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September 22, 2021, Online, New York, NY, USA
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Alternative Accommodations 3.0: No Longer the Alternative
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About the talk


About speakers

Carl Shepherd
Investor and Co-Founder at HomeAway
Francis Davidson
Co-Founder & CEO at Sonder

In 2004, Carl G. Shepherd co-founded HomeAway, Inc., the first international marketplace for private rentals of vacation homes, and served over the years as President, COO, CDO and as a board member, until the sale to Expedia in 2015. Leading M&A , Shepherd acquired 24 companies in 8 years building an international business with offices in London, Paris, Frankfurt, Madrid, Singapore, Sydney, Rio de Janero and Austin. He remains an active early investor in travel and adjacent start-ups, and has served on the board of @Leisure Holdings in Amsterdam, Turnkey Vacation Rentals in the US, RVShare, and is Senior Non Executive Director for Hostelworld, PLC in Dublin. A frequent speaker at travel industry events from Shanghai to Berlin, Shepherd is considered one of the charter members of the sharing economy. Before HomeAway, Shepherd was COO of Hoover’s Inc., VP of Finance and Business Development of Human Code, and CFO of both Hanley-Wood and Texas Monthly, Inc. He began his career in the New York City office of what is now Accenture, specializing in the advertising industry. He and his wife live in Austin, Texas.

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Francis Davidson is the co-founder and CEO of Sonder, a company that’s revolutionizing hospitality through innovative, tech-powered service and inspiring, thoughtfully designed accommodations. With thousands of beautiful spaces built for travel and life, Sonder is pioneering a new category of accommodations. Today, Sonder has more than $4.5 billion assets under management and continues to grow rapidly — operating in more than 30 cities across 8 countries and welcoming hundreds of thousands of guests annually. In 2018, Francis was nominated to Forbes’ “30 under 30” list for Consumer Technology. Francis studied Philosophy and Economics at McGill University. He enjoys science, art and literature.

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Please welcome investor and founder of HomeAway. Carl. Shepherd and the CEO and founder of sonder Francis Davidson in discussion with skiff senior, travel Tech, reporter Sean, O'Neill. Hello, everybody. Good afternoon. Once again, we're going to have to ask questions in the app of the ones that I have. So, please feel free to ask your questions. We have a great channel here today. And Greg say about the cookies are two people from two very different segments of the travel

industry that have different views on issues that are abroad, relevance the most of the people here, and they're not afraid to call bullshit on things when they feel it's appropriate. So, thank you. Thank you, Carl for joining us. I guess I would want to start out first with Brian chesky both of, you know, at the CEO of Airbnb spoken stage last night with our Co-op and he was, he has his vision that things are going to really fundamentally change. For the next 10 years that you're going to have a business. Travel is going to be changed

and family tree. Travel, so I'd like to start Carl with you. Like, you heard him talking about Family, Travel Group, Travel is going to be a boon for like 10 years on. It's not just a 2020. What's your take on that? I was glad to know that he finally figured out what everybody else figured out. 40 years ago, families and Groups travel using vacation rentals. The industry is in the United States, almost 70 years old in Europe, at the hundred, and twenty years old. And it's always been about families and groups traveling together when I heard that I should have

thought. Well, I don't think that's the way things are going to the next. He's going to try to be competing more intensively with maybe with, for both and with booking.com of the others, like we've had company in Germany, home to go at the price comparison site for vacation rentals, vacation, finder. There should have like trying to bring more. Where do you see online travel searching for vacation rentals, shaking out, and in the near future. That's me, or you Hannah and Airbnb. Are the question for VRBO is Hell in a grated. It will

become with Expedia. If I was Expedia, I would leave it separate but they paid me four billion dollars so they can do what they want. And I kind of believe that the consumer is best served by being as close to the provider as possible. I'm not a fan of the homes to go model. I had friends that had invested in. That night told him, I wouldn't do it, but I don't think metasearch works at well, because the inventory is not standardized enough for metasearch to really be beneficial in that van der is

getting more into cesky said that, he know, he's exchanged in the new hybrid work environment. And you traditionally, it's under been like, about a 70% leisure. You're moving more, try to get more business, tell us what your projection of house on their wants to anticipate the demographic Trends. See the quality that we provide is actually really strong argument for business travel and we've been out some really exciting partnership with the GDs and provider. Isn't any other kind of Beat It? Be relationship will allow us to increase the share of the revenue that comes

