, Lufthansa Innovation Hub.
The airline is TripActions’ first strategic investor. The round closes TripActions’ Series D funding, with more than $250 million raised at a valuation of $4 billion. See more on the TripActions-Lufthansa strategic partnership, here.
>>Life House, a hotel startup, has closed a $30 million round of Series B funding.
Thayer Ventures, a firm that invests in early-stage travel sector startups, led the round. The startup has raised $40 million in venture capital equity to date. Real estate owners have, through a few real estate capital funds, committed about $200 million to invest in building properties with an intention of hiring Life House as the branded management company to run the hotels.
Life House differs from players like Sonder and Lyric in that they don’t lease properties.
That said, in terms of customer segmentation, Life House joins other players, like Sonder (which runs licensed hotels as well as short-term rentals), and Lyric, an Airbnb-backed short-term rental manager, in offering places to stay with hotel-like amenities, design touches, and full regulatory licensing as hotels.
“The ‘small hotels’ space is very interesting in our view, and in many ways open territory,” said Chris Hemmeter, managing director of Thayer Ventures. “Consolidation among the major brands and larger management companies coupled with rising labor costs have driven many legacy competitors away from the segment.”
The Marriotts and Choice Hotel groups of the world have tended to offer midscale or economy brands for second-tier and third-tier cities to accommodate the basic needs of business travelers while keeping operational costs low. But these hotels often don’t have a design-forward approach or experience-driven, local offerings, creating a gap in what some travelers want and what franchisee operators are offering.
“Life House has cracked the code here by combining a true lifestyle design experience for guests with a cutting edge and integrated end-to end tech stack that improves performance for owners,” Hemmeter said. “That combination of forces could be lighting in a bottle in what is a very large segment.”
To be clear, Life House is a management company and doesn’t have plans to franchise its brand. The technology it has built has been predominantly on the management side.
The opportunity comes with potential pitfalls.
“Whether in a primary or secondary market, new entrants like Sonder or Life House could offer higher, design-led experience travel, but they will have to prove they can also be a low-risk option for travelers and investors,” said Heather Richer, chief marketing officer of RedAwning, a branded collection of vacation rental properties. “Can they execute on things that matter like the digital experience, seamless check-in, or cleanliness?
“No matter how much a business traveler might be interested in staying with one of these new entrants, the lack of global loyalty rewards or ease of accessibility to their corporate-mandated travel programs could be tough barriers to overcome,” said Richer.
“The challenge for these new entrants will be to build a brand that stands for something different – similar to what Airbnb has done in the rentals space,” said Jared Alster, co-founder and chief strategy officer at Wildebeest, a marketing consultancy for the travel industry.
Life House offers 800 beds today, and expects to offer hotels in 11 cities by this summer.
“Millennial consumers are looking for an affordable, stylish, comfortable, amenity-rich experience from a brand that reflects their values and personality,” said Alster. “If new hospitality brands can nail their brand marketing strategy, and figure out how to succinctly communicate it, they’ll be fighting to steal share from each other via word-of-mouth and branding instead of worrying about Google’s next move in search advertising when it comes to acquiring customers.”
>>ByHours, a service for reserving hotel rooms by the hour, has raised a funding round of about $8.9 million (€8 million).
Angel Ventures and DILA Capital, both from Mexico, led the round. The Barcelona-based startup has raised about $20 million (€18 million) in funding to date. Early investor Howzat Partners also participated. For context, see “Former Momondo CEO Hugo Burge Serves as a Startup Guardian Angel.”
The hotel bookings company offers “microstays” of 3, 6 and 12 hours in more than 3,000 hotels in Europe, Mexico, and the Middle East. What do people get up to when they rent a room for three hours? Perhaps they’re holding meetings to raise funds for other startups.
ByHours has had more than 250,000 users and has sold more than one million hotel hours of bookings. This year, the company expects to increase its turnover by more than 150 percent with the addition of more than 2,000 hotels to its portfolio.
Christian Rodríguez and Guillermo Gaspart co-founded the startup in 2012. They plan to start operations in the U.S. and to build a business-to-business offering.
>>Stasher, a service for travelers to find places to store their luggage, has raised $2.5 million in investment.
VentureFriends led the round. Stasher has raised $3.75 million in seed funding to date.
The startup’s mobile app points travelers to storage spots in 1,200 locations in more than 250 cities. To date, customers have stored more than 450,000 bags through the network.
The London-based luggage storage platform aims to use the fresh funding to continue partnering with international hotel chains, short-term rental providers, and online travel agencies. Last year, it partnered with tours and activities booking service Klook, short-term rental and hotel brand Sonder, hotel chain Marriott, and online travel agency Hotels.com to promote its service and offer storage locations.
Each item left at a so-called StashPoint is insured against damage, loss, and theft up to the value of about $1,300 (£1000). Guardhog, underwritten by Hiscox, a global insurer, provides the insurance.
>>QuickBus, an online booking site for buying inter-city bus tickets in Africa, has completed a seed round of an undisclosed amount.
Shorooq Partners, a venture fund based in the United Arab Emirates, led the round. Nigeria’s Echo VC and Oman Technology Fund also participated.
The Nairobi-based company offers listings for routes in Kenya, Uganda, and Angola so far, said Humphrey Wrey, founder and CEO of QuickBus.
Skift Cheat Sheet:
We define a startup as a company formed to test and build a repeatable and scalable business model. Few companies meet that definition. The rare ones that do often attract venture capital. Their funding rounds come in waves.
Seed capital is money used to start a business, often led by angel investors and friends or family.
Series A financing is typically drawn from venture capitalists. The round aims to help a startup’s founders make sure that their product is something that customers truly want to buy.
Series B financing is mainly about venture capitalist firms helping a company grow faster. These fundraising rounds can assist in recruiting skilled workers and developing cost-effective marketing.
Series C financing is ordinarily about helping a company expand, such as through acquisitions. In addition to VCs, hedge funds, investment banks, and private equity firms often participate.
Series D, E and beyond These mainly mature businesses and the funding round may help a company prepare to go public or be acquired. A variety of types of private investors might participate.
Photo credit: A view of a guest room at the Life House Hotel in the Lower Highlands district of Denver, Colorado. The company has received additional venture capital funding. Life House