Rival to Airbnb, hotels has to go very big, or go home

If you haven’t heard of Sonder, you’re not alone. The company has done a remarkably good job of flying under the radar until their recent turbulence.

Sonder operates by leasing and renovating apartments and hotels, which are then rented out to guests. Instead of owning the properties, Sonder leases them and earns revenue through guest rentals. Sonder specializes in offering shortterm serviced apartments that provide a welcoming and consistent home-like experience.

To secure properties, Sonder enters into multi-year fixed leases, mixed leases, or revenue-sharing agreements, often acting as the primary or exclusive tenant in properties and development projects. Sonder utilizes machine learning to analyze data from nearby hotels and Airbnb listings, enabling them to forecast and select the most suitable properties.

In addition to their current offerings, Sonder plans to expand into other property types, such as resorts, villas, and residences. They also aim to develop a franchising model and offer software solutions to third parties.

Sonder Holdings’ stock has gone down significantly. According to Barrons, shareholders have lost 40.24% year-todate

The problem with reinventing the wheel is that it’s, well, a wheel.

As someone who has traveled over three million miles, all across the world, and mostly but not exclusively on business, do you know what the best thing is about hotels?

That they’re hotels. There are humans to get you anything you need, check you in, give you advice as to where not to walk, where to get the best Sichuan chicken, and when you get back from whatever you were doing, the room is clean.

I did the whole Airbnb and more upscale version of the same thing and there always something and each time the new something is more annoying than the last something.

Yet Sonder is convinced that they are revolutionizing the shortterm rental market space. The company’s mission is to combine the best parts of hotels and private homes, offering living room spaces and kitchens so people can cook and relax like they would in their own home, and to do that, they raised $135 million in venture capital to turn Airbnb-style rentals into a hotel-like experience

I predict that Sonder isn’t going to make it.

While Sonder is in direct competition with Airbnb, hotels, and other short-term rental companies, what sets them apart may not prove to have been enough of a competitive and comparative advantage.

Because Sonder owns and oversees their own properties, they banked on being able to deliver a consistent, top-tier experience for the guests. Features such as technology-enabled keyless entry and a mobile app that facilitates check-in and provides essential information for their stay were intended to lure people away from hotels.

But it takes a long time not only to build a brand, but a new niche in an existing vertical, as Sonder has tried to do.

Fundamentally, they need to pull enough of a mass of people from hotels and sharing-economy experiences such as Airbnb to make the business model work in the long-term, and they don’t seem to be able to navigate this turn.

If they do, it’s going to be a good trick. This is a miserable space in which to set up a new business because you have to go very, very big or you get sent home. As odd as it sounds to say, $135 million may prove to be a remarkable undercapitalization for a business such as Sonder to succeed. It’s realistically probably a billion dollar play to shift enough minds and hearts to have people think of Sonder at the same time they’re thinking of hotels and Airbnb.

When startups aim to disrupt a massive and alluring market, they must discover methods to challenge the very core of established norms. If they fail to do so, their journey becomes an arduous struggle that starts leaking when venture capitalists provide some funding, and plummets into a valley of despair when they realize the true difficulty of the path ahead.