Since the idea of Airbnb was first conceived in October 2007, the model for how living spaces are utilized has changed drastically. Gone are the days of limited hotel availability and cookie-cutter room designs. Today, all sorts of properties around the globe can be transformed into spaces where people who are traveling for work or vacation can stay.

This model has been around for over a decade, yet few improvements have been made to reduce the negative aspects of the guest experience. With over 6 million homes listed on Airbnb, the biggest challenge for guests is how to find and book places that are guaranteed to offer high-quality experiences.

One solution could be just to choose a standard hotel room. However, even people who have had the occasional bad experience with platforms like Airbnb return for those good experiences where they find a home away from home. What full-stack hospitality companies have found is that the best way to reduce the risk of bad hosts and bad guest experiences is to curate the entire experience from check-in to check-out. This idea has led to the rise of a variety of new startups that provide booking platforms for curated listings of boutique apartment-suites.

Companies In The Full-Stack Hospitality Vertical

Sonder currently has apartment-suites in 21 cities. Although locations are mostly concentrated in the US, Sonder is working towards building a global presence, with properties already available in London, Montreal, and Rome. Sonder puts a lot of emphasis on selecting art and furniture that reflects the cultural vibe of each city. Locations are said to be in the best neighborhoods where people actually live. In July 2019, Sonder closed a $210 million Series D funding round, bringing the company’s total valuation to over $1 billion, with $400 million raised. While Sonder has been around since 2012, it has experienced its most significant growth in the past year or so. In August 2018, it only had 2,200 rentable spaces. In July 2019, it had increased to over 8,500. Sonder estimates that 2019 revenue will reach $400 million, up 4x from 2018.

Sonder emphasizes that apartment-suites fit with the unique style of each city

Each Lyric apartment-suite includes boutique amenities, such as a Casper mattress, digital access, fully-stocked kitchen, local artisanal coffee, and more. Currently, Lyric is available only in the United States. Cities include Chicago, Dallas, Houston, Minneapolis, New Orleans, New York, Philadelphia, and Pittsburg. The company has partnered with 20 of the top 50 NMHC (National Multifamily Housing Council) developers and has strategic relationships with Starwood founder Barry Sternlicht and Fifth Wall, a real estate-focused venture fund. Lyric has raised $179 million over four rounds. Most recently, Airbnb led a $160 million Series B funding round in April 2019. This is significant due to the fact that these two companies would appear to be natural competitors. By funding Lyric, Airbnb is simultaneously hedging its bets and validating the business model for full-stack hospitality. According to the Lyric website, the company puts technology at the center of its business model. For property owners, a tool called Wheelhouse provides a sophisticated pricing algorithm to help determine optimal prices for every evening of every stay.

Lyric apartment-suites feature a variety of boutique amenities

Cosi is another startup to watch in this space. While the Sonder and Lyric are mostly focused on expanding in North America, Cosi is setting its sights on Europe. In August 2019, the company raised €5 million in seed funding. This platform is currently in the pre-launch phase.

The Cosi team

Advantages

Now that we’ve looked at three companies that are poised to be major players in this space, here is their value proposition.

Quality Over Quantity

The idea of booking a stay at a new place on Airbnb can be daunting. Even with positive reviews and glamorous photos, many people might find it difficult to confirm whether or not a place is going to be as advertised. Anything from the previous guest leaving trash everywhere to an unresponsive host can change one’s perceptions of the experience. Because of the sheer quantity of available listings, quality controls put in place by the platform are typically not enough to deter low-quality listings.

In comparison, full-stack hospitality companies mentioned above have a mission to curate each listing in order to maintain higher standards for what the guest experience should be like. In essence, by limiting the number of available listings, platforms can ensure that customer expectations meet reality. Yes, this means that these emerging platforms might face growth limitations. However, they have the potential to make up for this through a higher lifetime customer value (LCV) by focusing more on creating tailored experiences that meet quality standards that make guests want to book on a more frequent basis as compared to Airbnb or traditional hotels.

Creating Memorable Experiences

To go philosophical, what is the definition of home? For many people, home is anywhere that is clean and inviting. For others, home is about a unique experience where comfort and luxury coexist. What existing booking platforms have lacked is consistency with each experience.

While you might be staying at a particular place that does features elements of the local decor, cuisine, etc., this is ultimately determined by the host. Many places are merely for guests to rest at night. Some places will be memorable, and others will be forgettable. The new generation of apartment-suites is deciding not to put the overall quality of guest experience up to chance. By making hospitality and amenities core components of each stay, these companies aim to make memorable experiences the standard, not the exception.

Higher quality stays can help create better travel experiences

Potential Challenges

Regulations

The regulatory landscape has limited the possibilities of market expansion for booking platforms in recent years. Yes, it’s easy to say that Airbnb has set a precedent for other companies to follow. However, it’s important to consider the fact that regulations must be dealt with on a case by case basis in each city. Plus, there’s a lot of money and time involved to get approval to launch such projects. Even in cities where Airbnb won approval, it could be an uphill battle for this new wave of companies.

Limited Availability

Most companies in this space are focused on either North America or Europe. Within these markets, there are only a select number of cities that have boutique full-stack hospitality suites. If you want to go to a smaller city or town, you probably won’t find many options available on these sites (at least in 2019). Compare this to platforms like Airbnb where you can find places available even in the most rural areas all over the world. It’s easy to say that you will only book with Sonder or Lyric when in New York, for example. However, you might have already gotten used to booking with Airbnb when going to places that don’t have full-stack hospitality services. Therefore, you might be inclined to continue to use Airbnb out of habit, even when going to places that do offer curated listings.

Established Players Adapting

Because companies offering full-stack hospitality are curated, they offer a solid vision that offers the quality advantage of established hotel brands and the home experience of Airbnb properties. However, there is also the possibility that hotel brands will continue to evolve and eventually rely on this same business model. For example, many chains have already developed extended-stay suites specifically for business people. While there is clearly a major gap in the market being filled by full-stack hospitality startups at the moment, it’s crucial to realize how quickly major corporations can pivot in order to remain competitive as the industry evolves.

Can full-stack hospitality companies expand to new markets around the globe?

Conclusion

Competition is heating up in the full-stack hospitality space, which is a good thing for guests and hosts. Curated places and better amenities ultimately means that anyone can have high-quality experiences when traveling. More importantly, startups in this vertical are providing greater consistency and commitment to a standard of excellence, something which customers have been demanding for years. For property owners, the idea of belonging to a select group of curated places also seems rewarding. If guests are confident in the quality of every place listed on a particular platform, it should be easier to fill vacancies and potentially earn more revenue.

In 2019, we still don’t know if this new generation of companies will become the next giants in the travel industry. At the very least, though, they are addressing market issues and developing new visions for what the experience of travel can become.