Vacasa, Sonder, and Inspirato Test Investors’ Appetite for Short-Term Rentals

Vacation Rental Startups Gear Up for IPOs

Three vacation rental management companies Vacasa, Sonder, and Inspirato are gearing up to go public via SPAC deals, testing investors’ appetite for alternatives to traditional hotels. With more Americans working remotely, the vacation property management startups have benefited from demand for vacation homes and apartment rentals.

But that’s not to say they don’t face challenges. The companies are facing increasing competition. They are also up against a shortage of properties to use for expansion. Nonetheless, Vacasa plans to go public by the end of this year with a valuation of around $4.5 billion, while Sonder is aiming to be valued at more than $1.9 billion in its public debut this year. Inspirato is targeting a $1.1 billion valuation.

More Market Share Coming

There is an opportunity for the professional management companies to grow in the current market. As it stands, the short-term rental market is dominated by individuals who post their homes and apartments on websites like Airbnb (ABNB). Professional managers like Vacasa and Sonder only represent 16% of the US short-term rental market, but that is up from 13% compared to before the pandemic.

The industry is expected to grow its market share even more because properties that are branded and managed tend to get higher rates than those listed by individual homeowners. Vacasa and Sonder think that managing a number of short-term rentals at one time is more efficient and that travelers like to know that the same basic standards will be met no matter where they travel.

Challenges Abound, But Demand Persists

The short-term rental market has grown about 30% since the pandemic began, but the startups are having difficulty finding new properties to rent out with real estate demand growing in vacation hotspots. The companies are not only at the mercy of what’s happening in the hospitality industry, but also the residential real estate market, competing with long-term renters and home buyers when they seek to add new listings to their portfolios.

Despite challenges, the short-term rental market is booming, which is why startups in the industry are commanding multibillion-dollar valuations. Vacasa, Sonder, and Inspirato are trying to capitalize on this trend as they prepare to go public.

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