It's the latest validation of the subscription model in travel. Inspirato, which has 12,500 customers paying for its luxury travel subscription products, is merging with Thayer's special purpose acquisition company, or SPAC.
Inspirato, a subscription-based luxury travel company offering vacation rentals and apartment stays worldwide, announced on Wednesday its planned merger with blank check company Thayer Ventures Acquisition Corp.
The transaction would give the Denver-based Inspirato an enterprise value of $1.1 billion and would lead to its public listing on the Nasdaq stock exchange under the ticker symbol ISPO.
The merger is expected to close in the fourth quarter. Founder and CEO Brent Handler will continue to lead the company. His brother and co-founder Brad Handler will be executive chairman.
Inspirato has about 12,500 subscribers across two core products. Executives are projecting a 17 percent annual compound annual growth rate for subscribers.
Its subscription pass, launched in 2019, costs about $2,500 a month to book travel at vacation homes and hotels. Subscribers can pick from a list of trips that typically features more than 150,000 combinations consisting of luxury homes, hotels, and experiences.
The company manages and controls these homes and hotel stays through leases and other exclusive agreements, similar to the way that a hotel brand manages and controls a real estate owned and operated by others. At the vacation homes, it puts in its own furnishings staff and operates concierge services.
The company estimated it has been spending an average of $5,350 to acquire each new subscriber, who pays between $30,000 and $32,500 a year.
The company also offers a $600 a month club membership that gives customers access to bookings at reduced nightly rates.
“When we founded this SPAC, were looking for a partner that was cracking the code with a differentiated business model for sustainable long term growth and upside,” said Thayer Ventures managing partner Chris Hemmeter during a press conference on Wednesday. “We’ve found it.”
The combined company is expected to have a balance sheet of more than $260 million in net cash, assuming no redemptions by their shareholders.
A private investment in public equity, or PIPE, transaction, will contribute about $100 million to the deal. The PIPE is led by Janus Henderson Investors and Rodina, and includes additional incremental capital from Kleiner Perkins, IVP, company founders, and others. Inspirato had raised about $85 million in venture capital.
“While hotel companies pay millions of dollars to incentivize their customers to travel with them, the reverse is true with is Inspirato,” Brett Handler said. “Our subscribers pay us for the benefit of being able to travel within our platform.”
Resilence for Subscription Travel During the Pandemic
Inspirato suffered a blow with the pandemic hurting 2020 revenue, when it only generated $165 million.
“We still managed in 2020 to make, on an adjusted EBITDA [earnings before interest, taxes, depreciation, and amortization] basis to make nearly $10 million and had positive cash flow,” Handler said. “We were able to do that because of the flexibility this model affords that we can get out of 88 percent of our leases within a year for convenience and 87 percent of our leases have force Majeure clauses.”
Executives forecast a return to pre-pandemic revenue growth this year. In the first quarter of 2021, it booked 50,000 room nights.
The company predicted it would generate $149 million in annualized recurring revenue by the end of the fourth quarter of 2022 and that its revenue would grow at a compounded annual growth rate of 41 percent between 2021 and 2025.
Luxury hotel companies like the subscription model as a way to guarantee room occupancy and reduce “spoilage,” or vacancies that could’ve claimed about $39 billion in revenue in 2019 had the rooms instead been filled at average rates. However, it’s not clear to what extent there might be cannibalization between sales in a subscription model versus a traditional model.
Brent Handler had publicized the company’s breakout subscription model for its “pass” product at Skift Global Forum 2019 (video, here), and Skift has covered Inspirato’s subscription traction for some time.
Handler said Inspirato believes its “serviceable addressable market” for luxury subscription accommodation in the U.S. will grow from $100 billion this year to $175 billion by 2025.
“We passionately believe that subscription travel is going to be a multibillion-dollar category very soon based on our own estimates and third-party research,” Handler said on Wednesday. “Travel is one of the last consumer categories that has not yet been subscriptionized.”
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Photo credit: An Inspirato vacation rental property at a resort in Los Cabos, Mexico. Inspirato