Sonder is raising $232 million (US $170 million) on a 1.77 billion (US $1.3 billion) valuation. The news comes one year after the Montreal hospitality unicorn raised US $225 million.
According to Forbes, Fidelity, Westcap Group, and Montreal’s Inovia Capital led the deal.
“It’s pretty extraordinary given the situation,” CEO Francis Davidson told Forbes. “We pivoted our strategy toward temporary housing, took measures to get to a good financial place and a position to bounce back rapidly on the upswing.”
The news may come as miraculous to many who wouldn’t expect a hospitality provider to survive COVID. But it appears Sonder’s investors continue to pump more money into the brainchild of Davidson.
Indeed, as Forbes pointed out, Covid-19 has pushed traditional hotel occupancy rates below 20%, shrunk airline demand by 95%, and all-but obliterated business travel.
Sonder leases and renovates apartments in trendy city neighborhoods, renting them to customers through Airbnb, Expedia, and its own site. Davidson and cofounder Lucas Pellan launched the startup 2012 as a way to rent vacant college apartments,
But now, Sonder’s portfolio has experienced big growth. Today its 1,000 employees manage more than 12,000 rooms across 28 cities and six countries. Sonder signs 3-5 year leases, often partnering with landlords to occupy full floors.
Its apartments feature luxury hotel perks like modern design, professional cleaning, fresh towels and toiletries, and an app-based concierge. Many see Sonder as a middle ground between an unpredictable Airbnb and a hotel experience – while Songer would say its experience is much more secure and closer to the hotel side of the spectrum.
“They offer a consistent experience that people can rely on,” Laurence Tosi, the founder of WestCap Group, told Forbes. He was previously the CFO of Airbnb. “They are masterly designed, easy to get to, can buy with one click, and bigger than hotel rooms.”
During COVID, Sonder’s occupancy, usually over 80 percent, plunged into the 40s, hurting revenue. Davidson lowered prices, unloaded nearly 2,000 underperforming properties, and furloughed or let go 400 employees—a third of his staff, says Forbes.
Davidson told the news website that during COVID, the demand for temporary housing came from college students shut out of dorms, workers looking for better work-from-home set-ups, and families in between moves. The apartments have also been a refuge for frontline medical workers looking to avoid infecting their families, and customers escaping Covid hot-spots for cities less hit by the virus.
“We acted fast to create a new landing page and marketing for people that wanted to socially distance, work from home, or needed housing,” said Davidson. “We created an impromptu sales team to work with medical companies and traveling nurse organizations.”