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Sonder becoming latest boutique apartment-hotel hospitality short-term rental company to boom

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Sounder CEO Francis Davidson joins Yahoo Finance Live to talk about the company's public debut, how 80% of their demand comes from leisure travelers, and what to expect from this short-term rental company.

Video transcript

JULIE HYMAN: Now though, I want to take a look at a stock that is up a bit today. It's called Sonder Holdings, it just started trading today after completing a SPAC, or I should say a de-SPAC transaction with Gores Metropolis II. Sonder, kind of a combination of a hotel and an Airbnb. In other words, it's something you rent in various cities, but it is not owned by an individual, but rather managed by this company, Sonder. Francis Davidson is the Co-Founder and Chief Executive Officer of Sonder. Hopefully, I have described that well, Francis. I've stayed in a Sonder before, so I have some familiarity with it. I'm curious who your customer base is at this point. Is it people traveling for work? Is it families? All of the above? What does it look like?

FRANCIS DAVIDSON: Yeah. Listen, I mean, we're a hospitality disrupter and we focus primarily on serving the needs of millennials and Gen Z. So our median age is much lower than other hospitality brands. But what's really important is that we actually design and we operate these beautiful hotels and apartments. And you can stay for a, night a week, or as long as you'd like. And so that means that digital nomads can stay with us, it's the business traveler. But, really, 80% of our demand is for leisure stays.

And what really kind of draws our demographic in is the services that we offer that can be accessed through the app. And the homegrown technology that we have allows us to maintain price points that are really competitive and offer really high quality and consistency, which really resonates with the next generation modern traveler.

BRIAN SOZZI: Francis, mobility has been hit recently because of the Omicron variant. Has that impacted your bookings or nights stayed at all?

FRANCIS DAVIDSON: Well, through the entire pandemic, I think we've demonstrated quite a lot of resiliency. So, of course, the pandemic has not been a positive news story for the travel and hospitality industry over the last couple of years. But relatively to the industry, our performance has been really stellar. Even Q3 of 2021, we showed that we generate about 20% more revenue than the comparable properties nearby us, which is a premium that we manage to sustain or exceed throughout the pandemic.

And so, our occupancy rates as early as summer of 2020 were already about 70%. And so, we've managed to find these kinds of use cases, like I mentioned, folks that are on the road that are working remotely, perhaps. I myself spent nine months staying at 25 different Sonder spaces throughout 2020. And so, a lot of new use cases that we're using we're very agile in kind of identifying these pockets of demand in a time where transient demand is a little bit less robust.

JULIE HYMAN: And to your point, I was also looking at revenue per available room, which tends to be the hospitality industries way of measuring how you guys are doing. $126 in the third quarter and that trends above traditional hotel companies that I was just kind of scanning Hilton and Marriott as a couple of examples. Is that kind of RevPAR sustainable? What do you see as the sort of long term rate?

FRANCIS DAVIDSON: Well, listen, we're very optimistic about the recovery of travel generally over the next few years. I think there's a long term trend of especially millennials and Gen Z spending a disproportionate amount of their incomes towards experiences and not goods. And so, I think that's a positive long term trend for us.

And we've shown throughout the last 22 months that we've been very creative at finding ways in order to keep our properties full and the occupancy really attractive. And that's been demonstrated in the RevPAR figures that you just quoted.

BRIAN SOZZI: What does in your platform do today that you see it doing in a couple of years?

FRANCIS DAVIDSON: Well, we want to keep investing in technology, I think this is really the answer for this business. The reason we can be successful is because we've created a mobile app, which allows our guests to request a series of services very efficiently, frictionlessly in a modern fashion. And so we want to keep investing in guest facing technology tools, but also there's a lot that underpins our entire operation that makes it possible for us to automate and streamline a lot of the work in the back end. That's really the magic.

The reason why they go on Sonder.com or on our app, and you see so many amazing spaces with great reviews, you'll notice that the price points are actually quite affordable for the level of quality that you're obtaining. And, really, technology is the answer there. It allows us to really operate these places so efficiently that we can offer an elevated experience at a price point that can be afforded to the many.

JULIE HYMAN: Yep. Full disclosure, the one I stayed in was in New Orleans, and it was a pretty enormous space. I was pleasantly surprised by the size of the thing. Francis, you said you spent nine months last year on the road, staying at different Sonders, did you have a favorite?

FRANCIS DAVIDSON: Oh God. It's such a tough one because we've got amazing spaces. One of my favorites is, for example, the Hyde in Philadelphia, former hat factory that was-- it's really industrial architecture. And we had a partnership with a series of artists that came in and did custom murals. We've got amazing properties in London and across the entire US and most Western European capitals.

And so, no, the trip took me to 21 states and many countries in Europe. And I was just kind of mind blown by the quality that we were able to offer and, again, at a price point that really is accessible to the many.

JULIE HYMAN: Well, congrats on the first day of trading. We will catch up again soon. Shout out by the way to the balloons with your ticker symbol by USMT. Pretty clever. Francis Davidson. Co-Founder and CEO of Sonder. Appreciate it.

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