Well, that didn’t end well.
Sonder, the short-term rental operator that splashed onto the scene with a SPAC merger and public listing in early 2022, ultimately could not successfully untether itself from the creeping burden of a flawed lease arbitrage model, and almost from the start, the ship started taking on water. Toss in what turned out to be an overly ambitious growth plan, limited operational history and a less than human tech focused delivery platform, and the ship just couldn’t carry the weight. And make no mistake, the storm clouds were forming well before the very untidy ending with Marriott.
It’s a story as old as the ages.
For as long as ships have been traversing our oceans, miscalculations in course have lead even the most accomplished captains to run aground . Even today, with the very latest navigational systems, the slightest of errors can often compound, and conspire, to bring down otherwise seaworthy vessels. And just days past the 50-year anniversary of the horrific sinking of the world-famous Edmund Fitzgerald, that lesson is perhaps more poignant than ever. The seas are unforgiving.
And so are the markets.
And with Sonder, it’s particularly unfortunate. After a strong launch in the public markets, with capital at hand, and a short-term rental market that was exploding, the send-off seemed carefully tailored to take full advantage of the coming evolution of the Hospitality market – consumers yearning for alternatives to traditional hotel stays. Seeking not just more space and vetted product, but experiential travel. Social. Connected. Meaningful. And, above all, authentic. Leaning into a new use for a tried and true asset class, Sonder rapidly grew their enterprise – at one point reaching a market valuation of $2.2 billion.
And to say that market is still ripe, would be a gross understatement. Indeed, projections indicate the STR market as a whole will exceed $140 billion in 2025 and will grow to approximately $408 billion by 2035. That’s an 11.3% CAGR over the next decade (researchnester.com).
So, make no mistake, Sonder’s destination was right.
Unfortunately, the course they charted was all wrong.
Sonder’s spaces were cool, modern and inviting. With great walk scores and unique furnishings, their urban getaways married Airbnb originality with a hip, funky vibe and designer fit and finishes. They assembled a polished team and double-downed on a “tech-first” solution that other operators in the space had very loudly touted.
And perhaps in hindsight, that’s where the ship sprung its first leak.
For, Hospitality has been around for centuries. Well before apps and WiFi. The heart of guest interactions has always been people. A “human” touch. And, as far as we have come, even with daily advancements in AI capabilities, it’s still difficult for machines to show empathy. A computer can’t shake someone’s hand, offer to grab their luggage or walk them to their room after a long flight. So while tech is certainly a tool – and one that we are fully embracing in our business – it can’t greet you with a smile.
At Reside, we’ve held firm to that history and continue to put people at the center of everything we do. We’ve been at this for over 35 years, taking care of folks who are staying a day, a week or a year. Our model is flexible and dynamic which has served us well over these past many decades. And, with a culture of kindness and properties staffed with hospitality professionals, we deliver first-class experiences in all of our buildings from coast to coast. When it comes to travel – especially in today’s often disrupted environment – we believe people still want to deal with people. Making stays more connected – not less.
So how do we do it? Front desks with welcoming faces and friendly hellos…?
Well, we’ve stayed true to an approach that has proven itself many times over. Instead of master leases, we sign long-term hospitality management agreements, eliminating landlord exposure to operator credit risk and fully aligning performance with NOI delivery – all increasing owner returns over time. And without the forward-looking lease liability associated with lease arbitrage bets that have proven extremely difficult to get right. Whether that was WeWork or any number of followers, so many now conscripted to the trash heap of failed ambitions – from Stay Alfred and Lyric to all the rest.
More importantly, we have solved for what we believe was always the most obvious omission in those models – a worldwide Brand affiliation. With system demand built-in and ready to fill apartments in every major city. We believe our unrivaled affiliation with the world’s largest hotel operator – Wyndham Hotels & Resorts makes our offering innately distinguishable in the market. No other operator has the power and reach of a Hospitality giant behind their offering and fueling their growth.
With 10,000 properties across the globe and over 115 million Loyalty Rewards members (with the program just voted #1 by USA Today for the 8th year in a row), we believe Wyndham stands alone and their entrepreneurial approach to the space has already paid dividends.
So here we sit. Charting a new course through the vastness of the travel landscape. While Sonder unfortunately becomes yet another ghost ship adrift somewhere over the horizon, Reside continues our long journey. Well stocked, disciplined and resolute.
We know the destination –
And have every intention of landing safely ashore.
J.R. Dembiec
Reside, A Wyndham Residence
