San Francisco hotel giant vows to invest in Scotland
A SAN Francisco-based hotel and serviced apartment provider has revealed bold ambitions to expand in Scotland’s two biggest cities, despite coronavirus continuing to obscure the outlook for 2021.
Sonder Hotels currently has a single property in Scotland, the 30-unit Royal Garden Apartments in Edinburgh’s New Town, where it has seen strong occupancy in the second half of the year after reacting to the pandemic by moving into the long-stay market as tourist numbers fell.
The company has big plans to expand on its entry into the Scottish market and has secured a deal for its first property in Glasgow, with further sites in Edinburgh to follow.
This year alone Sonder expects to invest nearly £14 million throughout the UK and Ireland, and underlined its appetite for growth when it recently secured $170 million in Series E funding.
Sonder is on track to open its maiden Glasgow property, a 41-unit managed service apartment block in the Finnieston area, in 2021.
“Our ambition is to significantly grow the portfolio in Edinburgh over the next few years,” said Lia Prendergast, the company’s general manager for the UK and Ireland.
“Our ambition would be to get to between 500 and 1,000 keys in Edinburgh. In Glasgow, we have signed a 41-unit building already but, again, we would have ambitions to grow further in Glasgow in the coming years.”
Ms Prendergast, who joined Sonder about a year ago after working in retail strategy and consulting, added: “One thing to note is while our current portfolio in Edinburgh is apartments, we also have hotels. We are a hospitality company that has hotels, apart-hotels, [and] managed-service apartments in our portfolio.
“We are looking to expand both our hotel fronts, as well as the apartment fronts, in a city like Edinburgh over the next few years.”
Sonder can trace its roots back to 2014, when co-founders Francis Davidson and Lucas Pellan created a start-up that matched travellers with student apartments in different cities. Its website notes its portfolio has since grown to include properties in more than 35 cities in seven countries, with the company welcoming more than 825,000 guests per year.
Sonder’s model is not to acquire freehold interests but to lease buildings, which it then manages as serviced apartments or hotels, providing an “end to end” guest experience.
While Sonder is keen to increase its presence in the hotel market, the flexibility of its serviced apartments has been a boon during the pandemic.
In Edinburgh, it has been able to compensate for the sharp fall in tourist numbers by marketing to different audiences, including executives who have relocated and people who have preferred renting space at Royal Garden Apartments over leasing private properties for longer periods, given the economic uncertainties.
The company has also seen its properties used by key workers during the pandemic, who had to perhaps move out of homes shared with vulnerable parents.
September saw Sonder record its best month in 2020 for its Royal Garden Apartments in Edinburgh in terms of revenue per available room, which exceeded pre-covid levels. That came as people sought apartments for extended stays, and amid demand for staycations.
The company’s apart-hotels in Dublin, Ms Prendergast said, also enjoyed their best three-month spell, from August to October, since their launch, with the average stay rising to 30 nights.
“One of the biggest challenges is having to react to a changing environment very quickly, but we have managed to do that successfully,” Ms Prendergast said.
“When Covid first hit back in March, we saw the early signs of it in Rome. We re-focused from a business that was predominantly targeting shorter day tourists into the extended stay model.
“We did this across the business. That has really helped us get through the challenges posed by Covid.”
Equally, Sonder’s investment in technology, both to enhance the guest experience and underpin back-end operations, has been a major asset amid the crisis. Its technology, for example, allows guests to check in via their mobile phone, and access their room via a digital lock, without having to interact with staff.
“At the back end, we have got proprietary technology that underpins the guest experience, and allows us to allocate tasks to our staff on the ground,” Ms Prendergast said. “[There is] a lot of technology in our model.
“We were building towards the future of hospitality for some time, and that future arrived quicker than anticipated because of Covid. People are increasingly seeking out the contactless experience now, and we are well positioned to offer that. It has been part of our proposition for quite some time.”