In a maturing short-term rental industry, it’s either consolidate or cease to exist.
Miami-based Here.co, which offered fractional ownership investments in short-term rentals, has ceased operations.
Here launched in 2022, buoyed by the pandemic-induced interest in short-term rentals. But the macroeconomic conditions and higher interest rates forced the company to shut down – effective immediately.
The company will list all the properties for sale. Upon the sale of each property, the net proceeds will be distributed to the respective investors after settling selling expenses, wind-down costs, loan repayments, and deferred fees owed to the manager, it said on its website. In its managerial role, the company will oversee the sale process, aiming for the best possible outcome for investors, acknowledging that market conditions will influence the sale terms. The objective is to sell all properties within the next six months to optimize value.
Throughout this period, Here will continue filing necessary SEC reports for both Here and each Series until the completion of the property sales, according to Short Term Rentalz.
Here isn’t the only company affected by the macroeconomic conditions. Last week, Wisconsin-based property manager Frontdesk, laid off its entire workforce of approximately 200 employees and halted its operations. Frontdesk had garnered nearly $26 million in venture capital and envisioned itself as a prominent property manager in the U.S.
The startup’s business approach involved leasing apartments at market rental rates, furnishing them for short-term rentals across more than 30 markets. However, challenges arose primarily due to upfront costs, associated capital expenditures, and fluctuations in demand and rates.
And in November last year Cabana, a startup offering camper vans as vacation rentals, sought buyers to prevent its closure, after all efforts to secure additional venture capital were unsuccessful. Its CEO Scott Kubly wrote in a LinkedIn post that it has ceased operations and started the sale process.
Having previously raised $16 million, including a $10 million series A round in 2021, Cabana had notable investors such as Craft Ventures, Goldcrest Capital, Nordic Eye, and entrepreneur Jason Calacanis.
That notwithstanding, the company couldn’t weather the economic climate.
“Ultimately, it was a series of macroeconomic events that felt like a black swan event hitting every 9 to 12 months. The automotive industry experienced a semiconductor shortage that ground global vehicle production to a halt. That was followed by a labor shortage and 10% inflation. Then interest rates spiked to the highest rates in 20+ years. And most recently, venture capital deployment has dropped by ⅔ in the last 12 months,” Kubly wrote.
Startups like Here.co and Cabana, which were either founded or funded post-pandemic low-interest economy, saw higher company valuations and an increased potential for growth.
However, with the current rise in interest rates and market contraction, companies that aggressively raised funds during that period are facing challenges in meeting their previously inflated valuations.
“And now that interest rates are going up and the market is pulled back quite a bit, it’s really hard for those companies that raised aggressively in that period of time to live up to the valuations that they raised under, and so now they’re in this crunch,” Cara Whitehill, an industry advisor and investor and the founder of Unlock Advisors told Skift earlier.