Travel bookings are starting to pick up after a precipitous fall at the beginning of the coronavirus pandemic, and private accommodations are winning out due to lingering concerns about the virus in shared spaces. Investors already think the space could see the strongest rebound after the pandemic ends.

Short term rental companies are seeing the largest rebound as some consumers plan summer vacations before the season ends. Consumers are looking for vacation destinations in driving distance, and most of them are using services like Airbnb and Vrbo — reporting shows that these services are winning in the initial stages of the recovery.

Covid-19 Accelerated ‘Survival of the Fittest’ in Private Accommodations

More established companies like Airbnb and Vrbo have seen a rebound in recent months, but startups in the short term rental space have been forced to take action in order to continue operating.

Lyric is a company providing apartment-style accommodations that raised $180 million from Airbnb and other investors. The pandemic has forced the company to close all but one of its locations. Forbes reported that Lyric will “now shift focus to software tools including an existing pricing tool for accommodation.”

Stay Alfred, a luxury rental brand, ceased their operations in April, while Sonder landed $170 million in funding after cutting 1/3 of their workforce in March.

Ultimately, companies that can cut costs and ride out the pandemic-induced downturn have the opportunity to take advantage of less competition in the space. However, lasting through the downturn requires something that only a few private accommodation companies have — scale.

Looking at a Post-Pandemic Market

Revenue for companies in the private accommodations space has been cut drastically over the last few months. Companies at scale will still face challenges, but they have the best chance not only to survive but thrive after the world returns to some sense of normalcy.

Chris Hemmeter, managing director of Thayer Ventures, sees an opportunity for big players in the private accommodations space. He said in an interview with PhocusWire:

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.

A lot of travelers did not book vacation rental assets because of a lack of reliability; they did not know what they were going to get but in lot of ways assets are superior to hotels.

Even today you can’t book connecting hotel rooms, there’s no guarantee you’ll get it. Part of our thesis when we invested in Sonder was that that lack of brand standards was an untapped opportunity.

Investors are realizing that the winner coming out of coronavirus will likely emerge into a landscape that is dramatically different at least as regards competition and investors back the likely winner.

One way to examine how investors will treat the market is to watch Airbnb’s potential IPO — the company has changed its tune frequently over the last few months. The company recently announced that it is “resuming work” ongoing public.

“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.”

Chris Hemmeter, Managing director of Thayer Ventures

Seeing the reception to an Airbnb IPO could provide some insight into how the private accommodations space will grow in a post-pandemic economy. Some investors predict that companies like Airbnb will dominate the recovery, ultimately accelerating the market’s growth.

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Categories: Stays