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Everything to Know about Sonder

Everything to Know about Sonder

Building the future of hospitality, Sonder has blazed their way into the hospitality business and has been dubbed the unicorn of the industry as much as the “Travel’s Newest Billion-Dollar Brand”. The quasi-hotel company Sonder is revolutionizing the short-term rental market space and is on a mission to redefine hospitality by bringing exceptional stays around the globe.

Let's take a closer look at this premier hospitality brand that is setting the bar high and has been one of the biggest game-changers in recent times in the short-term rental market.

Get to know Sonder Inc.

Founded in Montreal, Canada in 2014, Sonder is a boutique apartment-hotel hospitality company that manages short-term rentals in North America, Europe, and Dubai. Headquartered in San Francisco, they offer a wide variety of accommodation options - from rooms to suites and apartments - available in 35+ markets across nine countries and three continents. Sonder makes better stays accessible for everyone. With perks such as a concierge at your fingertips guests can enjoy the comforts and amenities of a hotel while renting their very own vacation rental space - the $1 billion hospitality startup, claims to offer personalized apartment rentals that offer the best of both worlds.

Among the startup's most notable features are that it converts properties into short-term rental properties and hotels. It's one of many new hybrid companies such as Lyric and Blueground that combine elements of hotels and apartments. As opposed to Airbnb, Sonder owns and manages its own rental properties, which are licensed as hotels.

As explained by founder Francis Davidson,

“‘Sonder’, is as simple as apartments, villas, and condos that are serviced to the level of hotels. They are consistent and dependable,” he continued, “We are the managers of the entire experience. Rooms on Sonder have to apply and go through intense quality control. We only select apartments that will delight our customers.”

In essence, Sonder is a hotel-quality room without the commercial feel of a hotel.

The Founding Story

In 2012, while he was a student at McGill University, Francis Davidson started renting out his own apartment and managing apartments of out-of-town students in the summers as a way to earn extra money. In 2014, Davidson and Lucas Pellan founded Flatbook (later renamed Sonder), and brought the company to Montreal tech accelerator FounderFuel. By June 2020, the company had raised a total of over $550 million, valuing Sonder at $1.3 billion. Sonder has since raised over $46 million from venture capitalists.

What are the Key Features Sonder offers?

The modern design and highly streamlined technology allow guests and managers to have a seamless, consistent experience. In addition to being easy to use, it is also reliable, efficient, and scalable. By using one easy-to-use, personalized portal, guests, and managers can control all aspects of booking, check-in, guest experience, check-out, management, maintenance, and housekeeping processes. Sonder's system is simple, easy, streamlined, and centralized.

1. Seamless Contactless Check-in

Sonder features contactless service on its guest app, allowing it to carry out more requests with contract-free service.

The front desk at a Sonder hotel is never busy. There are no easily lost keys, no key cards that demagnetize without warning, no rickety or insecure lockboxes, and no annoying issues or concerns that need to be addressed at "Reception." Instead, guests are sent a secure key code prior to arrival for a completely contactless check-in. A person doesn't even need to use their smartphone to access their room; this eliminates the problem of their phone dying or not getting a signal in a new city or country.

2. Fully-equipped living spaces

Sonder apartments come with fully equipped kitchens and in-unit washers and dryers. Some also include access to building amenities such as game rooms and movie theatres. A 24-hour concierge service can be contacted via the Sonder app.

3. Flexible cancellations

Guests who cancel their booking any time before their stay will receive Sonder credit for the full value for one year.

4. Comprehensive cleaning

Cleaning is being tracked through Sonder’s housekeeping app, while all cleanliness standards and protocols have been updated to reassure guests of their safety during their stay.

5. 24/7 customer service

This enables staff to respond to concerns instantly, boosting customer satisfaction and ensuring guests feel taken care of throughout their stay.

6. High Security

Any suspected unauthorized access can be addressed remotely and immediately, and managers can change keycodes and other settings instantly via the portal, ensuring security at all times, and removing safety concerns such as key lockboxes with codes that never change.

