How Sonder Straddles the Hotel and Short-Term Rental Divide

If you follow the short-term rental industry, you would have read or heard Sonder touting itself as “a leading next-generation hospitality company that is redefining the guest experience through technology and design” countless times.

However, the hospitality company description seems nondescript — is Sonder a hotel company or does it offer Airbnb-style short-term rentals?

The answer is both: Sonder is a property manager or management company for a portfolio of properties that is 60% apartment-style units and 40% hotels.

“Our mission starts with the words to revolutionize hospitality,” co-founder and CEO Francis Davidson told financial analysts earlier this week during the company’s second quarter earnings announcement. “And we’ve been very careful not to say to revolutionize short-term rentals or apartments, hospitality is a broader category, and we hope to be successful across a variety of asset classes starting with apartments, but also with hotels and with a few bets that we have in resorts.”

Now that the company launched its first hotel collection, Powered by Sonder, a few weeks ago, it seems the hotel part of the equation may get considerably larger.

Davidson sees Powered by Sonder, which consists of 23 independent hotels in around a dozen markets, as a “vast, vast opportunity,” particularly in major European cities where independent properties — the ones that aren’t flagged Accor, IHG or Marriott — are dominant, as well as in New York City.

There’s not much investment or refurbishing involved so the Sonder and the hotel owners can get the deal done very fast without needing to obtain financing, which can be tricky these days, he said. On the other hand, deals to develop and open multifamily apartment buildings and ensuring these unit have Sonder design standards, require financing and might take 2-3 years to open.

“So Powered by Sonder allows us to operate these hotels, to bring in our technology, to bring in our operations,” Davidson said. “But without having to redesign the whole thing, if it already is really interesting and distinctive and beautiful and has its own identity. And so it’s allowed us to really expand the range of supply that we can take on at really attractive economics.”

So you can expect Powered by Sonder to grow much larger in the future.

“Over time, adding a plethora of accommodation categories, we think, is the most appealing brand value proposition,” Davidson said.

Meanwhile, Sonder continued to lose money — $45.3 million in the second quarter — although revenue rose 30%. The company emphasized improvements in its burn of free cash flows, with those margins still in negative territory.

The North American market showed weakness in short-term rentals and corporate travel, a sector that Sonder began emphasizing relatively recently.