United States: As Expedia Group plans to recover from the halt in bookings during the Covid-19 pandemic, it is reportedly preparing to phase out its multi-family short-term rental business, which includes its Expedia Multi-Family Solutions Group product.
The product was formed after Expedia Group acquired hotel startups Pillow and ApartmentJet in 2018, before merging them for $54 million and bringing in staff from its subsidiary Vrbo. This has been rebranded to create a suite of products under the name Flexible Living Platform, which claims to allow owner users to “seamlessly enter the sharing economy, generate revenue, increase the bottom line of net operating [NOI]and create new equipment for your residents”.
By doing so, landlords could use the tools to attract more short-term rental bookings in already vacant apartments that tenants can also offer to customers.
Speaking to Skift, an Expedia spokesperson revealed that the company was “terminating” its business with Pillow and ApartmentJet as part of its “drive to simplify”.
San Francisco-based Pillow allows residents to list their apartments as short-term rentals without breaching the terms of their leases. At the time of its acquisition by Expedia, it had already raised $16.5 million in venture capital investment from backers such as Mayfield, Expansion VC, Peak Capital Partners, Sterling.VC, Veritas Investments, Chris Anderson, Dennis Phelps and Gary Vaynerchuk.
Meanwhile, Chicago-based short-term property management software ApartmentJet helps landlords earn money from vacancies. The startup had raised more than $1.2 million in capital from Network Ventures and BlueTree since its inception in 2016.
Prior to the acquisition, Airbnb was Pillow’s exclusive multifamily software partner, but an Airbnb spokesperson has since confirmed to Skift that was discontinued when Expedia joined the startup and decided to create its own service, known under the name Friendly Buildings Program.
Two years ago, Expedia signaled its intentions in the alternative lodging space with the purchase of the two startups, following a $3.9 billion acquisition of HomeAway and its collective travel brands. in 2015.
The move was seen as the first step in competing with Airbnb in its core short-term rental segment. He was looking to provide software tools for property managers so they could effectively manage short-term rentals over Airbnb’s competitors, including HomeAway and then VRBO.
When purchasing Pillow and ApartmentJet in 2018, Expedia outlined its ambitions in the space to Phocuswire: “The acquisition of Pillow and ApartmentJet will help unlock opportunities for urban growth which, over time, will contribute to the HomeAway’s ability to add an even wider selection of accommodations to its Marketplace and Expedia Group brand marketplaces, ensuring travelers always find the perfect place to stay.
However, as time has passed since the outbreak of the coronavirus outbreak earlier this year, the company, led by new group CEO Peter Kern and chairman Barry Diller, has been busy reorganizing the company to simplify and streamline its operations, as well as reduce unnecessary costs.
In February, the online travel agency confirmed that it was lay off 3,000 employees, or approximately 12% of its workforce. This followed Diller’s claims that the organization was “bloated and ossified”, and staff were told it had been necessary to “reduce and eliminate certain projects, activities, teams and roles to streamline and focus our organization”.
The last few months have also been marked by major upheavals within the company’s board of directors. Kern was named CEO and Eric Hart CFO just a month agoreplacing former incumbents Mark Okerstrom and Alan Pickerill, who resigned abruptly in December on reported disagreements with the company’s board of directors over strategy.
In April, the group confirmed through Diller that it had raised $3.2 billion in inbound capital, consisting of $2 billion in debt financing and $1.2 billion in equity investment injected by Apollo Global Management and Silver Lake Partners.
The Covid-19 outbreak has led to a significant drop in demand in urban areas, which an Expedia spokeswoman cited as the reason for the company’s decision to end its multifamily rental business. short term.
Reem Ibrahimi, founder of Boston-based private equity fund Capstron Capital, told Skift that one solution for multifamily space could be to adopt a “diversified cash flow model” in which mixed-use buildings could contain both short-term and long-term units. term rentals, affordable housing and possibly housing to specifically target workers.
Rented.com CEO Andrew McConnell told the same publication: “With the reset caused by Covid, many of these experiments are being shut down to focus on the core business.
“In some cases, it could be a forcing mechanism to exercise discipline by cutting things that really should have been cut anyway. In other cases, it could lead to cutting things that are promising, but which just don’t make sense right now,” he added.
Comments are closed.