- London startup will get 64 million euros to fund expansion
- Luxury home-sharing CEO dismisses looming threat from Airbnb
Accor SA, Europe’s biggest hotel operator, agreed to buy Onefinestay for 148 million euros ($168 million) to confront competition in the online, sharing economy and expand in the high-end market.
Accor plans to invest an additional 64 million euros to increase the London-based startup’s presence internationally, it said in a statement Tuesday. Onefinestay, which will remain an independent unit within Accor, provides high-end homes for rent Airbnb-style, combined with hotel-like services for the proprietor and guests.
“Onefinestay has successfully captured a sweet spot: a combination of needs that neither traditional hotels nor new actors of the sharing economy can meet,” Accor Chief Executive Officer Sebastien Bazin said in the statement. “We are accelerating the transformation of our business model to capture the value creation linked to the rise of private rentals."
Since becoming CEO in 2013, Bazin has cut costs, expanded in China, adding luxury properties and competing more aggressively online.
Founded in 2010, Onefinestay had previously raised $81 million over the course of four funding rounds. But its business model is capital-intensive: unlike Airbnb, which is primarily a marketplace for landlords and short-term renters to meet, Onefinestay carefully selects its properties for its well-heeled clientele -- the company says it only accepts 1 of every 25 properties it’s offered -- and then prepares each property for the renter and sends someone to personally greet the guests upon arrival.
The startup -- which currently offers a portfolio of 2,600 luxury properties in London, Paris, Rome, New York and Los Angeles -- said in a statement that it had plans to move into 40 new cities within the next five years and expand revenue 10-fold. Onefinestay had annual sales of 15 million pounds in 2014, the last year for which financial statements were available at U.K. Companies House. That same year it recorded a net loss of 13 million pounds ($18.4 million.)
“With this investment we will be able to accelerate our growth,” said Greg Marsh, Onefinestay’s CEO and co-founder, in an interview with Bloomberg Tuesday.
Accor’s move has been interpreted as an attempt to stave off competition from Airbnb, the San Francisco-based home-sharing company valued at more than $25 billion -- more than twice Accor’s $9.8 billion market cap. In some cities, such as Accor’s home of Paris, Airbnb has been offering an increasing number of luxury properties in prime locations.
In August, the home-sharing service listed some 400 apartments in the French capital at prices above 500 euros a night, according to French local news site thelocal.fr.
Joe Silva, manager of the Four Seasons George V hotel in Paris, told the site "a large part of our clientele, especially the families, will abandon the hotels" in favor of luxury Airbnb rentals.
But Marsh said Onefinestay’s business model was substantially different from Airbnb’s.
“This is a business that has much more in common with the traditional luxury hotel operation,” he said. “I don’t see pure play marketplaces like Airbnb coming after this segment.”
Airbnb didn’t respond to a request to comment.
To make its high-touch model successful, Onefinestay needs to be in many more cities, says Dominique Vidal, a member of the company’s board of directors and a partner at Index Ventures, which led Onefinestay’s $3.7 million Series A investment in March 2011 and participated in the startup’s subsequent rounds.
“You might be enjoying the service in Paris or London, but you need to service those people in other places,” he said, noting that otherwise it’s difficult to retain customers and build brand loyalty. And, with such an upscale business model, expansion is expensive.
That’s where Accor comes in. And it’s not just the money. Accor offers Onefinestay a way to hook customers. Marsh said he can envision possible future tie-ins with AccorHotel’s customer loyalty programs for brands such as Sofitel or Fairmount, Raffles and Swissotel -- luxury brands that Accor acquired for $2.9 billion in December. He said he could also see integrating Onefinestay’s booking system with that for Accor’s luxury hotels.
Onefinestay’s typical guests are families or groups of people staying for more than four nights, Marsh said. This makes his business model complimentary -- not disruptive -- to Accor’s, since the same individuals might choose to stay in a traditional luxury hotel when traveling for business, he said.
While Airbnb has the cash to move into the luxury-home rental space, Vidal said, he doubts it would want to deviate from its more hands-off marketplace model in order to provide the level of service needed to appeal to wealthy luxury travelers.