A Onefinestay property in Los Angeles. The company recorded substantial losses again this year. Onefinestay
When AccorHotels bought luxury Airbnb rival Onefinestay for $168 million (£117 million) last year it promised massive geographical expansion and tenfold revenue growth over a five-year period.
This now looks mightily ambitious given the current state of the company.
Accounts recently filed at the UK’s Companies House database for Onefinestay (Lifealike Ltd) show that the business is still producing substantial losses under its new owner.
For calendar year 2016, the group’s pre-tax loss loss ballooned by 65 percent to $37.3 (£28.8 million). Turnover grew by 7 percent to $22.3 million (£17.2 million).
The company once again blamed the poor performance on terrorist attacks in Europe, which “resulted in a reduction in trading in Paris and London.”
The directors said: “The group was disproportionally impacted relative to other participants in the travel industry due to the reliance on long haul leisure guests for whom travel is often discretionary and who cancelled or deferred trips due to concerns regarding the security situation in Europe.”
A long road
Even under the guidance of AccorHotels, Onefinestay’s path to profitability looks a long one. Revenue growth has stagnated (see below) and over the past three years the company has only added a handful of new cities.
“My concern is not the actual business idea; I love the business idea of taking a mainstream vacation rent product and putting it into a niche, which is the luxurious sector,” said one travel investor who did not want to be named. “I just don’t understand how somebody can think there’s enough people that actually have deep enough pockets to afford homes that are posted on that website.”
Onefinestay’s potential problems surrounding scalability might be one of the reasons it was bought by a strategic buyer rather than, say, a private equity house. Prior to the acquisition, it attracted $80.9 million over a number of funding rounds.
The investor added: “It was definitely a success story for the investors. It may not have been extreme multiples but it was multiples our industry on average is used to. So I think from that perspective it was a fine deal and I think for a strategic [buyer] it definitely makes probably more sense, but from a pure venture capital/private equity side I could never see how it scaled and brings up the returns we would have an interest in.”
Chris Hemmeter, managing director at Thayer Ventures, also sees the potential benefits Onefinestay might bring to AccorHotels in the long run.
“Onefinestay is an interesting model and I do think they can be profitable or at least accretive to Accor. The challenge for them is all about cost management, which gets easier as volumes scale,” he said via email.
“I also think Accor is thinking creatively about structuring their operational trade area reach in ways that will improve the Onefinestay model,” he said. “Finally, we should anticipate that as Accor integrates the Onefinestay model into their business, they will develop a product roadmap with unanticipated branches, perhaps alternative accommodations branches that are derivatives of the Onefinestay model but also new and highly profitable. Time and talent will tell!”
Changes at the top
Changes have already taken place in the leadership team. Co-founders Demetrios Zoppos and Greg Marsh, who was also the chief executive, left the company following the AccorHotels acquisition.
The company’s accounts note a one-off bonus payment of $6.8 million (£5.2 million) was handed to a director during the year. AccorHotels declined to say which director received the money other than to say the the “payment was part of a departure package.”
When the deal was announced, Marsh told Reuters: “I am re-investing in the company. For me, this is the beginning of a new chapter, not the end of the story,”
Five months later he was gone, replaced by another co-founder of the company, Evan Frank.
Earlier this year, Frank spoke to Skift about expansion plans and the company’s new vacation product.
“Well, look, 2016 was definitely a year of change for Onefinestay. A lot changed. When we think about how the year began and how the year ended, it’s really been a transformational time in a bunch of ways,” he said. “It was a good year.”
The AccorHotels purchase of Onefinestay was followed by a number of deals in the luxury alternative accommodation space.
Airbnb paid between $200 million and $300 million for its one slice of the upscale market in the form of Montreal-based Luxury Retreats and AccorHotels further increased its foothold in the sector by buying Travel Keys for an undisclosed amount.
Without published accounts, we can’t know for sure whether these two companies are loss-making like Onefinestay or profitable (some sources suggest Luxury Retreats is in the black).
A spokesperson for AccorHotels said: “As said at the time of the acquisition in May 2016, we plan to bring Onefinestay to breakeven in 2019.”