Short Stay Summit: SPAC public listings are driving 'unhelpful' valuations in the sector

Delegates advised to focus on profit, people and technology by investors and VC-backed firms at the annual short term sector show

Special Purpose Acquisition Company (SPAC) IPOs of short term rental businesses in the US are unhelpfully inflating expectations of company values.

A panel of expert investors and brands backed by VCs agreed that a spate of such deals like Vacasa’s $340 million raise in December 2021 have hyped up the sector.

That SPAC-backed listing, where a shell company was formed specifically to acquire the private firm to take it public and raise capital, valued Vacasa at $4.4 billion.

Graham Donoghue, chief executive of Sykes Holiday Cottages, described SPACS are a “solution looking for a problem” and said valuations are “completely skewed” due to needing to raise finance.

“I cannot think of a single one that has delivered a decent result,” he said. “These have been around for a while and there is a cycle. They keep popping up like whack a mole.

“It’s not useful for an industry because people get these inflated ideas of how valuable their businesses are.”

Henrik Kjellberg, chief executive of Awaze, said SPACS are like the tulip craze in Holland in the seventeenth century. “Speculation is human,” he said.

“I think these valuations are unhelpful. Eventually you come back to the fundamentals. What is your revenue looking like? Your EBITDA. That’s what it comes back to.”

He added maybe it was a good idea for Vacasa to use the SPAC vehicle to go public. “Let’s look at what they are doing but the US market is different to what we have here in the UK.”

Will Creedon, chief executive and founder of Australia-based supplier Alloggio, said the rash of SPACS are people trying to make a quick dollar.

“Yes, they leave a bitter taste in the people’s mouths because they have inflated values. And then you come back to reality.

“The most important thing is you run your business to make profit, then the share price will look after itself.

“Stay focussed on profitable growth, driven by fantastically talented people aided by technology and you will be fine. That’s it. Be steady. There will always be highs and lows.”

Sykes Holiday Cottages makes acquisitions when it believes it can create value in the company being bought by applying its technology and marketing nous, Donoghue said.

The form recent acquitted Forest Holidays which was founded in 1973 and which brought 700 cabins into the Sykes portfolio.

“Our purpose as a business is to take people on holidays and create connections, create memories and deliver exceptional service and do it in a sustainable way.

“Supply is definitely becoming a challenge. It’s becoming a restraint. We took a step back and said what does the supply look like, are there some good businesses in the supply chain we can invest in?

“They are operators and know what they are doing and were growing ridiculously fast and had 97% occupancy.

“We believe that by joining these businesses together we can create more value than individually by leveraging some of our technology. We are looking at the assets we have and saying how can we make them even better.”