Expedia Group's short-term rental business, initially formed from the acquisitions of Pillow and ApartmentJet, aimed to streamline multifamily rentals through its Flex platform. Launched in 2018, it quickly gained traction but faced challenges, including the Covid-19 pandemic, leading to its shutdown as part of Expedia's reorganization efforts.
What was Pillow
Pillow's main product enabled property owners to manage rentals and share homes with travelers, simplifying the hosting process on short-term rental platforms. Notably, Pillow raised $16.22 million in funding, was acquired by Expedia in 2018, and featured in CB Insights' Real Estate Tech expert collection.
Reasons behind Pillow's Failure
Impact of Covid-19 The pandemic led to a sharp decline in urban travel, directly affecting the demand for city apartments used for short-term rentals. Reem Ibrahimi noted, "City apartments are the most-impacted because they are driven by travelers coming into cities for work. It’s going to take a long time to revive."
Complexity and Inefficiency Expedia's multifamily rental business was not a core endeavor and added complexity to its operations. CEO Peter Kern and senior executive Barry Diller focused on reorganizing the company to cut costs and simplify operations, indicating that this business was seen as inefficient and non-essential.
Loss of Key Partnerships Airbnb discontinued its partnership with Pillow soon after Expedia's acquisition, opting to build its own service instead. This decision left Expedia's multifamily rental business without a crucial partner, significantly reducing its competitive edge in the market.
Impact on Investors and Market
The failure of Expedia's multifamily short-term rental business, created from the acquisitions of Pillow and ApartmentJet, had a limited impact on investors due to its early-stage nature. However, it underscored a broader market trend where companies are refocusing on core operations, especially in the wake of the Covid-19 pandemic.
Lessons Learned from Pillow's Failure
Focus on Core Competencies: Diversifying too far from your main business can lead to inefficiencies and distractions. Stick to what you do best.
Adapt to Market Changes: Be prepared to pivot quickly in response to external factors like pandemics or economic shifts to stay relevant.
Maintain Strong Partnerships: Losing key partners can severely impact your business. Cultivate and maintain strong, mutually beneficial relationships.
Streamline Operations: Simplifying your business model can reduce costs and improve efficiency, making it easier to navigate challenging times.
Understand Customer Needs: Always keep a pulse on what your customers want and need, especially in a rapidly changing market.
Frequently Asked Questions about Pillow
What led to the shutdown of Expedia's multifamily rental business?
The Covid-19 pandemic drastically reduced urban rental demand, prompting Expedia to simplify operations and cut costs.
What was the Flex platform?
Flex was a suite of tools to help landlords attract short-term rental bookings and enable tenants to offer their units to guests.
Why did Expedia acquire Pillow and ApartmentJet?
Expedia acquired Pillow and ApartmentJet in 2018 to create its multifamily rental business, later branded as Flex.
Looking Ahead
As the landscape for startups continues to evolve, it's crucial for founders to learn from past failures and prepare for all eventualities. If you're considering winding down your startup, Sunset can help you avoid penalties, reduce liabilities, and move on to your next venture seamlessly.
