Skift Take

The self-proclaimed next-generation hospitality company has a finely tuned strategy, but it may be a slow-burner as profits continue to be elusive.

While hospitality company Sonder has a complex digital strategy in place to fill its properties, what it really wants is for its mostly Gen Z and millennial guests to brag about their cool stays on social media.

Sonder describes itself as a next-generation hospitality company, and its R&D budget is wide-ranging, with marketing a key focus, according to its senior vice president of revenue.

“We have a very omnichannel approach to distribution, whether its sales or third-party distribution, things like Airbnb and booking.com,” said Shruti Challa, speaking at the Skift Future of Lodging Forum on Thursday.

It also uses Google Hotels and Tripadvisor. But at the same time it’s keen on using performance marketing. “Social is very big for us,” she added. “Our overall approach is to target the right customer in the right space at the right cost.”

The company queries data around questions like: what is the cost per acquisition per customer, and what is their lifetime value after that?

With performance marketing, they get to book directly, and it doesn’t have to be more expensive than using an online travel agency, she told moderator Seth Borko, Skift’s senior research analyst. They also become more loyal guests.

Social media marketing makes sense, given the type of guest Sonder wants to attract. The customer segment is “young, urban, open and thoughtful, and wants to self curate their stay,” Challa noted. “They’re more digitally enabled. Technology underpins a lot of the generation we believe in.”

Gen Z and millennials also care a lot about design, and how they appear to their communities, she added during the “The Tech Drivers Necessary for Lodging Today” discussion. “This is an age where social is a way of life.”

Driving Profit

Sonder, which operates in 39 markets, and has 7,700 rooms across 250 properties, is also ramping up efforts to target corporate travelers, again going for Millennials and Gen Z-ers, and has grown its corporate accounts from 150 to 250, with bank interns using Sonder properties as corporate housing. It counts entertainment groups, sports teams and Broadway shows as clients too.

It also wants to leverage technology to drive down costs, and ramp up RevPAR — or revenue per available room, a key industry metric.

“There are a lot of elasticity studies,” Challa said. “Even with just a small markdown, you can drive occupancy more effectively. If you have higher occupancy, you can get bookings earlier.” While that leads to higher variable costs, with more check-ins and check-outs, she said ultimately it produces longer lengths of stay.

Despite posting an $83 million loss for this year’s first quarter, she said the second quarter was looking up. “There’s a snapback in travel,” she said. Sonder will extend into new customer segments, on top of corporate travelers and digital nomads, and expects 140 percent year-on-year growth in the second quarter.

With murmurings of a recession, the wide-ranging tech arsenal will come in handy. “I’m optimistic in Sonder’s ability to pivot or shift,” she said. “We have to prove in terms of our financial performance. Proving to the market Sonder is here to stay.”

CORRECTION: This article was updated to correct misinformation given by Challa during her session on Thursday.

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Tags: future of lodging, revenue management, skift live, social media, sonder, technology

Photo credit: Shruti Challa, Sonder's senior vice president of revenue, speaking at Skift Future of Lodging Forum on May 12, 2022.

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