How investors are taking the long view on opportunities in short-term rentals
07/28/2020|9:03:55 PM|Phocuswire

Private accommodation is already being heralded as the comeback kid for post-pandemic trips, with many travel intermediaries putting their focus on domestic markets and short-term rental specialists reporting an uptick in consumer interest as well as actual bookings.

Expedia Group said last week that its Vrbo brand is the largest contributor to the steadily improving booking trend.

And, more recently, Airbnb announced that one million nights for future stays had been booked for the first time since early March. 

But like the rest of travel, private accommodation has been hard hit by the pandemic, leading some in the investment community to ask whether the size of the opportunity will be as great when the travel industry recovers.

Lio Chen, senior vice president for Plug & Play, points to the fact that investment in alternative accommodation businesses made up more than a third of travel tech deals in 2019, describing it as “too fast, too furious” for everyone to make a return on. 

Already, some startups in private accommodation have been battered by the coronavirus outbreak.

Chris Hemmeter, managing director of Thayer Ventures, still sees huge opportunity for private accommodation and believes the reason some are failing to attract investment is because they haven’t achieved scale.

“The reason we like the private accommodation space is that we have always felt like it was an asset class that suffered from a lack of brand standards.

Hemmeter notes that some of the brands are failing to attract investment and closing while others are raising. This, he believes, is an illustration of the importance of scale and, more specifically, how quickly companies have been able to onboard properties.

Room for growth

Hemmeter’s prediction is that in a few years the pandemic will have accelerated the growth of the private accommodation space.

And there will be other changes, with many predicting increased automation and the use of technologies such as machine learning to boost efficiency and productivity.

“We’re going to just see more innovation and anybody who tries to stick with the pre-coronavirus status quo and use antiquated technology to run their business is going to suffer. We’re focusing on companies, software and services that are leading out on that edge of productivity and flexibility.”

Much-heralded unicorns are elusive beasts - but that still leaves room for plenty of smaller deals.

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