Breaking down the Airbnb "threat" to Sonder

Tad Park (CEO/CIO at Volt Equity + early Sonder engineer) and David Kim (Head of Growth at Volt Equity) discuss Sonder stock ($SOND): Sonder's business model compared to Airbnb's ($ABNB), long-term market cap prospects, competitive positioning, and more
Our blog article related to this chat:
- Sonder vs. Airbnb (Investment Case, Part 2) www.voltequity...
--
Disclosure: Not investment advice. For educational purposes only. Do your own research. Full disclosure available at www.voltequity...

[@jymtb]

Really insightful discussion spotlighting a unique company and the interplay between market supply, demand and bargaining power.

[@lewisburton1852]

Are they really unique though? 🧐

[@rineditor7077]

Why is Sonder losing money? I'm trying to research the business model and don't understand why if they are running units with a profit margin above 20%, where is the loss coming from? I love the company, but it's almost looking like it was saved by the SPAC as they were burning too much money. Where is this loss coming from?

[@VoltEquity]

Great question. To be clear, their property level margins are not currently at 32%, that's what they project for 2025. Currently they have negative property level margins (largely due, most likely, to the fact that they're in a high-growth phase of their company with more newly contracted units than live units). These fresh units will take some time to hit their payback period (when income generated matches rent and other incurred expenses). You can see our key highlights of their investor presentation here: www.voltequity.com/post/sonder-investor-presentation-nov-2021

[@UtilityPro]

The CEO did just buy a $9.2 M mansion in the Hollywood hills. This has the company fires 28% of the workforce.

[@Kairosresearch6942]

Sonder is a geographically decentralized hotel.

[@VoltEquity]

Right - other hotels' franchise model means their franchised properties aren't really a network but siloed/independent hotels with just a facade of unified branding, even competing against each other to some extent. But Sonder is like a single network with nodes of properties geographically distributed.

[@Kairosresearch6942]

@@VoltEquity so do they buy residential units/properties renovate them and rent them? do they buy multi unit buildings? or do they build new properties? just trying to under stand their cost structure in getting these units out to rent.

[@VoltEquity]

No purchasing. They typically signed fixed leases (fixed periodic payments per unit), but are now also signing revenue share agreements (variable fee dependent on revenue metrics) and mixed leases (a hybrid of the fixed lease + rev share model). Usually with a 5-7 yr initial term with optional renewals on Sonder's end.

[@lewisburton1852]

@@VoltEquity you guys looked into avant- stay?

[@VoltEquity]

@@lewisburton1852 Yeah we heard of them but they are not a public company