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Lessons from Sonder, Oasis, and 15 Years of Building in the Space
The wind-down of Sonder in November, while not wholly unexpected among industry insiders, was a significant and even shocking event for the short-term rental (“STR”) and broader furnished/flexible rental sectors. It’s also a $2B+ cautionary tale for anyone betting on operationally intensive, asset-light hospitality – and a signal that the capital markets are finally re-pricing risk in this sector. As a fellow flexible rentals founder, I know all too well how hard it is to build and scale a start-up in an operationally- and people-intensive business like hospitality. So I’m hesitant to render judgment, knowing it’s difficult to peel back the onion and properly attribute the causes of successes or failures.
But since I've been in this space longer than I care to admit, and Sonder’s status as a bellwether for the industry, I wanted to share some insights that I hope are helpful – not just in STR, but across hospitality and built-word innovation at large.
For context, I’m the Founder & former CEO of Oasis Collections, the first STR brand, which I started back in 2008 based on my experience trying to find a furnished rental in Buenos Aires. The concept was “Home Meets Hotel” – combining the service, consistency, and amenities of a high-end hotel with the space, value, and authenticity of an apartment rental. The “rooms” were privately owned residential properties (mainly condos in urban markets); the front desk and concierge functions were provided by a centralized team; the amenities were delivered through partnerships with local gyms, co-working spaces, and members’ clubs.
While the concept caught on quickly amongst owners of investment properties and younger travelers, it took a while to gain broader acceptance with investors, institutional real estate owners, and corporate travel departments. I built a high-performing team of ex-pats and Argentines, and we bootstrapped the business from Buenos Aires for several years, expanding into key markets throughout Latin America. As we matured, and the rise of Airbnb helped to define the STR landscape, we moved the HQ to Miami, secured investment (along with a commercial partnership) from Hyatt, and reached 2.5k units across 25 markets in 12 countries. Both because Oasis was a first mover, and I ran the business for 15 years (until I exited in ’23), I’ve tried pretty much everything there is to do in furnished rentals. Short and mid-term rentals; b2c and b2b channels; both urban and vacation markets; destinations in LatAm, Europe, and the US; investment from strategics; M&A; demand- and supply-side corporate partnerships; a subscription model; various takes on delivering perks and amenities.
In short, I’ve been living and breathing this space for almost 20 years, so I have some thoughts…
The appeal of short-term rentals – when done right - is undeniable. Hence, the 492 million nights and $82B booked on Airbnb in 2024, and the parallel emergence of a ~$30B industry of branded, professional STR management companies. This is the sector that we’ll focus on here (1).
(1) As distinct from both marketplaces (e.g., Airbnb and VRBO), which do not directly manage properties or the guest experience, and managed vacation rentals (e.g., Vacasa and AvantStay), which I consider to be a different industry. I do, however, include operators focusing on mid-term rentals (generally defined as stays of 30+ days).
The need for these STR managers is clear – both for property owners seeking to increase NOI (without developing hospitality expertise) and for travelers seeking that “home meets hotel” experience.
Notwithstanding the above, it’s been extremely challenging for these management businesses to become stable and profitable at scale. This has proven true regardless of business model, geography, technology, team quality, etc. It's just a really difficult business.
There are many reasons that this is so, but the main ones are:
No control of inventory These businesses are asset-light by design (i.e., they don't own the properties that they manage). There’s nothing wrong with that; most hotel brands are as well (Marriott owns <1% of its hotels). But because the hotel model is effectively branded and well-understood by real estate owners, the management contracts are 20-30 years.
On the STR side, the default contract types are 1-3-year management agreements or 3-5-year master leases (more on that later). The shorter duration and relative weakness of these agreements create a series of cascading effects – e.g., less investment in FF&E, lower ROI on marketing, and high portfolio churn.
Multifamily buildings or condos also have an obvious alternative use – namely, their original use as permanent, primary residences. Thus, when something goes wrong or an asset changes hands, the likelihood that the owner will return the property to its original use is high.
This lack of control over the “supply side,” combined with a general misalignment between owner and operator, acts as a headwind to success. It negatively impacts the guest experience and the operator’s bottom line.
