Product Management Confabulation
What Product Managers are talking about.
The growth of Airbnb and other big travel startups has given a fillip to the wider travel industry, and today several smaller startups in the short-term property sector are announcing that they have merged to tackle the opportunity with more scale.
The UK’s BnbBuddy and The London Residents Club, along with both Hintown from Italy and RentExperience from Portugal — all companies that help manage properties that are listed on platforms like Airbnb — have combined to form a new startup called Altido.
Going into the merger, all four were profitable, having all been boostrapped from day one. But Michael Allen, the MD of the BnbBuddy, said that now the combined entity is using its scale and raising outside funding to grow the business. Altido is looking to raise a Series A in the tens of millions of dollars. It is not disclosing its valuation currently although the fact that it already has an international presence and profitability have helped it in this area, Allen said.
The combined company will have about 1,700 properties under management in 21 European destinations, which it will be using as the anchor for an aggressive push both on existing markets as well as other parts of Europe and beyond. There is a long way to go: as a point of comparison, when Guesty — which provides services to manage rentals of private homes on Airbnb and other services — announced $35 million in funding in March, the number of properties managed on its platform had reached 100,000 across 70 countries.
Other competitors will include the platforms themselves where these properties are getting listed: as Airbnb inches to an IPO, it’s adding ever more services and features to its platform to diversify its revenue streams and also bring in more revenues per customer. (As we’ve said before, that could also make Altido and others like it acquisition targets.)
The growth of Altido’s individual businesses up to now has been on the back of the massive growth surge we’ve seen around platforms — marketplaces, to be more precise — that help people easily list and rent out travel accommodation in private homes as an alternative to hotels; and would-be visitors to find, book and pay for these in an efficient and reliable way, alongside a wider growth of self-catering accommodations that exist as alternative to traditional hotels.
The wider market for “homesharing”, as the first of these categories is sometimes called, has become massive — with Airbnb, the outsized startup leading the charge, now valued at $35 billion — and it now accounts for some 20 percent of the supply of rooms globally by Altido’s estimate.
Some property owners are happy to play host and run and manage their own listings on these platforms — which include the likes of Airbnb, Homeaway and VRBO, and many others — but a big part of the scaling of these services has come by way of third-party management companies that handle different aspects of those listings, from cleaning before and after guests and stocking kitchens and bathrooms with consumables; to managing the relationship with the visitors; to managing the listings themselves.
Altido provides an end-to-end service for those who do not want to play host, alongside a business where it also helps maintain and manage service apartments and aparthotels and guesthouses.
Today the companies that make up Altido rely on third-party platforms to disseminate all those listings, but longer-term, the plan will be to build out more services to offer listings directly as well, alongside more technology to help hosts and other management companies optimise pricing and details around the properties themselves to make them more attractive.
“We see tech as a big enabler,” Goncalo Ribeiro, the founder of RentExperience, said in an interview. He said that his company already has proprietary algorithms that it uses to help calculate property risk factors, which it already uses and will roll out across the whole of the merged company, and the different operations have already been building technology to help onboard properties more efficiently. Areas that it hopes to address include “regulation risk, potential growth rates, historic market data, marketing calculations and more. Any decision we take we want to be proven by data.”
The rising tide of Airbnb is lifting all boats, and today a startup that’s building a series of living-coworking-activity spaces across the world primarily geared at digital nomads is reeling in a sizeable round to take its business to the next level. Selina, which operates a network of 22,000 beds out of boutique hostel-style operations in some 13 countries, has raised $100 million in funding, money that it plans to to use to expand its footprint to 130,000 beds across 400 properties by 2023, capitalising on the surge in remote working and the more holistic approach taken by digital nomads, who seek out places where they can take a bite or two out of life but still be productive at the same time.
In 2019 alone, the plan will be to open 35 Selina properties in the U.S., U.K., Germany, Portugal, Greece, Israel, Argentina, Brazil and Mexico.
The funding is being made at a post-money valuation of $850 million, the company confirmed. Co-founder and CEO Rafael Museri said in an interview that the startup is likely to tip over $1 billion in its next round.
This latest round, which brings the total raised by Selina to $225 million, is being led by Access Industries, with participation from Grupo Wiese and existing investors Colony Latam Partners.