through B2B. And yeah, I think you're right in pointing out that is going to be very different. And one of the milder, some ways in which they're going to be our last doesn't travel, but others use cases are opening up. That are very real, like our company. We were comfortable hiring, folks, all over 1,500 employees, and our view is that we should provide the freedom for our employees to work wherever they want to. But that's our office or remotely. But conversely, we don't want relationships to be stale. We want people actually come up and meet in person on a regular basis. Say every

three months ended up in the market and spend a few days together. Instead of a water cooler talk. We can actually have meaningful time to go. And I will require travel back to HQ travel to an off-site on some frequency in that. Freedom can also be used to go spend 1 month in Mexico, City and work out of Mexico City into those before. It's actually going to seek out new kinds of accommodations and providers to meet those needs for her trip. It didn't quite a business trip, maybe something in between team, chesky in terms of what the trend is for business and you feel like sonder

can be well-positioned to try to get that Blazer travel. Even though we're primarily Urban accommodations provider weave through Extended Stay Stay the 14 days or more in particular up like some really really significantly and we think that capability and that that that said the man is likely to sustain itself. I myself have been on the road for at least, I take 12 or 13 months in the last 18 months to visit at 26 of our 39th honor market usually, for 2 weeks days, where I just be doing my work. During the day Monday through

Thursday and then, you know, just being different city Monday through Friday and then be different different city in the evenings and weekends. So I think that's really like it here. I would, I was talking in the lobby of the TWA hotel last night with an anonymous executive and I was saying I was going to be having this interview and they were saying, well, ask them about how the institutional Dynamic institutions can get us into the play of short-term rentals. So sonder is like partly due Hotel, license, and

partly short term rental license, and the hotel hotel rates are real estate investment. Trusts have been coming for a long time. How long is it going to take until there is a s t? R e, does short term, rental Real Estate Investment, Trust. There are two kkr's and black Stones going to be getting into it, to think, I'm bored. So, I think it's now in the past. It's already occurring. Only going to grow inside overtime, especially Hospitality Reit. I think are looking for exposure to this category and we weren't conversations with some of them to explore operating some assets, especially

like, where we really Thrive which is smaller Tri-County properties. On the hotel side, 125 keys are fewer, independent hotels. I think those are really interesting after class, and no brand as we manage to come to do a roll over at least more assets, particularly in Europe. Are we seeing quite a lot of success in Barcelona in and the threads and your kind of these European markets, where there is kind of essential historical core of a lot of Independence Malachy County access institutional Capital to kind of go in in, in acquiring a lot like on a package deal with a lot of absence

or smaller. Haven't really been accessible to his nature of you know, the urban planning and Urban Design of these Markus Karl, I know wants to switch gears a little bit. No one else. At the skiff global forum stage is going to be as much about vacation rentals as you. And I know a Hot Topic with you is regulation and you think the travel industry should Be sure to pay more attention to the regulatory issue, run vacation rentals. So what what should we know when developing a business building? A scratch to be a short-term rental?

That is something that I think a lot of cities really want and they would they think they want that. I think the regulations that have come in place so far are moving a bit too far to the right where they're really diminishing the rights of homeowners and homeowners have skin in the game. The riddle is truly has begun is a segment in a significant way. It was founded on the basis of second homes. Airbnb brought us into the world of people would rent their back bedroom, and then they rented their entire apartment, but they don't typically own

that apartment. They typically rent that apartment for someone else who has the skin of the game. The landlord is the skin of the game. I think was Francis. This group is doing is for a thank. We need to have the skin in the game because that's how Capital gets deployed and we capitals, the boy that big cities, listen to that. The problem with regulations right now or they are be right there. I'm trying to force out of business, the bulk of the industry which a second homes and second homes are the things that help school districts pay their teachers and help

property taxes on those buildings, help cities in which the owners of those hounds actually are not consuming any services. And in fact, bring people in to do things in those cities. That wouldn't that the owners wouldn't do a visitor to Austin? Goes to a restaurant and it's 10 days will go to 20 restaurants. I will go to 20 restaurants. I live in Austin. I'll go there over 5 months. I'll get the 20 restaurant. So I think the shortsightedness of cities is driving vacation rentals back underground in the cities, which is bad for the industry's bad for Traveler, it's not even

good. It's not good for anybody right now. So, there is a trend in a lot of travel companies. Going public this year about a dozen or going public by her doing it and be a blank check, company is known as a special purpose. Acquisition company. Sonder is a classic example. If all goes according to plan with it later this year of being more than two billion dollar a public listing. So car. What is your take on some of the wave. All these companies going public? You're a very nicely, I may

