US: San Francisco-based apartment operator Sonder has raised $225 million in a fourth round of private equity funding, with estimations valuing the company’s investment at about $1 billion.
The investment has been led by Valor Equity, Westcap and Nicolas Pritzker’s Tao Capital Partners, with participation from Fidelity, Atreides Capital, ARod Corp, Spark Capital, Inovia Capital and Greenoaks Capital.
The company says it has tripled the number of available units to rent on its platform since last year, with more than 8,500 spaces in 20 cities being listed. On top of that, it expects to reach a $400 million revenue run rate by the end of the year, marking a period of accelerated growth in recent years.
In a statement, Sonder co-founder and CEO, Francis Davidson, said: “The future of hospitality will be dynamic, and it will demand flexibility. That’s what our diverse, unique and adventure-seeking world is like too.
“That’s why, while our spaces will continue to take on new forms and expand to exciting neighbourhoods around the world, a Sonder will always be unforgettable,” he added.
Sonder also raised $135 million in a funding round last year and it offers stays lasting between one night and two years in furnished spaces with hotel-like quality facilities and amenities.
The firm, which debuted in Chicago in 2015, operates using a “dynamic pricing” model and current checks suggest one- to three-bedrooms are listed between $135 to $265 per night.
Competing with companies such as Stay Alfred and Lyric in an ever-evolving lodging industry, Sonder believes it caters to travellers’ desires for hotel-like quality and facilities like a fully-equipped kitchen and washers and dryers.
Susan Tjarksen, managing director of capital markets for real-estate firm Cushman & Wakefield, explained to Chicago Sun Times that that trend was set to continue.
She said: “A lot of today’s apartment buildings have become so much more like hotels in terms of services or amenities. They have rooftop decks, pools, spa rooms and lobbies with coffee shops.
“For the landlord, assigning some units to Sonder or a similar operation also can greatly increase their income compared with what they can get from a monthly renter,” Tjarksen added.
The accommodation operator is furthermore preparing to grow its product line in Chicago by adding space in two downtown properties.
It says it will provide 92 units in the new Essex on the Park high-rise building at 808 S. Michigan Ave. and 48 units in a vintage building at 330 S. Wells.
They will supplement the 130 units that Sonder already lists for short-term rentals in Chicago, which are mainly in neighbourhoods like Lincoln Park and Bucktown.
Sonder has signed a long-term lease for each space and is responsible for keeping on top of the furnishings and maintenance for both.
Chicago-based general manager Ellen Schulz told Chicago Sun Times: “We don’t offer just one cookie-cutter experience for our guests. The type of hospitality product we offer is cutting-edge, and where people want to be,” she said.
Schulz said Sonder would try to lease full floors in a building when possible to separate its guests from full-time residents, in case of noise issues and potential disturbances. The company will also perform criminal background checks on prospective lodgers in certain locations.
The new units at 808 S. Michigan are expected to be available at the end of the month, while those at 330 S. Wells St. are scheduled for a September opening.
For more information, visit the Sonder website here.