Laurence Tosi and Allen Mask both have skin in the game when it comes to the prospects of Airbnb and Sonder. Are they downplaying Airbnb's challenges, and Sonder's breakout potential?
There will be Airbnb and Sonder — and everyone else.
To hear Laurence Tosi of WestCap Group and investment partner Allen Mask of CoLab Group tell it, the emerging dynamic in the short-term rental industry won’t be winner-take-all scenarios, but will see dominant players such as Airbnb and Sonder emerging in their respective sectors, and a fragmented group of weakened competitors filling in the rest of the leadership.
Speaking about Airbnb at the Skift Short-Term Rental and Outdoor Summit Wednesday, Tosi, founder and managing partner of Westcap Group, said that in 2019 it became clear that Airbnb was becoming a dominant marketplace, and that competitors were weakening, and their market share was becoming fragmented.
Likewise with Sonder, which plays in the quasi-hotel and short-term rental space and is slated to go public in a blank-check-company merger, it became clear that there was a “difference between the leader and everyone else,” Tosi said.
Both Airbnb and Sonder were breaking away from the pack, a development that accelerated during the pandemic, Tosi argued.
Skift Research senior analyst Seth Borko, interviewed Tosi and investment partner Allen Mask, managing partner at Colab, which is a WestCap affiliate, at the Skift online summit on the topic, “Where Do Short-Term Rentals Go From Here.”
WestCap is an investor in both Airbnb and Sonder, and both Tosi and Allen are Airbnb alums. Tosi was Airbnb chief financial officer, and Mask was head of global product marketing.
Of course, it should be pointed out, there are seldom winner-take-all dynamics in the travel industry, which usually has two to three dominant companies in each sector.
While Tosi’s theory about Airbnb’s dominance could become reality, in 2020 and early 2021, Vrbo, which has fewer than one third of Airbnb’s listings, for example, has made market share gains, at least in the U.S., and Airbnb has faced plenty of challenges.
For its part, Sonder benefitted from several of its competitors, including Lyric, Stay Alfred, and Domio, becoming pandemic casualties or winding down, and new rivals could certainly emerge to provide a more robust marketplace.
Not everyone is as sure as the duo about Sonder’s potential dominance.
Speaking in an earlier Summit session, HomeAway co-founder Carl Shepherd said that for Sonder, “the right things happened at the beginning of the year” for the urban-focused brand during the pandemic.
“It’s standing alone in the market, and its business model is as well-positioned to succeed as it’s ever been,” he added. “But there’s never been a $2 billion-valued corporate travel company. I’m interested to see how Francis (Sonder CEO Francis Davidson) takes it forward. The valuation’s very rich, it almost feels like I’m back in 2001 before the first dotcom bust, when pets.com got valued at billions of dollars.”
During another session at the Summit, Sonder CEO Francis Davidson claimed that Sonder’s business is 80 percent leisure travel.
Allen of CoLab Group predicted there will be consolidation in the short-term rental sector with new leaders emerging, and the marketplace will demand specialization.
The short-term rental industry in the past did a poor job of merchandising, and inventory tended to be commoditized, Allen said. The pandemic, he added, gave companies the opportunity to hit reset, to right some wrongs, and to address issues in a different way.
Both Allen and Tosi argued that Airbnb’s future is tied to its ability to rekindle individual hosts’ passion for the platform. That’s a dynamic that some would argue has waned during the pandemic because of Airbnb’s cancellation refund policies, and the dominance of professional managers on its platform.
Tosi said technology matters, and that Airbnb will need to continue to innovate on that front. Airbnb is slated to announce some technology upgrades for hosts and guests next week.
Airbnb will thrive “as long as they (hosts) believe in the mission,” Tosi said.
Note: This story has been updated to include Sonder’s assertion that it is a leisure travel-oriented company, and not currently a business travel one.
Photo credit: A living room in a Sonder rental. Investors argued that Sonder will dominate its sector. Sonder