7. Technology to manage the property

In addition, the manager can set the temperature and turn on lights before guests arrive to ensure the most welcoming environment; turn off the heating and lights when guests depart to conserve energy; and coordinate housekeeping, cleaning, and maintenance.

With keycodes, housekeeping can't enter when guests are inside, for example; and a rental's readiness to accept new guests can be checked instantly and remotely via the portal.

Safety Protocols when staying at a Sonder Hotel

On the pre-existing high cleaning standards with additional Covid-19 specific recommendations from the WHO, CDC and Canadian Public Health Agency guidelines, Sonder ensures every single housekeeper undergoes extensive training to ensure they employ Sonder’s high standards each and every time. Extra measures have been taken to implement best practices for cleaning and sterilization across all units, both within the Sonder apartment / room and building-wide.

Some safety protocols required from guests are as follows:

Face coverings - Guests are being asked to wear masks or other face coverings in all indoor common areas.

Signage - Signs have been put up across Sonder’s buildings to encourage social distancing and occupancy limits.

Occupancy limits - The number of guests that can occupy common areas is being limited to encourage social distancing between guests.

Also available to guests are amenities such as a lounge, luggage storage, an essentials closet stocked with things like extra toiletries and towels, and in most instances a theater room, gym and co-working space.

It’s a new way of operating, but may soon be the only way. With this technology-enabled experience, guests are in total control of their stay. Through the Sonder app, customers can access everything they need - from booking to interacting with guest services, to checking out - on their own mobile device anywhere, at any time.

A look at Sonder's Business Model

On the exterior Sonder looks like it is operating like any other short-term rental platform such as Airbnb or VRBO, but with a bit of added panache and a more luxurious appeal in terms of listings. However, closer examination actually reveals something different. Sonder leases and renovates apartments and hotels, and rents them to guests. Much like traditional hotel franchises such as Hilton and Marriott, Sonder does not own the properties but leases them and generates revenue by renting them to guests. This is in contrast to Airbnb, which acts as a marketplace between guests and hosts, neither leasing or owning any property.

According to Sonder, they sign multi-year fixed leases, mixed leases, or revenue shares as the anchor or sole tenant in your current properties and development projects, increasing NOI (Net Operating Income), accelerating lease-ups, and helping de-risk cash flow.

Through its digital-first approach, consistent high-quality, and beautifully designed short-term rentals, Sonder will appeal to a different segment of consumers mainly concentrated around business travelers, business traveler groups, families, and digital nomads. Ultimately, it may become the operating system for the hospitality industry in the future.

What makes Sonder - Swag and Stand different?

Sonder strives to set up shop in a city by absorbing its culture, listening to its needs, and responding accordingly. This enables Sonder to become an integral part of the community. In this way, they collaborate and add value to the hospitality industry within that city and allow real estate developers to have a quicker turnaround.

As an example, Sonder partners with an apartment REIT (Real Estate Investment Trust) and signs a lease for an unfinished property in order to renovate and operate the property. The developer gets 100% occupancy immediately after completion, which is a great deal for them. A traditional apartment developer may need a couple of years to stabilize the property. Furthermore, developers are not burdened with ongoing costs associated with tenant turnover and building maintenance. This results in immediate cash flow for developers as well as fewer operational headaches for property owners.

The same applies to hotel owners. Moreover, they do not have to worry about low occupancy rates during low seasons and seasonal hiring during high travel seasons.

How does Sonder list properties?

In terms of distribution, Sonder rents its units to customers through its own website and app Sonder also lists its properties with online travel agencies such as Expedia (EXPE), as well as Airbnb.

The Sonder app is recommended for download for any guest who chooses to stay in any of their properties. Sonder offers a clean, modern, contact-free way to stay in neighbourhoods around the world. By providing 24/7 guest support, self-check-in, stocked kitchens, crisp linens, and everyday amenities, Sonder ensures a unique, yet consistent experience.

How does Sonder list properties?

