Following the announcement of Superhog’s Series A funding round, we wanted to elaborate on why we’re so enthusiastic about the business and why we decided to lead this round.
£5m in ARR, a huge market, high growth, exceptional margins, and successful repeat entrepreneurs. That sums it up quite nicely! Below, we expand on each of these elements.
Short term rentals is a large and growing market
The market for short-term property rentals (holiday homes and flats) has grown rapidly over the past two decades. It now accounts for 30% of the hospitality market. Platforms such as Airbnb (founded in 2008) and Booking.com (2000) have proven to be transformational.
As this market matures, the management of short-term rentals is professionalizing. Half of the properties in European hotspots are now managed by professional agencies on behalf of property owners rather than by the owners themselves.
Reducing the risk for hosts and agencies
Professional agencies use professional tools to manage their rental properties, with the core tool being a property management system (PMS). The PMS allows them to seamlessly advertise properties across multiple platforms (Airbnb, Booking.com, agency websites, etc.), automate administration, organize check-ins and payments, and schedule ancillary services such as cleaning.
One PMS service which is rapidly gaining popularity is breakage insurance. Agencies don’t want to ask property owners to contact their insurance every time a plate or glass gets broken. Nor do they like to rely on damage deposits from renters. These deposits are especially cumbersome for guests that book multiple short stays in succession, for instance during a road trip. Damage deposits run into the hundreds or even thousands of euros and credit cards quickly get maxed out if guests have multiple bookings outstanding. In other words, asking guests to pay a breakage deposit impacts their experience and, by extension, occupancy rates.
Agencies can now solve this issue by taking an additional insurance that covers minor breakages. Superhog is a leader in this field. For a small fee, they offer agencies breakage insurance for each guest stay. Taking this insurance creates a much smoother experience for guests (no deposit), for hosts (no need to get involved in small breakages) and for agents (no need to deal with hosts or guests in the event of breakages).
Superhog offers a range of packages depending on the preference of the guest. At the low end of the range the guest still puts up a deposit and Superhog only charges the agency for handling any claims (Superhog pays out to the agent and later settles the breakage with the guest and their deposit). At the high end of the range, the guest buys a damage waiver which means they don’t have to provide a deposit.
Superhog’s revenues-per-booking are expanding rapidly as the most expensive package (e.g. including damage waivers) gains popularity. To grow the damage waiver market, Superhog shares part of the waiver revenues with the agents, thereby turning insurance into a revenue generator for agencies.
Attractive business model
Superhog has processed over 500,000 stays since inception, and currently generates £5m in annual revenues. Margins are high and fees per booking grow rapidly as more guests opt for the more expensive packages, and because Superhog is increasingly selling additional services to both agents and guests.
For instance, it has started providing insurance against fraudulent chargebacks, as well as authentication and KYC checks. Doing these checks is core to Superhog’s insurance underwriting model, and because the KYC technology was already developed for the underwriting capabilities, it was relatively easy to also productize it for customer use. On the guest side, Superhog has started to offer cancellation / re-booking insurance and host authentication (ensuring the property exists), in addition to the damage waiver product.
The fact that Superhog can monetize both sides of the market (guest and agent) is another element of the business model that really appeals to us.
Strong growth with an exciting new distribution channel
Superhog grew revenues significantly over the past year through direct sales, and we expect this high growth to continue. We are also excited about the potential of PMS platforms as an additional distribution channel.
Most PMS platforms have an app store for non-core services. Insurance has been non-core to date, and Superhog is one of several insurance options on the different PMS app stores. However, as the popularity of insurance increases (and especially now that Superhog has turned this into a revenue generator for agencies) property management systems are looking to embed this in their core offering, making it a default functionality rather than an option.
Several PMS already signed up to offer Superhog as their embedded solution. Combined they have an audience which is many times larger than Superhog’s current user base.
Where it goes from here
Superhog has built a reputation as best-in-class in terms of both product and service. Agency reviews are strong, it constantly pioneers new tools and revenue opportunities, and the team are seen as thought leaders in their market. Moreover, Superhog is the only player who can offer insurance globally.
We believe the company will be able to sustain its current high growth rate for many years, supported by several growth drivers: 1) ongoing organic growth, 2) the new embedded PMS offerings, and 3) the ongoing expansion in revenues per booking.
A stellar team
Superhog is run by seasoned entrepreneurs with considerable experience building businesses. With a track record in both insurance and hospitality, hey combine the two ingredients we consider crucial to win in this field.
CEO Humphrey Bowles has worked in the short-term rentals industry for over a decade. Most recently as head of new business at Onefinestay, which was acquired by Accor Hotels.
COO Andrew Boldt has a decade-long track record in the insurance industry, including founding and selling Insurance Tailors.
We are thrilled to join Humphrey, Andrew and the entire Superhog team on their exciting journey and look forward to many more years of exceptional performance!
Here at 6DC, we love investing in Fintech and SaaS companies across Europe from Seed to Series B. We believe in disruptive technologies addressing real customer pains. Quality businesses that scale exponentially and are led by extraordinary entrepreneurs. If that sounds like you, please get in touch here.