Reinventing the Hotel

We at Spark are proud to announce we’ve led the $10m Series A round in Sonder, and are excited to get to work with Francis and his team on reinventing the hotel.

We travel to experience another place in all its uniqueness. The success of AirBnb and other short-term rental marketplaces over the last 8 years was a rejection of the sameness of mega-hotel chains like Hilton and Marriott. Thanks to Homeaway, AirBnB, and others we can now get the authentic experience we crave, the ability to temporarily “live like a local.”

But, their success also created a new problem, unreliable quality for a traveller.

U.S. travellers spent almost $89b on vacation travel just this summer, often their highest single discretionary spend of the year. If you take a week off of work, head to New York or Santa Cruz or wherever with your family and the accommodations are terrible you can never get that time back.

Vacation travel is what you would call a high cost of failure market. If you have a bad Uber ride it was a bad 5–10 minutes, you give a bad review and move on. Meanwhile, if you have a terrible travel experience then you might give a one star review, or even get your cash back, but you can’t get that week back and you can’t get a refund on a bad experience.

In fact it’s reminiscent of what staying in hotels was like prior to Conrad Hilton starting the hotel revolution. Back in the 1930s a traveler would arrive at a new hotel with little to no idea what to expect. Will the owner be there to hand over the keys? Will the sheets be clean? What am I walking into?

Hilton, Marriot and others solved this problem by creating the age of the industrial hotel. They gave us reliable quality and created economic juggernauts, but they also created an emotionally empty sameness to the experience.

That’s the paradox of travel. You want uniqueness, but you also want consistent quality. Meanwhile as a business you want scale and operational efficiency which can be directly at odds with what consumers are looking for.

Sonder is a unique startup that is on its way to solving this problem by reinventing how a hotel is built, how it is experienced, and how it operates.

Consumers find Sonder through AirBnb, Homeaway, and others. They find a property that is in the neighborhood they care about, from the Back Bay in Boston to downtown Montreal. These are the kind of wonderful places, over 500 already in the Sonder Collection, that have made the short term rental market grow so quickly.

But when you step into a Sonder property you also know it is going to be a great experience. The bed will be comfortable, the fridge will be stocked, the wifi working, sheets clean, and if you need fresh towels they’ll be there in minutes via a quick text in Facebook messenger.

This is not trivial. Hotels are 60 years into being optimized to operate in single locations, big huge buildings that never move, where a cleaning crew can go from room to room efficiently. In order for Sonder to operate they had to reinvent how a hotelier runs. They needed to build a new, data-driven, reflexisive, mobile-focused approach that is much more complex than a typical hotel’s operations. They had to rethink what it would mean to build a global hotel company.

When we met with Francis and his team we were struck by how clearly they had thought through the fundamental paradox of travel. While there are a lot of startups trying to tackle the travel market, we’d never seen such a thorough rethinking from top to bottom of what it meant to build a truly next generation hotel company.

As product people, it was hard for us at Spark not to respect the experience of staying at a Sonder “hometel” as they now call it. As an investor, it was equally impressive to see how well they were managing a very complex business with an eye towards scale while maintaining margins. And their NPS score spoke for itself.

Much like Kayak or Orbitz could not be successful without someone building billion dollar hotel companies that people wanted to stay at, we believe Sonder is positioned to make AirBnB and Homeaway much stronger. And they might also finally offer consumers the consistency and uniqueness that they’ve always craved on a vacation.