Skift Take

Vacasa has reached a remarkable milestone with its plan to go public, having parlayed the booming interest in vacation rentals during the pandemic. Yet the full-service property management sector is crowded, and going public is only the start of the journey.

Vacasa, the largest full-service vacation rental property management company in the U.S., said on Thursday it planned to merge with blank check company TPG Pace Solutions.

The transaction is set to give Vacasa, a startup based in Portland, Oregon, an equity value of $4.5 billion. The deal is expected to lead to its public listing on the New York stock exchange under the ticker symbol VCSA.

Vacasa’s merger with the special-purpose acquisition company (SPAC) is set to close “as soon as practicable,” according to a statement. CEO Matt Roberts will continue to lead the company. The combined company forecasts it will have $485 million in gross cash proceeds. A private investment in public equity, or PIPE, transaction, and a forward purchase agreement will contribute about $200 million to the deal.

Vacasa has disclosed raising $634.5 million in private equity funding — more than any other startup of its category. Private equity firms Silver Lake, Riverwood Capital, Level Equity, Altos Capital, Adams Street, and NewSpring Capital, together with founder Eric Breon and management, expect to roll all of their equity and plan to retain an 88 percent ownership of the company following the transaction’s close. That’s slightly more than the typical 80 percent ownership at many special-purpose acquisition companies.

Vacasa professionally manages more than 30,000 vacation homes mostly in the U.S. but also in Belize and Costa Rica. It has less than 1 percent of vacation homes in the U.S., highlighting the fractured market.

In 2021, the company expects to generate $757 million in revenue on a gross booking value of about $1.6 billion. The company forecasts a revenue compound annual growth rate of 31 percent from 2021 to 2023, with revenue growing to $1.3 billion by 2023.

The company isn’t profitable yet. It forecasts a $49 million loss this year on a projected $757 million in revenue. Despite a large “adjusted gross profit,” it doesn’t expect to break even until at least 2023.

If revenue reached roughly $1.002 billion in 2022, that would imply a multiple of 3.7 times the blank check company’s post-deal enterprise value of $4.5 billion. That would be roughly in line with the multiple on $91 billion market capitalization of online travel conglomerate Booking Holdings.

Comparing the property management company with online travel agencies is relevant because Vacasa tries to drive direct bookings and repeat booking via its website and mobile app. As of the year to March 31, 35 percent of Vacasa’s revenue came from bookings direct to the company’s site or mobile app.

Vacasa said its site and app attracted 37 million visits in the first three months of this year, up from about 10 million in the same quarter in the pre-pandemic year of 2019. The startup said only about 20 percent of its visitors were the result of paid search engine marketing. It hasn’t done traditional TV or billboard marketing. It projects its sales and marketing expenses this year to be about 21 percent of its forecasted revenue.

Finding comparisons in the property management sector isn’t easy. No publicly listed company is a pure-play in running full-service vacation rental management. Wyndham sold, in 2018, its portfolio of European vacation rental businesses to Platinum Equity for $1.3 billion for a unit, since rebranded to Awaze and undergoing a tech overhaul.

Vacasa’s investor presentation on Thursday, linked to below, noted that about one out of five homeowners who listed with Vacasa were new to renting out their properties, based on individual homes added since 2019. That suggests the company is helping to add supply to the market.

The company said in its investor presentation it has often been able to provide an approximately 20 percent rental income lift to homeowners in the first year and a 10 percent lift in the second year. So while Vacasa may not be profitable itself, its service may be profitable to many homeowners.

Vacasa Has Expansion Plans

Having about $480 million in cash may let Vacasa do more mergers and acquisitions. The company said it saw an opportunity in the more than 350,000 homes currently managed by 4,500 local professional managers in desirable destination markets (touristed, non-urban markets) that have at least 20 units under management as of March 31. The startup’s largest acquisition to date was of Wyndham Vacation Rentals for $162 million.

Vacasa said it plans to re-enter Europe, a market it left mostly during the early pandemic crisis.

In Europe, Awaze is a big player. Awaze’s main UK rival is Sykes Cottages, backed by private equity firm Vitruvian Partners after a half-billion dollar deal in 2019. (See Skift’s profile of Sykes, here.)

In 2019, Oyo Hotels & Homes acquired the Amsterdam-based vacation rental company @Leisure Group for $415 million (€369.5 million).

Travel SPACs Have a Moment

It has been a quick trip for TPG Pace Solutions as a blank check company. The vehicle, spawned by alternative asset firm TPG (which has $96 billion of assets under management), was listed in April. Its success in raising $285 million in cash, finding a target, and securing additional funds from other investors, suggests the market for special purpose acquisition companies is shaking off some recent market jitters.

Vacasa is joining others in the travel and transport sector in raising money and going public. So far this year, Inspirato, Sonder, HomeToGo, Cvent, and SWVL announced mergers via blank check companies, with others possible. (See Skift’s coverage of special-purpose acquisition companies in travel.)

Earlier this year, Skift previewed the high probability Vacasa would seek to go public this year. Vacasa has partly benefited from a surge of U.S. consumer interest in short-term rentals during the pandemic. Skift Research’s Travel Tracker has shown that the vacation rental market share of total accommodations doubled between February 2020 and November 2020. Skift Research subscribers can read our May report: The Short-Term Rental Landscape Will Never Be the Same.

See the investor presentation, below. This article was updated after the investor presentation was released.

Download (PDF, 15.03MB)

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Tags: spacs, startups, vacasa, vacation rentals

Photo credit: A view of a three-bedroom vacation rental in Idyllwild, California, that's available for booking via Vacasa. Vacasa

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