Hospitality Companies Follow Pandemic Demand by Offering Villa Rentals

A luxury short-term rental company’s expansion into Mexico is yet another sign hospitality brands like what they see in the future of high-end vacation home rentals.

Los Angeles-based AvantStay is expanding into the Cabo San Lucas, Mexico, market through a partnership with luxury villa rental brand Blue Desert Cabo, the companies announced Tuesday exclusively to Skift. The partnership, which begins with roughly 30 listings and plans to go up to around 50, is the first international foray for AvantStay, which specializes in short-term rentals for groups.

The new partnership aims to better position the company for further opportunities abroad at a time when competition is heating up in the luxury, whole-home vacation rental business from some of the world’s largest hotel companies like Marriott and Accor.

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“This is an opportunity to do something much bigger and also, with the combined capabilities of both companies, unlock bandwidth for both teams to expand in Mexico,” said AvantStay CEO Sean Breuner.

While AvantStay has been focused on the U.S., many of its customers are in Southern California and had been requesting Cabo listings since the Mexican resort destination is so popular with travelers in the region. Breuner and other AvantStay leaders are adamant global expansion will continue with local partners like Blue Desert to fuel expansion in various markets abroad.

The pandemic and easing of travel restrictions to Mexico last year sped up the Cabo partnership.

“The minute Cabo reopened at the end of July, it was insane the amount of bookings we started getting,” said Sean McClenahan, co-founder of Blue Desert Cabo. “Looking at the silver lining of Covid, this relationship was fast-tracked.”

Rapid Acceleration

The Cabo expansion is part of AvantStay’s plan to launch in over 30 markets this year. The brand operates currently in 60 cities, Breuner said.

But bigger, traditional hotel brands are also pushing into the high-end homes and villas sector. Marriott’s Homes & Villas brand now has more than 25,000 listings, up from the 2,000 seen at the division’s launch in 2019. Accor and Four Seasons have similarly pushed into the hotel-branded vacation rental space to varying degrees.

“There has to be growth [in this sector] because, post-pandemic, people are getting used to not being in mass groups with a bunch of people they don’t know,” McClenahan said. “If you can get a whole villa with hotel-style amenities for you and your whole group, who wouldn’t want to travel that way?”

Marriott’s Homes & Villas platform only works with home management companies and operators, including AvantStay, rather than individual homeowners.

While the company initially described the vacation rental business as a very small part of its business during the initial months after its launch, Marriott President Stephanie Linnartz indicated on an earnings call earlier this month there are a “couple million homes” that would fit the profile of the Homes & Villas platform.

That could be yet another growth vehicle for AvantStay, which would be interested in expanding the Homes & Villas partnership to the new working relationship with Blue Desert Cabo in the future.

“If you give people the opportunity to spend loyalty points on something that isn’t a hotel, especially with the demand for this new way of traveling in controlled environments in this new world, I think what [Marriott is] building is very impressive and we expect to continue to build our relationship with them,” Breuner said.

There are also growth opportunities on the investment side of the business. AvantStay has raised $60 million to date, and Breuner claims investor interest is heating up due to the pandemic accelerating short-term rentals as a preferred way to travel for many guests.

While companies like Marriott, AvantStay, and Blue Desert say they want to stick to luxury listings compared to the more open platform of Airbnb, the short-term rental giant going public also elevated the profile of the entire vacation home rental business — especially in the eyes of institutional investors.

Future growth doesn’t necessarily have to ride on the investments of private equity funds or high-net-worth individuals.

“I’d say the interest is really at an all-time high, and Covid has probably accelerated the institutionalization of the space by about two to three years,” Breuner said. “Now we have the ear of the entire capital markets industry: debt, equity, and private equity.”

[CORRECTION]: An earlier version of this story used outdated fundraising information supplied to Skift. This story has since been updated to reflect AvantStay’s current debt and equity fundraising figures.