Selina itself has taken a page out of the digital nomad bible: the company’s first properties were across Latin America — founded in 2015 when Museri and co-founder Daniel Rudasevski were resident in Panama — although the company itself was established in New York and now its co-founders are relocating to London.
In addition to the equity funding, Selina has also secured some $300 million in country partnerships to build out its hostels and their related activities across the globe. Museri noted that the company mainly leases the buildings where it operates its services rather than buying the real estate outright, and so some of these local contributions will be from property owners who pay in to help refurbish their locations to share in some of the returns that come from the hostels that eventually open up.
“We are converting boring spaces into cultural hubs, quickly,” is how Museri describes it.
This latest funding will be used to bring on more talent and build more bridges into local communities — which Selina relies on to build out its operations, which include not just a place to sleep and work, but activities throughout the day for those staying in its rooms as well as other locals — as well as to continue investing in its tech, which is built out of the co-founders’ home country of Israel, in Tel Aviv, and specifically to improve the booking process and algorithmic recommendations that people use both to figure out where to travel next, as well as what they want to do when they get there.
Selina’s rise comes at a time when we’ve seen an interesting convergence in the worlds of working and travel, where people are demanding an increasingly greater amount of flexibility in terms of how they approach both.
In the world of startups, that evolution has been spearheaded by the likes of WeWork and Airbnb, which have respectively turned the concept of leasing or buying an office, or renting a stodgy and soulless hotel room, on its head, providing more interesting and way more flexible approaches to both.
In more recent times, both WeWork and Airbnb have in effect moved ever-closer to each other, with WeWork now starting to provide its customers with places to sleep, and Airbnb offering places to work as part of its bigger Business effort.
Notably, WeWork founder Adam Neumann is actually an investor in Selina, having been a part of its previous $95 million round. (That’s something to think about when considering that move the We Company, as it’s now called, makes into adjacent areas like accommodations.)
While these outsized companies present inevitable competition to Selina and the many others that are approaching the opportunity, Selina is continuing to build out its business not just as co-working or co-living space in a variety of urban and exotic locations, but as a place to go for experiential enjoyment — one of the reasons it has attracted this funding.
“We believe Selina’s focus on building a global hospitality platform for digital nomads will redefine the way millennials live, work, play, learn and give back,” said Lincoln Benet of Access Industries, in a statement.
Museri said that today some 80 percent of travellers stay for 2.5-2.8 days, although it’s not completely unusual for people to stay 12 or 60 days, too. “It’s a process,” he said when I asked him for a more concrete figure. “If they are happy, they stay longer. If they want to move, they can jump to another Selina. It’s flexible. We do have people who fall in love and stay longer, but three nights is the average stay, and it’s growing every day.”
The average age of its residents is 25 to 35, he said, but again the range is pretty wide, with some travelling not as individuals but in groups of friends or families.
Most activities are free, Museri notes, although there are also additional paid experiences you can get on top (example: surfing — one of the typical activities in the beach properties — might be free, but surf lessons come at a price; or basic yoga might be free, but an extended multi-day program would not be).
“This is the future of accommodation,” Museri said. “Airbnb is improving but we are doing something completely different. We don’t think any one brand will touch all three spaces [of work, sleep, play] the way that we will.”
The growth of Airbnb — and likewise other platforms like Booking.com, VRBO and Homeaway for listing and renting short-term accommodation in private homes — has spawned an ecosystem of other businesses and services, from those who make money renting their homes, to cleaning companies that make properties “Airbnb-ready”, to those who help design listings that will get more clicks. Airbnb has seen some wild success so far, but it turns out that being a part of that ecosystem can be a lucrative business, too.
Today, Guesty — a Israeli startup that provides a suite of tools aimed at property managers that list on these platforms — is announcing that it has raised $35 million, money that it will use to fuel its growth, after seeing the number of properties managed in some 70 countries through its tech double to over 100,000 in the last year.
The company is not disclosing valuation with this round, which was led Viola Growth with participation also from Vertex Ventures, Journey Ventures, Kingfisher Investment Advisors, La Maison Compagnie d’Investissement, TLV Partners and Magma Ventures. But Amiad Soto, the CEO and co-founder, noted that it too has “more than doubled” since its last funding almost a year ago. PitchBook notes that round was around $90 million post-money, so this would put the current valuation at at least $180 million, likely more.
