Progress in the long-term corporate travel bet | Tech US News


Skift Take

Sonder’s growth is slowing by design and macroeconomic conditions. Bet on the promised land of 2023, when he hopes to turn the red ink into green.

Dennis Schaal

Property manager Sonder is positioning itself for the long term to tap higher-spending business travelers, adding 200 corporate travel accounts, and a former CWT chief executive to its board, during the third quarter.

The company ended the September quarter with 600 business travel accounts, up from 400 at the end of the second quarter, and appointed Michelle Frymire, who served as head of travel management company CWT for 13 months until May 2022, to Sonder’s advice. directors to provide advice on boosting corporate travel.

Business travel won’t be a big part of Sonder’s mix anytime soon, as its foray into the sector comes in a post-pandemic corporate travel environment, and the company really started focusing on the sector just over a year ago.

Meanwhile, some corporations have recently been cutting back on travel spending because of macroeconomic conditions.

But Sonder hopes in the long term to gain incremental revenue per available room by adding business travelers to its customer mix. Sonder’s revenue per available room in the third quarter was $158, up 25 percent year over year.

“So the baseline is very low,” Sonder co-founder and CEO Francis Davidson told financial analysts during the company’s third-quarter earnings call on Wednesday, referring to its business travel initiative. “And so for us, as we’re adding these types of corporate accounts, hopefully at a much faster rate than there would be any contraction in global demand, that could be kind of a net gain for us. So we see that the opportunity is that there is huge white space for our business to generate corporate travel.”

An “extreme slowdown” in demand is not expected

Sonder lowered its full-year 2022 revenue guidance to more than $455 million, which would represent an increase of more than 95 percent from 2021. In February, Sonder’s forecast for the year was revenue growth from 100 to 110 percent.

Sonder president and chief financial officer Sanjay Banker said the reduced guidance was mainly related to unfavorable exchange conditions.

“And so bookable nights will increase sequentially for the fourth quarter, of course, but not as much as we’ve been expecting recently,” Banker said. “So when you put all of that together, without giving explicit guidance on the type of breakdown, that’s what our earnings guidance is reporting. It’s not, to be clear, a macro issue, but really about FX (foreign ) and the time of new units”.

Banker is stepping down from his executive role and will stay on until the end of the year while a search is underway for a new chief financial officer. He will join the board of Sonder.

Sonder’s revenue grew 85 percent year over year to $125 million in the third quarter. The company is doing a lot of things, including reducing the expected pace of new property signings and cutting back on geographic expansion targets, in an effort to turn the company cash flow positive.

During the third quarter, Sonder’s free cash flow was negative $39 million compared to negative $45 million in the second quarter. Cost cuts led Sonder to lose less money in the third quarter than in the second quarter, but an expected decline in revenue per available room slowed progress.

“We remain committed to achieving positive quarterly free cash flow by 2023 without additional fundraising and preserving a strong cash cushion,” Davidson said.

Sonder’s share price fell 10.2 percent at the close on Wednesday and fell another 1 percent to $2 a share in after-hours trading.


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