A guest can use the Sonder app to:

  • View reservation details
  • Book early check-in and late checkout
  • Access your Sonder's building, door, and WiFi codes
  • Review check-in and parking instructions
  • Get info on building amenities
  • Explore neighbourhood recommendations

Who does Sonder partner with?

  • Institutional owners
  • Hotel owners
  • Private equity funds
  • REITs (Real Estate Investment Trust)
  • Property companies
  • Boutique and family office firms
  • Entrepreneurial developers

To Partner with Sonder, you can reach them via email on partners@sonder.com

Sonder forward plan in the hospitality industry

Sonder forward plan in the hospitality industry (Source: Sonder and GMII Investor Presentation)

The company aims to increase brand awareness in order to sell directly to consumers. Direct bookings from Sonder's platform grew from 10% at the beginning of 2018 to close to 60% in 2021 - a continuation of this trend will increase profitability even more. It is a positive sign that Sonder is growing and getting repeat purchases, referrals, and organic traffic.

Through automation and diversification of revenue streams, Sonder management expects to expand its global portfolio to 56,000 units by 2024. Sonder hopes to expand into other parts of the world, such as Asia. As part of its strategy, the company wants to transition to a liability-light business model characterized by revenue sharing and mixed lease agreements. Additionally, Sonder plans to expand its portfolio to include resorts, villas, and residences.

Essentially, Sonder is highly ambitious in its aims to become the next Hilton or Marriott, while simultaneously being a highly tech-savvy company.

The growth of its platform is heavily influenced by supply growth or the sheer number of listings. Sonder has about 5,000 Live Units (units that are bookable) and 7,000 Contracted Units (units that have been signed but not yet booked) in the pipeline, as declared in its investor presentation. Sonder plans to grow its Live Units supply by 15-fold over the next 5 years, an ambitious goal. Due to the company's recent changes to its business model, it may be possible to scale more quickly.

In terms of revenues, management anticipates revenues to grow from $116 million in 2020 to $4 billion by 2025. Revenue growth will be achieved by a combination of supply growth and RevPAR growth. Thanks to the pipeline of Contracted Units due for delivery soon, they are optimistic that they will be able to accomplish this.

What to know about the Sonder IPO

According to a report published by betakit, Sonder co-founder and CEO Francis Davidson opened up about the acquisition plans in April 2021, and SEC filings confirm that the company reached an agreement with Gores. The companies estimate that Sonder will obtain $650 million USD in cash proceeds from the deal, which will increase the company's enterprise value to $2.2 billion. According to the report, the value represents a 3.6 times increase in Sonder's projected revenue for 2022. 74% of Sonder's stock will remain owned by existing shareholders.

The transaction includes a $200 million private placement led by an affiliate of Gores Group, the investment firm founded by the SPAC’s CEO Alec Gores, and includes participation from Fidelity Management & Research Company, funds and accounts managed by BlackRock, Atreides Management, entities affiliated with Moore Capital Management, Principal Global Investors, and Senator Investment Group.

Sonder has raised more than $560 million to date, with its Series E round in 2020 giving the company a $1.3 billion valuation. Its backers have included Fidelity, WestCap, ScaleUP Ventures, Real Ventures and Inovia Capital, among others. Gores Metropoulos raised $450 million in a January initial public offering.

Sonder Holdings Inc. and Gores Metropoulos II Announce Closing of Business Combination

In a report by Businesswire dated 18 January 2022, Sonder Holdings Inc. announced it completed its previously announced business combination with Gores Metropoulos II, Inc. (Nasdaq: GMII, GMIIW, and GMIIU) ("GM II"), a special purpose acquisition company sponsored by affiliates of The Gores Group, LLC, and Metropoulos & Co. A special meeting of Gores Metropoulos II stockholders approved the business combination on January 14, 2022.

The combined company's common stock and warrants began trading on 19 January 2022, on the Nasdaq Global Select Market ("Nasdaq") under the ticker symbols "SOND" and "SONDW," respectively.

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