Evolve Vacation Rental Network recently raised $100 million of capital with Durable Capital Partners LP leading the charge. This comes on the heels of Evolve’s biggest competitor, Vacasa, going public in December 2021.
Evolve Vacation Rental Network is a vacation rental property management company and is the second-largest one in the United States, coming after Vacasa. Evolve and Vacasa, though competitors have entirely different business models. Vacasa is more the sum of the acquisition of many small local property management companies and their staff, and Evolve adopts more of a platform approach that puts it somewhere in between Airbnb/Vrbo and Vacasa.
Evolve defines itself as a “vacation rental hospitality company,” which is true, but it is very vague and shows that they have a different business model. But the thing that really sets Evolve apart from other vacation rental companies is its fee, which is only 10%, similar to Airbnb and Vrbo. However, Evolve helps with the listing and marketing of properties as well as with guest support. The fee doesn’t cover on-the-ground operations such as cleaning, which is left up to the owner to arrange. However, Evolve will connect the owners with a list of vetted cleaning companies.
New investment round for Evolve Vacation Rental
During Evolve’s latest round of funding, the company raised $100 million with Durable Capital Partners LP at the investment helm. Durable Capital Partners LP is an investment manager whose focus is set on companies that they believe will compound over time. Durable invests in both public and private companies that are of a small or mid-size. Durable invests in companies with long-term strategies in mind, not focused on quick ROIs. It is not clear exactly how much Durable invested in Evolve, but reporting tells us that it was by far the most significant investor from the recent $100 million raised. Since 2011 when the company was founded, Evolve has raised over $235 million.
Evolve Vacation Rental’s recent growth achievements
Evolve was founded in 2011 with the goal of making vacation rental risk-free for property owners and worry-free for guests. Since its inception, Evolve has become one of the fastest-growing vacation rental companies in the U.S. and has just had its most successful year yet. To date, Evolve has generated over $2 billion in revenue for its property owners. Evolve’s other highlights include:
- Creating a portfolio of 19,000 homes in over 750 markets
- Having over 7 million guests book with them
- Increasing the net booking value by 78% year-over-year
- In 2021 growing its revenue per listing 38% more than the market average
- Growing the number of employees by 68% to more than 800 in 2021
Evolve’s Risk-Free Guarantee for owners
Evolve’s Risk-Free Guarantee is one of the most attractive business practices for property owners. Under this policy, Evolve promises to refund 100% of all management fees if after 6 months the property owner is not satisfied with the service, revenue, or anything else. Evolve does not even require any sort of proof to back up feelings of dissatisfaction in order to receive the refund, a completely unprecedented move within the industry.
The refund can only be issued one time for each property listed and is based on the 10% fee Evolve charges for listing and management. In order to get the refund, property owners must submit a request form within 30 days of the 6 month period ending (210 days after activation) any later and the request will not be accepted.
Evolve’s Rest Easy Promise
Flexibility has been important for travelers since the onset of the COVID pandemic as many lost money on trips that were booked ahead of time. Since the demand for better flexibility increased exponentially from consumers, Evolve responded by creating its Rest Easy Promise. The Rest Easy Promise is a guarantee to guests that they can cancel a reservation within 48 hours of booking without any penalty. Additionally, if a guest’s plans change, they can let Evolve know within 48 hours of check-in and receive a travel credit which remains good for 2 years.
Evolve also promises its guests that what you see on their website is what you get because they check every property listed in person before it can go up on their website, but if guests are dissatisfied for any reason, Evolve will work as a virtual front desk that is available 24/7 to address their concerns.
Evolve vs Vacasa
Evolve’s business model: Between an OTA like Vrbo / Airbnb and a full-service property management company like Vacasa
Evolve has a very unique business model that is halfway between OTAs like Airbnb and property management companies like Vacasa. Where Airbnb and Vrbo are distribution channels and Vacasa is strictly a property management company that lists on OTAs, Evolve navigates the waters between, both acting as the property manager and the OTA. The company takes a much lower management fee of 10%, a significantly better deal than Vacasa’s roughly 35% fee.
Another unique feature of Evolve is that they have no boots on the ground. Check-ins are completely automated and cleaning is paid for by the owner (though Evolve will put their property owners in contact with trusted local cleaning companies if needed), but there are even more unique features, so let’s dive into them.
1. A different vacation rental management model
Evolve’s CEO Brian Egan describes his company’s strategy as taking a “holistic approach” to property management, saying, “We help owners manage the hardest parts of their rental business, like reaching large audiences of guests, listing the property on Evolve’s vacation rental website and marketing it through other third-party rental platforms (i.e., HomeAway, VRBO, Airbnb, Tripadvisor, FlipKey), handling photography, setting and adjusting rates, responding to guest inquiries, review management and vetting cleaning companies.”
Instead of charging a 30-50% management fee like most vacation rental management services (Vacasa is about 35%), Evolve takes a flat fee of 10% of whatever a property owner charges for a stay. According to Egan, the team can keep costs low because it operates in multiple destinations whereas most property managers stay extremely local. It also exercises “discipline” in spending by avoiding things like cleaning costs.
2. Support for guests at a distance
Evolve also aims to support guests through its “Rest Easy Promise,” which is based on four property standards: Evolve properties must be safe, guest-ready, clean, and as advertised. If a guest finds that a property that fails to meet any of these criteria, Evolve guarantees to make it right and they have 24/7 customer support to make sure guests can always reach them if an issue arises.
3. A scalable model with no boots on the ground (unlike Vacasa)
From the very start, Evolve’s leadership team showed global ambitions. Egan and his co-founder Adam Sherry knew they needed to develop a technologically-driven business model that could support vacation homes all over the world. To achieve this, they carefully constructed value proposition elements like their cleaning policy and low fees. While many similar companies hire their own cleaning staff, Evolve refers homeowners to cleaning companies in the area, cutting costs while still supporting their hosts.
About this strategy, Egan said, “Traditional property managers are limited by the number of people they can hire in each market for tasks like cleaning and maintenance. Evolve taps into existing businesses in each area and then connects them with our homeowners.”
Vacasa’s successful path to going public may inspire Evolve
In December 2021 Vacasa took the leap and became public. With an estimated valuation of $4.5 billion, that meant that the average price of each of its 30,000 properties was $150,000. But despite its impressive valuation and acquisition of large property management companies like Wyndham Vacation Rentals and Turnkey, Vacasa actually has yet to turn a profit. When it hit the Nasdaq, it did so in a non-traditional way by being acquired by a SPAC, TPG Pace Solutions and they expect to start turning a profit by 2023. This move may inspire Evolve to take a similar path in the future if Vacasa sees the results it is projecting.