The idea for Guesty came about like many of the best startup ideas do: out of a personal need. In 2013, twin brothers Amiad and Koby were renting out their own apartments on Airbnb, and found themselves spending a lot of time doing the work needed to list and manage those properties.
Their first stab at a business was an all-in-one service to help hosts get their properties ready and subsequently tidied up for listings. “I was cleaning apartments, Koby was doing the business development, and my girlfriend was doing the laundry,” Soto told me in an interview. They quickly realised that this was never going to scale, “and also that our competitive advantage was building software. We are computer geeks.”
So the company quickly pivoted to building a platform that could provide all the tools that property managers — who work with individual property hosts/owners and had started emerging as key players as Airbnb itself scaled out — needed to juggle multiple listings. (That girlfriend is now his wife, so seems like they may have pivoted just in time.)
Guesty started as SuperHost and, like Airbnb, went through the Y-Combinator accelerator. It eventually rebranded to Guesty, and it now provides tools in a dozen areas that touch property managers and the job they do: Channel Manager (“channel” being the platform where the property is being listed), Multi-Calendar, Unified Inbox, Automation Tools, Mobile Management App, Branded Website Task Management, Reporting Tools, Owners Portal, Payment Processing, Analytics, Open API, 24/7 Guest Communication.
The plan is to complement that in coming years with more “smart” tools: the company is introducing AI and machine learning elements that will help it suggest more services to users, and for managers to use to do their jobs better. (One example of how this might work: if you have a property manager in New York City, and the city regulator changes something in the tax code for properties in Brooklyn, this will now be suggested through to managers whose properties are affected, and this can help with pricing modelling down the line if the manager, say, wanted to keep a specific margin on rentals.)
Perhaps because short-term property renting is a relatively new area of the accommodation and residential market, it’s fairly fragmented, and so Guesty is providing a clear move to consolidate and simplify some of that work.
“There are about 700 different services and other things that go into short-term property rentals,” Soto noted when I asked him about this. “It would take me hours to go through it all with you.”
And indeed, the market itself is much bigger than what Guesty is currently working with. Soto estimates that there are around 7 million properties now collectively getting listed on these short-term letting platforms, speaking to the opportunity ahead.
Guesty very much got its start with Airbnb and that helped it not only establish what property managers needed, but also to forge a close relationship with Airbnb at a time when it wasn’t yet building many bridges to third-party services. Soto said Guesty built its own private API to use with Airbnb, and subsequently helped inform how Airbnb eventually build an API that others could use.
It’s still a trusted partner in that regard. Now that Airbnb is moving into multi-dwelling arrangements — that is, rooms in hotels (which will now expand with its HotelTonight acquisition), plus multiple apartments in single buildings for big groups that might want to secure bookings at several places at once — it will very soon be launching a tool for these kinds of listings. Guesty has helped in the building of that, too.
Still, the opportunity for short-term lettings is bigger than Airbnb itself these days. Booking.com and its many subsidiary businesses have made a big move into this area, as have many other companies, and Guesty now handles bookings on a number of “channels”. Soto said on average, the number of bookings on its platform that are listing on Airbnb is 60 percent, with some vacation spots seeing the percentage much lower, and some urban markets seeing a much higher penetration.
This is one of those cases where being an early mover in identifying a market opportunity has worked in a startup’s favor. Guesty’s strong work with Airbnb has helped the startup build stronger ties with those companies that hope to compete with it and give Airbnb a run for its money: Booking.com, Soto notes, is a premier partner these days.
“Guesty was the first to recognize the potential of the property management market and has quickly become a category leader with its vertical-oriented, end-to-end approach,” said Natalie Refuah, partner at Viola Growth, in a statement. “Technology and AI continue to disrupt the innovation stack, acting as a catalyst to the digitization of “traditional” areas such as real estate and travel. Guesty is leading the charge, fostering a more seamless experience for property managers while providing clear advantages to customers and ultimately, their guests. We believe that with its experienced and elite executive team, Guesty is fully equipped to modernize and revolutionize the property management ecosystem.” Refuah is joining Guesty’s Board of Directors.