INSUBCONTINENT EXCLUSIVE:
Airbnb has well and truly disrupted the world of travel accommodation, changing the conversation not just around how people discover and
book places to stay, but what they expect when they get there, and what they expect to pay
Today, one of the startups riding that wave is announcing a significant round of funding to fuel its own contribution to the
marketplace.Domio, a startup that designs and then rents out apart-hotels with kitchens and other full-home experiences, has raised $100
million ($50 million in equity and $50 million in debt) to expand its business in the U.S
and globally to 25 markets by next year, up from 12 today
Its target customers are millennials traveling in groups or families swayed by the size and scope of the accommodation — typically five
times bigger than the average hotel room — as well as the price, which is on average 25% cheaper than a hotel room.The Series B, which
actually closed in August of this year, was led by GGV Capital, with participation from Eldridge Industries, 3L Capital, Tribeca Venture
Partners, SoftBank NY, Tenaya Capital and Upper90
Upper90 also led the debt round, which will be used to lease and set up new properties.Domio is not disclosing its valuation, but Jay
Roberts, the founder and CEO, said in an interview that it’s a “huge upround” and around 50x the valuation it had in its seed round
and that the company has tripled its revenues in the last year
Prior to this, Domio had only raised around $17 million, according to data from PitchBook.For some comparisons, Sonder — another company
that rents out serviced apartments to the kind of travelers who have a taste for boutique hotels — earlier this year raised $225 million
at a valuation north of $1 billion
Others like Guesty, which are building platforms for others to list and manage their apartments on platforms like Airbnb, recently raised
$35 million with a valuation likely in the range of $180 million to $200 million
Airbnb is estimated to be valued around $31 billion.Domio plays in an interesting corner of the market
For starters, it focuses its accommodations at many of the same demographics as Airbnb
But where Airbnb offers a veritable hodgepodge of rooms and homes — some are people’s homes, some are vacation places, some never had
and never will have a private occupant, and across all those the range of quality varies wildly — Domio offers predictability and
consistency with its (possibly more anodyne) inventory.“We are competing with amateur hosts on Airbnb,” said Roberts, who previously
worked in real estate investment banking
“This is the next step, a modern brand, the next Marriott but with a more tech-powered brain and operating model.” These are not to be
confused with something like Hilton’s Homewood Suites, Roberts stressed to me
He referred to Homewood as “a soulless hotel chain.”“Domio is the anti-hotel chain,” he added.Roberts is also quick to describe how
Domio is not a real estate company as much as it is a tech-powered business
For starters, it uses quant-style algorithms that it’s built in-house to identify regions where it wants to build out its business, basing
it not just on what consumers are searching for, but also weather patterns, economic indicators and other factors
After identifying a city or other location, it works on securing properties.It typically sets up its accommodations in newer or completely
new buildings, where developers — at least up to now — are not usually constructing with short-term rentals in mind
Instead, they are considering an option like Domio as an alternative to selling as condominiums or apartments, something that might come up
if they are sensing that there is a softening in the market
“We typically have 75%-78% occupancy,” Roberts said
He added that hotels on average have occupancy rates in the high 60% nationally.As Domio lengthens its track record — its 12 U.S
markets include Miami, Los Angeles, Philadelphia and Phoenix — Roberts says that they’re getting a more select seat at the table in
conversations.“Investors are starting to go out to buy properties on our behalf and lease them to us,” he said
This gives the startup a much more favorable rate and terms on those deals
“The next step is that Domio will manage these directly.” The most recent property it signed, he noted, includes a Whole Foods at the
ground level, and a gym.Using technology to identify where to grow is not the only area where tech plays a role
Roberts said that the company is now working on an app — yet to be released — that will be the epicenter of how guests interact to book
places and manage their experience once there.“Everything you can do by speaking to a human in a traditional hotel you will be able to do
with the Domio app,” he said
That will include ordering room service, getting more towels, booking experiences and getting restaurant recommendations
“You can book your Uber through the Domio app, or sync your Spotify account to play music in the apartment.Ans there are plans to extend
the retail experience using the app
Roberts says it will be a “shoppable” experience where, if you like a sofa or piece of art in the place where you’re staying, you can
order it for your own home
You can even order the same wallpaper that’s been designed to decorate Domio apartments.Although Airbnb has grown to be nearly as
ubiquitous as hotels (and perhaps even more prominent, depending on who you are talking to), the wider travel and accommodation market is
still ripe for the taking, estimated to reach $171 billion by 2023 and the highest growth sector in the travel industry.“Airbnb has taught
us that hotels are not the only place to stay,” said Hans Tung, GGV’s managing partner
“Domio is capitalizing on the global shift in short-term travel and the consumer demand for branded experiences
From my travels around the world, there is a large, underserved audience — millennials, families, business teams — who prefer the
combined benefits of an apartment and hotel in a single branded experience.”I mentioned to Roberts that the leasing model reminded me a
little of WeWork, which itself does not own the property it curates and turns into office space for its tenants
(The SoftBank investor connection is interesting in that regard.) Roberts was very quick to say that it’s not the same kind of business,
even if both are based around leased property re-rented out to tenants.“One of the things we liked about Domio is that is very
capital-efficient,” said Tung, “focusing on the model and payback period
The short-term nature of customer stays and the combination of experience/price required to maintain loyal customers are natural enforcers
of efficient unit economics.”“For GGV, Domio stands out in two ways,” he continued
“First, CEO Jay Roberts and the Domio team’s emphasis on execution is impressive, with expansion into 12 cities in just three years
They have the right combination of vision, speed and agility
Domio’s model can readily tap into the global opportunity as they have ambition to scale to new markets
The global travel and tourism spend is $2.8 trillion with 5 billion annual tourists
Global travelers like having the flexibility and convenience of both an apartment and hotel — with Domio they can have both.”
