WhyHotel raises $20 million to bring pop-up hotel rooms to cities across the U.S.

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Airbnb has emerged as the single greatest disruptor of the $500 billion hotel industry over the past decade, and with the peer-to-peer home rental giant gearing up to go public in 2020, a slew of startups have staked their claim to a piece of the “alternative lodging” action.

One of those companies is WhyHotel, a Washington, D.C.-based startup that operates pop-up hotels in newly-built “luxury” apartment buildings. The company today announced that it has raised $20 million in a series B round of funding led by Harbert Growth Partners, with participation from Highland Capital Partners, Camber Creek, Working Lab Capital, Geolo Capital, Revolution’s Rise of the Rest Seed Fund, and former Bain Capital Partners MD Mark Nunnelly.

This takes the company’s total funding to $35 million since its inception.

Pop-up

Founded in 2017, WhyHotel partners with property owners and real estate companies to transform empty apartment blocks that have yet to be leased, into temporary apartment-style hotels. The company currently offers a handful of properties across Seattle, Houston, Arlington, and Tysons Corner, and with another $20 million in the bank it said that it plans to expand its footprint into new markets across the U.S.

“How people use space is evolving at a much faster pace than the 3-5 years it takes to deliver a high-rise building,” noted WhyHotel CEO and cofounder Jason Fudin. “To address this, we are accelerating innovative real estate offerings for consumers and developers alike.”

Above: WhyHotel partnered with real estate investment trust AvalonBay Communities Inc. to operate a temporary hotel in a new-build apartment block in Seattle

While tourists looking for luxury short-term accommodation is part of WhyHotel’s offering, it’s also targeting extended stays which may appeal to people who are relocating to a new area, business travelers, or even those who have to move out of their own home while renovating.

This setup may appeal to building owners for multiple reasons: it can take a considerable amount of time to shift every apartment in a new-build, and thus WhyHotel can be on-hand to ensure that the property is making money from the get-go. Moreover, if WhyHotel proves that it can make a lot of money from shorter-term rentals, there is every chance that the property owner may decide to keep at least some of the apartments as holiday lets.

“Unlike major operators that have been hobbled by delivering products that mismatch long-term lease obligation and short-term consumer contracts, our products are designed with an understanding of real estate cycles in mind and the goal of building a sustainable, profitable business,” Fudin added.

Hybrid

WhyHotel fits a growing trend spearheaded by the likes of Airbnb which have helped drive demand for alternative accommodation that is more homely. Earlier this year, San Francisco-based hospitality company Sonder raised $210 million at a valuation of more than $1 billion for vacation apartments that come with hotel-level service, while New York’s Domio raised $12 million for something similar. And Airbnb itself led a $160 million investment in Lyric, which develops what it calls “creative suites” for professionals.

Essentially, these properties are hybrids that promise some of the best elements of hotels, such as concierges and a gym, with the homeliness of an Airbnb. In the future, WhyHotel said that it plans to offer “additional products and services” to guests for the duration of their stays.

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