Courtesy of WhyHotel
WhyHotel was founded in 2017 by CEO Jason Fudin while he was vice president of strategic initiatives at Vornado Realty Trust.
- WhyHotel, a company that operates pop-up hotels in new apartment buildings as they start to lease up, just announced a $20 million Series B funding round.
- WhyHotel was founded in 2017 by CEO Jason Fudin while he was vice president of strategic initiatives at Vornado Realty Trust, one of the largest REITs with a market cap of $12.66 billion.
- We spoke with Fudin about how he got the idea for temporary hotel rooms, and why he thinks this approach could help fill apartment space in new buildings more efficiently.
- Another venture-backed rental company, Zeus Living, announced on Monday that it raised $55 million in funding from a group including Airbnb, while both Sonder and Lyric had nine-digit funding rounds earlier this year.
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WhyHotel, a company that operates pop-up hotels in new apartment buildings as they lease up, is fresh off a $20 million Series B funding round and looking to expand to more cities.
WhyHotel was founded in 2017 by CEO Jason Fudin while he was vice president of strategic initiatives at Vornado Realty Trust, one of the largest REITs with a market cap of $12.66 billion.
We spoke with Fudin about how he got the idea for temporary hotel rooms, and why he thinks this approach could help fill apartment space in new buildings more efficiently.
From his vantage point in the real estate world at Vornado, Fudin saw the high costs incurred by landlords as they attempted to lease up a new apartment building over an 18-24 month period. He ran one successful pilot with Vornado, creating a pop-up hotel in a newly opened building, and then left Vornado to start WhyHotel with cofounder Bao Vuong, vice president of development at developer PN Hoffman.
The company, based in Washington, DC, has operated only in the DC/Baltimore region and Seattle, but is planning to expand to Houston, Orlando, and Atlanta in the coming year while also adding more locations in DC and Seattle.
The latest funding round was led by Harbert Growth Partners, the growth equity arm of real-estate investor Harbert Management Corporation. It also included proptech VC Camber Creek, and Mark Nunnelly, a former managing director at Bain Capital Partners.
The company has raised $35 million in total, including this most recent round. Camber Creek has invested in every round of funding, and MetaProp has invested in both the seed and Series A round. WhyHotel has also received funding directly from Vornado.
WhyHotel is operating in a crowded field of venture-backed companies offering short-term and mid-term rentals. Zeus Living said on Monday that it raised $55 million in funding from a group including Airbnb, while both Sonder and Lyric had 9 digit funding rounds earlier this year as well. Fudin says that these companies "see themselves as hospitality companies, and they rent apartments as a way of securing inventory."
"We see ourselves as the engine of flexible, commingled real estate assets," Fudin said.
This vision animates both the pop-up hotels and WhyHotels' newly-announced development arm, Hospitality Living. These Hospitality Living developments will be designed to be flexible between short-term rental and long-term living, similar to Airbnb-partner Niido, and will also include coffee shops open to the public. The company's goal is to open its first development in 2022.
Fudin compares the pop-up hotels favorably to other venture-backed short-term models.
"Our model is specifically designed to be temporary, and because of that it is highly capital efficient," Fudin said.
Instead of typical venture-backed short-term rental models that lease space from owners, WhyHotel partners with them to share revenue.
This keeps the lease off of WhyHotel's balance sheet, and because it ia hosting in space that would otherwise be empty, the developer is making money off of an asset that previously wouldn't have made anything until it was leased. The approach echoes the move away from leases and towards managed partnerships that is taking place in the flexible-office world.
Fudin said that other companies will spend tens of thousands of dollars to decorate a single unit, and that WhyHotel eschews those costs because it will only operate in a unit for a 24 month maximum.
The company doesn't skimp on hospitality, operating with a 24/7 staff, instead of the app-based concierge approach that is popular with other venture-backed short-term rental companies.
One of developers' favorite things about the company, according to Fudin, is that it can actually convert customers into tenants of the building.
"It happens in every project," Fudin said. A large portion of these customers are relocating to a new city. They stay at a WhyHotel while searching for permanent employment, and eventually end up leasing an apartment in the building.
- Read more:
- The growth of Airbnb, Sonder, and other short-term rentals offers 3 key benefits for destinations, according to the CEO of a company that tracks 10 million listings around the world
- VC Camber Creek, which has steered clear of co-working, explains how it invests in the midst of a proptech gold rush