The self-proclaimed next-generation hospitality company has a finely honed strategy, but it may be slow as profits remain elusive.
While hotel company Sonder has a complex digital strategy to populate its properties, what it really wants is for its largely Gen Z and millennial guests to brag about their great stays on social media.
Sonder describes itself as a next-generation hotel company, and its research and development budget is large, with marketing a key focus, according to its senior vice president of revenue.
“We have a very omnichannel approach to distribution, whether it’s third-party sales or distribution, things like Airbnb and booking.com,” said Shruti Challa, speaking at the Skift Future of Lodging Forum on Thursday.
It also uses Google Hotels, Tripadvisor and Kayak. But at the same time you are interested in using performance marketing. “Social media is very important to us,” he added. “Our overall approach is to target the right customer in the right space at the right cost.”
The company queries data around questions like: what is the cost per acquisition per customer and what is their lifetime value after that?
With performance marketing, they can book directly and it doesn’t have to be more expensive than using an online travel agency, Seth Borko, senior research analyst at Skift, told the moderator. They also become more loyal guests.
Social media marketing makes sense, given the type of guest Sonder wants to attract. The customer segment is “young, urban, open and thoughtful, and wants to organize their stay on their own,” Challa said. “They are more digitally enabled. Technology underpins much of the generation we believe in.”
Gen Z and millennials also care a lot about design and how they look in their communities, he added during the discussion “Technology Drivers Needed for Hosting Today.” “This is an era where social is a way of life.”
Sonder, which operates in 39 markets and has 8,000 rooms in 250 properties, is also ramping up its efforts to target corporate travelers, again targeting Millennials and Gen Z-ers, and has grown its corporate accounts from 150 to 250, with interns banking. using the Sonder properties as corporate housing. It also counts entertainment groups, sports teams and Broadway shows as clients.
It also wants to leverage technology to lower costs and increase RevPAR, or revenue per available room, a key industry metric.
“There are a lot of elasticity studies,” Challa said. “Even with just a small downgrade, you can drive occupancy more effectively. If you have a higher occupancy, you can get reservations earlier.” While that leads to higher variable costs, with more ins and outs, he said it ultimately leads to longer stays.
Despite posting an $83 million loss for the first quarter of this year, he said the second quarter was looking up. “There’s a backlash in travel,” she said. Sonder will expand to new customer segments, in addition to corporate travelers and digital nomads, and expects 140% year-over-year growth in the second quarter.
With rumors of a recession, the vast technological arsenal will come in handy. “I’m optimistic about Sonder’s ability to pivot or change,” he said. “We have to prove in terms of our financial performance. Demonstrating to the market that Sonder is here to stay”.