Market structure and the opportunity for institutionally-backed PMs

Introduction

Short term rental property managers (PMs) have been capital magnets over the past decade, raising $2 billion at heady valuations.  Institutional investors have funded at least 27 PMs, and high profile brands such Sonder and Vacasa have disclosed $1billion+ valuations. But following WeWork’s public flame-out and Oyo’s layoffs, well-capitalized businesses that combine real estate, technology, and branding face greater scrutiny.  Can institutionally-backed PMs sustain the growth to warrant these valuations?

To shed light on this question, Transparent analyzed the structure of short term rental supply to understand PM growth prospects. Our research suggests that, at least through the lens of market concentration,  institutionally-backed PMs are poised to maintain their growth. Large PMs, especially those focused on urban markets, have been the fastest growing segment of short term rental supply.  

Short term rental supply tends to become more concentrated over time.  This trend is clear from the history of more mature leisure markets, where large PMs have increased their market share.  As urban markets mature, we expect the same market structure to emerge. While a view on profitability requires access to company financials, our work demonstrates that institutionally-backed PMs can grow into their valuations by consolidating urban markets.