Operational complexity This is partially tied to the above. Managing two distinct sets of customers (property owners and guests) is a big lift. And the larger you get, the more institutional (and thus demanding) the owners become.
Then there’s the dispersed nature of the operation. Most STR groups start by managing individual units, then build up to 5-10 units per location, and so on. Even groups like Sonder, which focus on full buildings, have many fewer units or rooms per location than the average hotel, creating a more distributed operation. Add to that the larger size and variability of each unit (a kitchen, multiple bedrooms and bathrooms, maybe outdoor space), and the different group sizes and “stay occasions” of the guests, and the complexity compounds.
Meanwhile, the average length of stay isn’t meaningfully longer than a hotel’s (~4 nights vs. ~3). This combination of: (1) a 2-sided marketplace, (2) distributed, non-uniform portfolios, and (3) high volume makes it a real challenge to create an efficient operation and deliver a consistent guest experience.
Lack of established tech systems STR tech has taken a big leap in recent years, with property management systems like Guesty and Mews gaining scale and the emergence of point solutions for operations (e.g., Breezeway), revenue management (Wheelhouse, Beyond Pricing), and more.
But earlier entrants (including Oasis) had to build their own tech, at significant expense, and even the SaaS solutions available today aren’t fully mature and offer incomplete solutions for what is a highly complex business model. An operator at scale might need 10 different software platforms. Whether you build or buy, it’s expensive and complex to administer.
Minimal brand recognition In the early years of this space, companies like Oasis and Onefinestay aspired to build hospitality brands. To an extent, I think Sonder did as well. But that has proven difficult, for a variety of reasons that merit a separate analysis. Without a brand, your product becomes a commodity, which means that you compete primarily on price. Lack of brand awareness also means customers don’t go to your website and book directly; instead, they book on aggregator websites like Airbnb, which charge significant fees. A race to the bottom on rates and margins ensues.
you're locking in a fixed rent to the landlord, then betting you can resell those nights at variable short-term rates. When it works, margins are 4-5x. When it doesn't, losses compound overnight.
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This analysis scratches the surface. In a recent conversation with Crimson CoPilots, I went deeper on the operator economics that don't show up in pitch decks — the PropCo/OpCo playbook, the unit economics of MTR, and what I'd do differently if I were starting Oasis today. If you're an operator, investor, or real estate owner trying to make sense of this space, the full discussion is worth your time.
While Sonder faced the same intrinsic difficulties as any other STR business, it also faced specific concerns about its business model and approach. It should be noted that the majority of venture-backed STR companies took similar approaches for the same reason: the imperative to scale quickly at all costs.
Master leasing This is the big one. A master lease implies taking long-term leases (typically 3-5 years) on blocks of units or full buildings, and then sub-leasing them for shorter periods (usually days or weeks). In plain terms: you’re locking in a fixed rent to the landlord, then betting you can resell those nights at variable short-term rates. When it works, margins are 4-5x. When it doesn’t, losses compound overnight.
This approach - also known as rental arbitrage - creates a mismatch between fixed, long-term liabilities and variable, unpredictable, short-term revenue. When market conditions change, the operator has a tough quarter, or the deal was bad to begin with, losses add up quickly. It’s also incredibly balance-sheet intensive. Sonder reported $1.5B in liabilities against $1B of assets as of March 2025.
Why do it then? First, it enables faster scale because more landlords are interested in signing a master lease than in a management agreement with no guaranteed rent. Second, it works great when the good times are rolling, as the arbitrage between the rent and the rate charged to the guest can be 4-5x.
Companies across various asset classes have imploded due to this approach, most famously WeWork (which collapsed under the same lease-liability mismatch – $47B in lease obligations against uncertain revenue). In the STR sector alone, well-funded casualties in addition to Sonder include Stay Alfred, Lyric, Domio, Zeus, and Casai. Those 6 companies raised ~$1.2B. There’s then a much longer list of venture-backed companies that raised $10-30m and failed, primarily due to the master lease model. What’s puzzling is that these negative outcomes persisted for ~6 years and across at least 2 cycles, yet the top venture firms in the world continued to pour capital into this model. The thesis, I think, was that software margins would eventually emerge from operational chaos – that tech would tame the complexity. It didn’t.
