Sonder founder and CEO Francis Davidson talks:
- The advantages of becoming a public company
- Finding niche-use business travel clients
- Securing corporate customers during a pandemic
Short-term rental provider Sonder this week debuted on Nasdaq stock exchange after shareholders approved its merger with purpose acquisition company Gores Metropoulos II. The day after, Sonder founder and CEO Francis Davidson talked with BTN lodging editor Terri Hardin about the importance of establishing a consistent stream of business travel demand and the steps Sonder is taking to approach that market.
BTN: The morning after, how did you feel about going public?
Davidson: Felt pretty damn great. This was an awesome milestone for the business. Incredible amounts of work have gone through building this business over the last eight years, especially with this unending pandemic. I’m incredibly proud of what the team has done to thrive despite all odds and to lead us to this point.
BTN: Why is going public now the right choice for Sonder?
Davidson: Going public gives us the capital we need to keep pursuing very rapid expansion and reassures our real estate partners. We’ve partnered with developers before they figure out the floor plan they want to adopt, and we co-create that with them in a way that’s optimal for the both of us.
We’re going to show our balance sheet, our financials and the progress of our financials. This gives a lot of comfort to the real estate owners and developers who are putting in sometimes tens, if not hundreds, of millions of dollars toward building these properties specifically for Sonder. Their banks and lenders also want to be reassured that we’re going to be able to perform.
BTN: To what degree did the pandemic play a part in your successes and your challenges?
Davidson: We took the last 22 months to develop new capabilities and lean into our strengths, like contactless service. That you can do so much on the phone and mobile app makes it much easier for someone who’s Covid-conscious to stay with us and receive all services digitally has really played to our advantage. Also, we were creative in identifying niche-use cases, like traveling nurses, which is an interesting demand stream for us. It’s allowed us to do really well on occupancy and to help perform on [revenue per available room]. It demonstrates what we do well and that our business model is resilient in the face of adversity.
BTN: To what degree will you make business travel part of your revenue stream?
Davidson: We want to be the premier global hospitality brand, and there is no such company of that scale that only serves the leisure transient traveler. We know it’s a crucial mix. Until 18 months ago, we focused almost exclusively on leisure. We’ve always wanted to tackle business travel, but it was important to do it at the right time. So once our leisure travel was robust, we thought, “Let’s move on to the more complex business travel segment, where the standards are really high.” We had to make sure that our experience was consistent and high quality.
Regardless of what one might think about the speed of recovery of business travel, our view is that in the very long run, this is going to be a substantial component of our business, and now’s the time to start building those capabilities. We announced recently that we’ve got over 100 accounts that have signed up as corporate customers that are that are relying on Sonder for their travel needs. They were all signed during the pandemic, so we think it’s been a good moment to lean in.
We don’t need to rewrite the playbook. When it comes to our business travel strategy, we’ve mostly hired industry people who know how to do this and know the intricacies of what travel managers are looking for.”
BTN: How are you pursuing corporate contracts?
Davidson: We have a sales team. We’ve hired some veterans from the hospitality industry. It’s headed by Kristin Richter. She was previously the chief revenue officer for the Americas at Radisson. She [now] heads up our business travel and sales organization.
We’ve learned our lesson: There are some areas where we will innovate, and there are others where we should hire experts who know what they’re doing. We don’t need to rewrite the playbook. When it comes to our business travel strategy, we’ve mostly hired industry people who know how to do this and know the intricacies of what travel managers are looking for and the corporate [request-for-proposals] season and all the industry knowledge that is required to be successful.
BTN: Right now, 50 percent of your corporate business is coming from relocations. Are you planning to diversify your business travel demand?
Davidson: Extended stays are such a slam dunk of a value proposition. You can stay in a nice, branded, high-quality apartment for a few weeks. It just works really well, so extended stays relocations, corporate contracts for stays of, I’d say, 14 days or 30 days or more is the bread and butter of our business travel demand right now.
We have an interesting value proposition for business travelers, because we are better for longer but fewer trips. You’ll see some really impressive price points for properties that are well located and look great. That’s because of the technology we’ve built. It’s fast and efficient and easy to do everything on your phone. That’s really something [business travelers] appreciate on the ground … and it’s a really appealing value proposition to travel managers.
BTN: Before the pandemic, luxury properties might have promoted themselves as “high-touch.” After the pandemic, nobody wants to touch anybody. How did that benefit Sonder?
Davidson: The vast majority of our guests show up and go straight to their rooms. They’ll use the app in order to fulfill services. There’s a grand philosophical debate in hospitality, which is the white-glove service approach and the face-to-face interactions—the more traditional ways of thinking about high-quality service. The way we think about high-quality services, instead of a smile, it’s like an emoji in a gif. That might sound bizarre for some people, but for Gen-Z and Millennials, that’s actually more comfortable to them than face-to-face interaction. That’s a cognitive shift. Not every customer likes the way we do it, but a growing quantity of customers really love it that way.
BTN: Which kind of properties are you looking to add to your portfolio?
Davidson: There’s been a really big shift in our history. We used to work with owners of apartment buildings and figure out how we could bring a few of these units onto the Sonder platform. But for a few years now, we’ve focused on conversions of commercial buildings, ground-up construction, and repositioning of independent hotels. We [still] want to have apartments, [but] we also want to have hotels because not every trip requires a large space. A business trip where you’re only in town for a couple of meetings for a couple of days—you don’t need the whole kitchen and laundry room. Our view is that the best possible hospitality brand will have a series of options within the portfolio that can fit any specific trip.
We went public because this is the time to shine. Especially given that there’s so much change happening in the industry. That’s a large motivation for our public offering. Let’s go get the capital that we need to extend this concept fast because we know this is what the future of hospitality looks like.
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