have done something. If you're an old guy and I have probably oldest guy in the room. If you seen these movies before, there is a lot of capital chasing the travel industry right now. There's a lot of capital and when you have a lot of capital stupid capital, and I think there's a lot of stupid Capital ice packs are one of the things that help stupid Capital go faster. Some of the valuations that I'm seeing for companies unfamiliar with our extraordinary. I

don't know how that will be rewarded. The market, the gentleman that earlier today who was on screen was talking about you. The proof is in the pudding after they go public and they see their value spot. That's not good for anybody. So I am wondering about the valuations that are out there. I think they're very lofty, but that's because Everyone is chasing the name companies, their tasting things that they think they're going to be easier for the Public's except for the public markets. Except so I would just be leery that every time in my history that I've seen a lot of money chasing

something. I saw it in 1998 and 99 and we had the 1.0 bus that if I remember, pets.com those sorts of things happened, when you have to pay Capital, so if you have any take on that, I mean there's that point amazon.com also did come out of that prices. So in theory, you could maybe agree with this even though you think sander is going to be the exception. What what's your view on the current wave of travel IPOs in that either. I'm not a public market

investor, but I would wager that there's some companies that are overvalued and I'd wager that a lot of the capital going to stack. You might be going towards. What company is that wouldn't have otherwise had a good shot. But I also believe. There's so many companies are doing this. If there's a lot of advantages for really great companies. I think we've seen some really saw the company's go through that pass as well and demonstrate that, it's a really legit way to go public as the company. And so I think I was some of our most the most astute investors at that we have in our cap table are

looking at Knotts back to the category, but really saying you're really, really good opportunity for Alpha generation because there's a lot of people that are getting all these companies have the same bro, you know, into one of those with you for you and now it was a lot of skepticism. But in reality there are some businesses that are overvalued and some of their undervaluing be really, really just interesting for the investor is going to the work. I think it's incumbent on CEOs and Boards of private companies to really ride Herd on the valuations that are being brought to them,

because they're the ones who on the day after a transaction is done, have to go in front of the public markets and justify think so. It's really incumbent did not get the most money and the highest value. It's to get the defense will valuation. I think everyone still wants that little pop after you go public because that really does help you through. I've been I've been taking two companies public. I got the pop on the second when I didn't get the pop on the first one. And the first one ended up in the hands of Dun & Bradstreet very quickly. So, it's just one of those things that I've in

the boards and CEOs in particular need to never have their classes have roses in them. They need to be very studious about the valuations except and it may not be that the highest value six pack with the highest value is the right partner for you and Kai. Call the Francis. I was first wrote about Sondra in 2018 and I got the reaction after word from an executive who said, you're just drinking the Kool-Aid and there's no these companies. When they say they have these emails, hockey stick projections, you know what, you can't

believe it. And so now you are going Pub. Later this year and the Wall Street Journal early, this month had an article and they, they say they had a mixed picture and Saunders. One thing they said is they up and see how the company is projecting. You're going to have this hockey stick, gross revenue in 2025 is going to be at 4 billion dollars. What is your response to certain that criticism or why the picture of the exceptions? Yeah, but I understand that extremely high growth is not something we see often especially in public markets, but in February 2020, right before the covid

crisis, we were growing revenue, 180% year-over-year and so it's difficult to imagine that we can get back to that level of growth. If you haven't seen our historical performance or how little time, we've been around, and how rapidly than growing. But really, it's kind of a mathematical equation is simple as Supply aggregation for our business. Our value proposition for gas. So strong. And the feedback is so, so good. That the only limited to our group is really Supply aggravation and the last 18 months we've been doing is building up. The pump and building our base of Supply,

but not opening at during the pandemic opening it and then the second half of 2021 into 2022. In particular, you're kind of avoiding the trough of of demand shocks. And so we have extremely good, visibility into the Ford kind of openings of our properties. We've signed it. We have a lot more units that are signed and we have units that are open in life today. And and we have a pace of finding this proves a pipeline. We're adding color 1000 units, a month and West Side. 1000 units translates into sixty million dollars in annual revenue and these properties are open and she do that meal

twelve months a year. That's 800 Mail Plus million dollars a year in Revenue. That is brought through bye-bye. Buddy's Buddy's properties. And so I think that with all so careful underwriting making sure that we're looking at consol property and they arrest far. We're not going to be here or you going to do less good than these, properties and if you bring these two things together in the build-up, you let me show investors that decides to go along sonder. Really foolish that, you know, there is there's a lot of outside even to our model. Even though the numbers look on a staggering from