Broad range of product types Sonder’s initial product type was several apartment or condo units at a given location. As they grew, they began taking on entire apartment buildings (which became their primary offering) and eventually hotels. Some companies do all of the above and add single-family homes to the mix.
There’s nothing wrong with creating different product lines if a) the industry is clearly defined and understood, and b) the given company already has an established brand and operational expertise. If neither of those conditions is in place, the result is customer confusion and massive operational complexity.
Not high-end enough In the early years of STR, there was a lot of focus on design and experience, both to differentiate from hotels and to justify hotel-esque prices despite the lack of services and amenities (e.g., room service, pools, restaurants). Over time, however, Sonder (and the industry overall) gravitated to a more generic, middle-of-the-road offering.
Given the operational complexities noted above, the operator’s net revenue per stay needs to be relatively high to cover costs and generate a profit. The “race to the middle” approach pushes this metric down, while simultaneously eroding guest experience differentiators and potential brand equity… leading to even lower rates in a vicious cycle.
All of this is not to suggest that there are easy or obvious alternative approaches. I’ll say it again - the space is hard. Sonder undoubtedly built something impressive in terms of sheer scale (reaching ~10k units across ~40 markets), and there’s no question that the strategies above (particularly master leasing) enabled them to grow much more rapidly than others (including Oasis). But the tradeoff was a riskier business model, uneven quality, and difficulty in establishing brand awareness and/or loyalty.
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Master Lease A long-term lease (3-5 years) on a block of units, sub-leased nightly or weekly. Fixed liabilities, variable revenue.
Management Agreement A fee-for-service contract where the operator manages without taking on lease liability. Risk stays with the owner.
NOI Uplift The increase in net operating income achieved by converting a property to a higher-yielding use (e.g., traditional rental to furnished MTR).
PropCo/OpCo A structure separating real estate ownership (PropCo) from property operations (OpCo), aligning incentives and isolating risk.
Almost two decades after the industry’s inception, the jury is out on whether there is an STR model that does work at scale. So, should everyone just throw in the towel? Go into b2b SaaS or hit the beach? I don’t think so. Here are a few humble recommendations for operators and investors who want to keep fighting the good fight:
(2) Generally, 2-4% of gross revenue + 8-15% of adjusted gross operating profit.
Why? Longer stays = more revenue per booking and fewer “turns” per year. This approach is only modestly more operationally intensive than traditional multifamily, but with gross rents of 1.7 – 2.5x, which creates enough juice to generate meaningful (15-25%) NOI uplift for owners and sustainable economics for the operator.
Second, well, math. Consider the difference between an average booking for a design-forward, 1,200sf, 2-bedroom in a tier 1 market and a 600sf 1-bedroom with Ikea furniture in a tier 2 market.
That’s a 3.2x difference in net revenue, with roughly the same direct cost per booking and corporate overhead allocation. Of course, finding and signing high-end properties is easier said than done, and, like MTR, the TAM is smaller. But again, it’s doable. While the vacation rental space has several scaled operators focusing on the luxury market (e.g., Inspirato, AvantStay), I’m not aware of anyone currently doing so on the urban side.
Nail all aspects of the guest experience – design, FF&E, amenities (whether on-site or via partnership), housekeeping, maintenance, customer service. Then expand.
Since the venture model is reliant on generating massive scale quickly, this logic implies that these businesses are not venture-appropriate. I think that’s true. They profile more in the growth equity wheelhouse. But growth equity generally means later stage and larger checks. Which, for earlier-stage companies, leaves angels, family offices, and real estate-adjacent investors that are comfortable with slower growth and less ultimate scale.
The primary benefits, as it relates to STR, are:
Master leases transfer risk to the operator and require capital. Management agreements transfer risk to the owner and require trust. One scales fast and breaks faster. The other scales slowly and survives.
In summary, this space has proven to be a tougher nut to crack than most (including me) imagined. But now, with years of data and lessons learned, and consumer demand remaining strong, the operators who survive the next cycle won’t be the fastest to scale – they’ll be the most disciplined about what they scale, and why.
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