Hostaway, a property management system and software marketplace for the short-term rental industry, has raised $365 million at a valuation of $925 million.
The investment, probably the largest received by a STR technology specialist, has come from growth equity specialist General Atlantic with participation from previous investor PSG. Both will become "significant minority shareholders" once the deal is closed.
Founded in 2016 in Finland, Hostaway said the funds will go towards product innovation, expansion especially in France, Italy and Spain and initiatives around artificial intelligence.
Speaking to PhocusWire, Hostaway co-founder and CEO Marcus Rader said AI was going to change the whole travel market but no one really knows how.
The company needs its own “war chest,” he said, to continue building products and services including AI-driven tools for its customer base of property managers.
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AI is going to change how customers look for short-term rentals, he said, so Hostaway also wants to invest in improving existing products and tap further into the direct booking trend, which the company “wants to accelerate.”
Hostaway unveiled four new products in 2024 — including financial services for property managers in April, insurance earlier this month and dynamic pricing — which require further investment, according to co-founder Saber Kordestanchi. And the company also wants to offer in-house trust accounting software, which customers are asking for, he said.
“For any of these [products], we might look at either building in-house or acquiring a solution,” Kordestanchi said.
And the company wants to continue its current “growth streak,” he said, with Hostaway increasing annual revenue growth every year for the past five years.
Rader, meanwhile, said that he didn’t really see any big challenges to the company’s growth next year but went on to describe AI as “a really exciting challenge because nobody know how it’s going to look five years from now.”
There are always challenges with growth, Kordestanchi said, especially as Hostaway expects to grow faster.
“But also considering how we have more resources compared to before, and how we have grown and we expect that we can solve a lot of those challenges,” he said.
Future priorities
As for priorities for 2025, Rader reiterated that it would be AI, product investment and new markets with the focus towards whatever is the most urgent need of customer.
Asked what he thought was wrong with the STR industry currently, he said negativity.
“A few years ago interest rates started going up and long-term rates have been going up and there has been talk about saturation of the markets and too much regulation,” Rader said.
“It’s a little bit too much focus on all the negativity. The fact is that short-term rentals are increasing in market share over the global accommodation market. They’ve gone from 6% to 15% in just a few years. The fact is that the global accommodation market is increasing. Another massive benefit short-term rentals has had for the past two years that the number of so called digital nomads or even remote workers has increased so dramatically.”
And restrictive regulations, he said, are already looking as if they will be rolled back.
“So there are a lot of bright sides and that’s what a lot of people get wrong,” he said.
“Also, regarding saturation, this is a self-adjusting, a self-regulating market. If you take all the houses in a market and put it as short-term rentals they’re not going to rent out because there isn’t enough demand. So, they’re either going to get sold and then be rented out long term so someone is going to be living there.”
Kordestanchi said the industry is also waking up to the need for professionalization and technology consolidation, an area he discussed in detail in a recent article for PhocusWire.
General Atlantic described Hostaway as "a category leader."
"We believe Hostaway is poised for continued growth, and we are thrilled to work alongside PSG to support the company across a number of value creation initiatives,” said Matthew Dorr, principal, General Atlantic.
Investors continue to see huge opportunity in vacation rental technology. Hostaway announced funding of $175 million from PSG in mid-2023 with the investment earmarked at the time for technology development, recruitment and potential acquisitions.
More recently, Guesty announced $130 million to accelerate its expansion and just this week, Vacasa founder and former CEO Eric Breon unveiled his startup Fairly. The vacation rental management company also announced $10 million in seed funding.