growth perspective. I think the last take me to 18 months of the pandemic is made, kind of our trajectory not as clear as it was before before. Those are really click under the hood. They see if they see that that, that, that the trend is there we have an audience for here as well. Short term, rental, and vacation rental continue to be as popular post-pandemic. And the only answer is yes. This was something that came up earlier today and you eluded Carl to you, no vacation rental. It's not a 2020 place when I'm sorry. This has been going on in his head at next to the momentum for many many

years. So on that point, let's move Beyond vacation rental and short term rental Carl. What a lot of some some people at the conference have been planning off of 2020 rates in 2021 rates. What what is the review on that on the board of a public company in Dublin and the advice but we're taking the hard as that. We can't make any sense of 2019 2020. And 2021. We don't we don't have to keep it secret. If you can look at any month in 2020 and extrapolate that month over KT next year, is going to be a

certain way. I think that to this poll question. I'm not sure whether we didn't eat away five years worth of growth in vacation rentals because I coined the phrase a few years ago that it's not alternative when its preferred and when you talk to families and friends traveling together, there's no question that they case you when those are preferred, the pandemic probably spread the speed that up. Now, I don't think you can extrapolate that we're going to have that type of growth again in the coming years. So I'd be very leery if I was a financial

officer of a publicly traded company of making any projections off of 2020. How you project, what's going to be happening in the future? Francis? Yeah, I mean very, very optimistic about the long-term potential, any good to take a step back and look at and what they value and how they use their disposable income. Travel remains. One of the top things to do with. Instagram is also made as a social currency. You can kind of share with the world that your experience is our. And there's

just, like, really long-term trends that are at play that I think we're going to overpower whatever we're seeing the short time here on top of potentially, shifting toward the world, where being healed. There's an increase in quantity of remote workers that are that are looking for places to stay avoiding the winter, things like that. So, no feeling feeling really optimistic about about the mentored the category, but always think I've got that. Like, the quality has to be there in the consistency and predictability have to be there. I think it specially for such a high risk of failure.

Experience brands that have standards are are going to snow in particularly well in this business. Earlier with Dennis and he said that, you know, you have to pick your spots and his suggestion to VRBO was that you know, you happy with you. You can't be everywhere. You have to be selective. How does, how does that lessen to translate to sonder? What, how, how do you say to try to be selective in your approach to growth? Yeah. I mean, there's a very robust set of criteria to be a property membrane centers that are really substantial brand

Review Committee that I personally sit on and every single property. Are we really migrated to where the world? Where now, we do almost exclusively and our buildings. That's an important shift in our Evolution. The average key count now is over a hundred, you know, it across on their properties, which means that were controlling the lobby and we're controlling the elevators, all the little details of things that could go wrong. And, you know, if we're still think we would say no to the vast majority of properties that are, that are put in front of us. And we really concentrate on areas

where the supplies are replaceable. Lincoln core locations are really difficult to build into. This is really strategically important for us as well. You offering me stop locations. That are irreplaceable like from a competitive standpoint is also really great rate of to make sure that we have these kind of really natural. Most. That's also going to contribute to while you're going to get the Wall Street Journal article, that is critical. It's very difficult to understand that something that they can't model and they can't model something, because only Francis knows what to be modeled. So

it's, it's a, it's, it is an interesting thing things that are newer hard for established companies, to understand, which is why Airbnb exist. It's why, you know, and think why that's, why HomeAway existed. The we came out of a place where nobody ever put the stuff together before we put it all together and lo and behold it, that the man went up, some new things, are always hard to model. I just would hate to be doing new things. In the case, personally other at the public company because the public markets are horrible to you when you miss a

quarter. A Carl with hostile world is it? It's a topic that we don't ordinarily get covered on the big stage. But what is the shake a lot of change in the Youth Travel? Barkat? What, where do you see how it was going in? The next couple years? Will we feel real? I feel bullish on houses right. Now. The biggest problem with hospitals is just the fact that their parents. They think things called parents of young people and you're nothing. And Mom is saying ain't, no way you're getting on a plane and going to sleep in rooms with people. You don't know and hang out in bars with people.

You don't know. I think that with all that pent-up, the Mando is huge. We can see if Oscar world. The pent-up demand for travel at the graphic was talking about that earlier. So I am really excited about things that can happen for hosta. Whirlwind, we come out of this someone earlier today, said, the thing you have to concentrate on his use user and customer experience. Last word, hostile rolls. Been spending all this time and effort is Making the best experience for people who want to travel that way and make no mistake. There is a there's there are people who want to

travel using hospitals. They live for it and it is 18 + 24, + 18 + 35.

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Carl Shepherd
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