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Innovation in Canada: The hospitality company that's part hotel, part home-share

Editor’s note: From November 19-30, Yahoo Finance Canada will be highlighting the best of Canadian innovation in a series called The Future Is Now. We’ll be bringing into the spotlight some of the companies and individuals that aren’t just pushing the limits, they’re creating new ones, for themselves and investors alike. We’ll be shining the spotlight on homegrown talent in the fields of satellite technology, autonomous vehicles, wearable tech and more. Check out our hub page for even more coverage and let us know in the comments: Which companies do you think represent the best of Canada looking toward the future?

A look inside one of Sonder’s Montreal apartments, styled to feel both homey like an Airbnb, and clean like a hotel. (Sonder)

When Airbnb was founded ten years ago, it brought a unique concept to the market: find travel accommodations that feel like home.

But as the model has gained popularity, some of the stays have come to feel too much like home. Staying at some Airbnbs can feel like a game of Russian roulette: will this be the one with the kindly landlord who is responsive but far from the premises? Or will you be listening to the sound of their kids screaming through the night?

Its meteoric rise shows there’s an appetite for the model, but many people want the reliability that a hotel can provide, while offering the “like a local” feel that home-stays can bring.

That’s the thinking behind Sonder, a company that marries the two travel experiences.

The idea began in 2012, when founders Lucas Pellan and Montreal-born Francis Davidson stayed at a home they had booked for a couple days. They couldn’t get in touch with the host to find out how they were supposed to get inside. When they did make it in (the key under the doormat, naturally), they found half-eaten food in the fridge and dog hair covering the furniture. They opted to leave the rental and go for an apartment instead. While it was free of dog hair and debris, it was a non-notable room surrounded by sterile chain restaurants.

It spurred the pair to create a new kind of home-stay experience: Sonder manages apartments in trendy neighbourhoods through major cities, and opens them up to travellers for short stays. What makes the company notably differs from Airbnb is the hotel-like amenities, like toiletries, a cleaning service, 24/7 concierge and attention to detail in the design.

A look inside one of Sonder’s Montreal apartments, styled to feel both homey like an Airbnb, and clean like a hotel. (Sonder)

While the company now runs its operation from San Francisco, Calif., Sonder CEO and co-founder Davidson says the company became a fully formed idea through participation in Montreal’s Founder Fuel program. Davidson says he’d been mulling the concept for a few summers, but participating in that incubator turned out to be a game changer.

“What we’re doing now is what we walked away from Founder Fuel thinking that we would do,” says Davidson. “It was really transformational. We got to meet entrepreneurs, investors, people that would ask tough questions including what the vision for the company was, and we hadn’t really thought about that thoroughly.”

Since then, Sonder has grown to around 3,000 units across four countries. Davidson says they work directly with developers, and turn buildings into properties managed by Sonder. The properties typically have less than 25 units, and are located in vibrant neighbourhoods, which you often can’t get with a boutique hotel.

“The spaces themselves are three, four times the size of a normal hotel room,” says Davidson. “So many hotels have beige walls and are kind of stuffy, and we have things that are uniquely designed and work really well for demographics often forgotten by the hotel industry, like friends, or families that are traveling with young kids.

“You can have the presidential suite for a price less than a standard hotel room.”

A look inside one of Sonder’s Montreal apartments, styled to feel both homey like an Airbnb, and clean like a hotel. (Sonder)

Davidson says their clientele skews slightly more to business travellers than typical hotels, as it offers amenities that frequent travellers often find themselves missing.

“It gets a little old to not have a dining table, you can’t just have some cereal in the morning, you don’t have a couch that you can just lounge on,” says Davidson of typical hotels. “Stays of a longer duration work really well.”

Davidson adds that people travelling for medical procedures have also found the Sonder apartments to be a good alternative to the typical hotel experience, especially when the length of their stay is unpredictable or when they have lots of family in tow.

Disrupting the hospitality industry

Sonder is in full-tilt expansion mode, with Davidson spending about 40 per cent of his time hiring to expand their 400 person team, he says. In August, the company announced that it had raised US$85 million in financing led by Greenoaks Capital. According to The Globe and Mail, Sonder generates US$100 million annually from its accommodations business.

Davidson says the company’s plans for expansion are aggressive: ultimately, they want to be in 192 countries around the world. While they haven’t spent much on marketing so far, Davidson says that won’t slow down the company’s reputation.

“The best businesses, honestly, just have a great product,” says Davidson. “Maybe that’ll change in the future but so far we’ve been really lucky that the experience speaks for itself. We’re operating at over 80 per cent occupancy, despite the fact that we don’t have a marketing budget…the value proposition is so strong there’s no need for us to shout about it.”

Instead, Davidson says the company is putting money into expanding into more countries, acquiring more properties, and developing a consumer app. Ten years down the road, he says he’s got big expectations for what the Sonder experience will be like:

“Hotels are disappointing… we want to create an experience that’s jaw-dropping,” says Davidson. “You walk into a Sonder, you arrive close by, the door unlocks by itself automatically. You open the door, music starts playing. A welcome message turns on that says ‘Welcome to your Sonder,’ there’s a little celebration. There’s fresh flowers in there. You have a welcome card. You look up, it looks like pages from Dwell magazine. And it’s a 1,000-square-foot apartment that you rented for less than the price of the Courtyard Marriott that’s right next door, and you can’t believe what just happened.”

A look inside one of Sonder’s Montreal apartments, styled to feel both homey like an Airbnb, and clean like a hotel. (Sonder)

But Sonder doesn’t see its reach stopping at disrupting the hotel industry. Davidson posits that the same sort of hospitality experience could extend into your home.

“We viewed it as a natural extension to our business fairly early on, there’s definitely a changing world in which people are moving more and more and want more flexibility and home ownership is becoming less and less accessible,” says Davidson. He envisions customers who stay with Sonder permanently, supporting families in their homes and enabling residents to move when it fits them, and helping them in that process.

“There’s something anachronistic with the 12-month lease, where you have to lug in your own furniture and you’re locked into a property where you can’t move away from,” says Davidson.  “We’re hoping what we’re building will lend itself to the housing industry.”

As Sonder looks to the nearer future of 2019, Davidson says the near-term plan is to push further into Europe, following up on the success of its properties opened in London and Rome earlier this year.

“Even though we’ve come quite far in terms of what we’ve done so far, we have some really exciting things that are going on that will make 2019 our breakout year as a company,” says Davidson.

“The goal for us is to reinvent the hospitality industry.”

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