Airbnb + Hotel = Sonder (?)
I have been following Sonder for a while now and I recently got a chance to stay at one of their units in New York City. I assume most in my network are familiar with Sonder but if you are not; their recent Series D funding made them one of the latest travel industry unicorns (a start-up valued at over a billion dollars). Their business model is something of a hybrid between Airbnb (I am using Airbnb as a generic term for that model) and a hotel.
In Sonder's investor deck they talk about the fact that travelers are “forced to choose between two flawed options, ” and I believe they did a good job showing their value proposition with the slide below (I think we could all add about a dozen more points to this).
This model has the potential to be an even a greater threat to traditional hotels than Airbnb as it promises to offer the best of both worlds; the comfort, community, cost of an Airbnb type rental but with the cleanliness, consistency, and safety of a hotel, and their intent (at least as currently stated) is to abide by the prevailing laws and regulations; from taxes, to zoning, to fire and safety to ADA. This takes away the argument of many hoteliers that they are “not against Airbnb, they just want an equal playing field” and allays the fears of guests, one of which recently came true for many Airbnb bookers, in Tokyo last year and Honolulu this year, when units booked were forced off the platform due to changes (and/or enforcement) of local laws.
The traditional hotel model is based on having a big box (building) with dozens, hundreds or even thousands of rooms sized (very small) so that the building can generate as much revenue as possible, whereas the Sonder model creates “micro-hotels” within traditional apartments utilizing design and technology to offer many of the hotel-like attributes that people desire. Their business model, which includes both asset acquisition and long term leases, definitely has some risks for the company and its investors, but this article is to look at the product from a guest’s (my) point of view.
So how did they live up to their investor pitch?
I stayed at one of their units in the financial district of NYC where they have numerous units in a building that is right next door to the New York Stock Exchange. They have other better-located units in NYC but for various reasons (mostly price) this one suited me the best.
Easy to use app and booking process
Communication with Sonder including check-in and check-out instructions easy to follow (at my unit entry was through a lock with a code)
Room (1 bedroom) was spacious (for NYC) and had everything you needed, including full kitchen and washer dryer and was stylishly appointed
I had a noisy neighbor and texted Sonder, the apologized and said they would contact the room next door and it soon became quiet. Not sure what would happen if the neighbor did not respond or if it was not a sonder unit, but this is much more than one would expect at an Airbnb, and better service then I have received at some hotels.
There was a lounge on the 4th floor to hang out if you wanted to and a place to store luggage (a huge plus over Airbnb, but this had some issues – see below).
This particular property was in a mixed-use building that appeared to have offices and private residences. There was a guard at the desk for the property (not for Sonder) but many people asked him questions and he was not very pleased about having to deal with Sonder guests, this is something that Sonder will need to work through as I am assuming this is an issue at many of their properties.
They offer free bag storage but you are told it is “at your own risk” and they suggest a third-party storage company (vertoe.com, another clever biz model). To me this is a big miss on their part, it would take little effort and cost to secure the baggage area and this apparently small issue is actually a very big reason why people might choose to stay at Sonder over an Airbnb (or a hotel over either).
I ran into one Chinese guest who could not figure out how to get into his room, his English was not very good and he seemed to be having issues communicating with Sonder, this is something they will need to resolve, especially since they are now distributing globally through OTAs.
It may have been user error on my part, but I went to the app during my stay to look at other properties for future bookings but was only able to look at my existing booking. Once I checked out it seemed to open up so I could search for other properties.
I requested an early check-in and I was notified by email that “It looks like we're unable to approve your early check-in request.” I felt the language could have been a bit more customer-friendly.
The bed in the bedroom was listed as a queen, but it felt smaller. There is plenty of space for a larger bed and would be much preferred by guests.
I see these negatives as teething pains and based on what they have been able to accomplish to date, I imagine they will quickly fix these issues, further improve and even be able to look towards ancillary revenue strategies to further improve the guest's stay (prior, during and post) and their own bottom line.
To state the obvious, scaling the business will be their biggest challenge going forward. Bringing on more units, having an effective marketing and distribution strategy and effectively scaling operations will be no easy task, though a billion-dollar valuation and full coffers will certainly help.
As a customer, I am keen to try Sonder again and hope they continue to push forward with their goal of “becoming the worlds most loved hospitality brand,” and don’t succumb to a buyout by one of the big boys, which invariably kills the momentum of (and sometimes actually kills) creative, disruptive companies.
Note: Sonder is not the only one pursuing this model, stayalfred.com among others are also in this space but Sonder is currently the only unicorn among them. Another interesting model to checkout is ROOM (https://www.connectwithroom.com/locations/), they are actually trying to create a model akin to an Airbnb inside of a hotel.