The tourism and travel industries are finally bouncing back after several tough years, with the UN predicting a full recovery to pre-pandemic levels. In a significant indicator of this growth, Hostaway, a prominent software startup in the space, has announced a massive round of funding to fuel its expansion.

Hostaway has closed a $365 million funding round at a post-money valuation of $925 million, led by new investor General Atlantic, with previous backer PSG Equity also participating. This investment is a significant vote of confidence in the company's vision to provide software solutions for vacation rental operators to manage listings, bookings, and communication across various third-party sites like Airbnb and VRBO.

Founded by Marcus Räder, Saber Kordestanchi, and Mikko Nurminen, Hostaway identified an opportunity to build a large company in the property rental market, providing software to match the massive growth of Airbnb, VRBO, and other platforms. The company's founders, who initially bootstrapped the business, spent their early years getting rejected by investors before securing their first big round of $170 million from PSG in 2023. This investment sent a shockwave through the industry, establishing Hostaway as a major player in the field.

Today, Hostaway operates a marketplace of around 200 related services and has seen its revenues and property numbers grow at a rate of 10x or more. The company's CEO, Marcus Räder, still practices what he preaches, listing multiple properties on the platform himself and living the digital nomad life. With 230 employees across 45 countries, Hostaway is officially based in Toronto but describes itself as a "distributed" workplace.

While Hostaway doesn't disclose its total number of users, Räder revealed that growth has been "more than 10x" since 2023, indicating that there are now around 1 million properties on the platform. This is still a small part of the overall market, estimated to total around 21 million vacation rentals worldwide. With 1.1 billion tourists traveling in the first nine months of 2024, according to UN figures, the potential for growth in this space is vast.

The funding will be used to expand Hostaway's capabilities across various areas, including technology, dynamic pricing, and smart locks. The company's basic capability is to let users manage rentals across multiple marketplaces, competing against the likes of Guesty and others. Hostaway will also be using more AI to expand its tools for even more granular and personalized results and predictive insights.

Hostaway's marketplace is a key differentiator, providing a product sandbox that allows the company to test and refine its services, as well as offer customers a wider selection of services to keep them on the platform. Raph Osnoss, the MD at General Atlantic who led the investment in Hostaway, believes that despite the huge ambitions of online travel agencies (OTAs) like Booking, Expedia, and Airbnb, there is still an area that is not touched by any of them, which Hostaway is addressing.

Osnoss notes that the short-term rental industry is inherently fast-growing due to people's preferences, but with more supply coming online, there will need to be more "professionalization" in the industry. Hostaway facilitates this by allowing professional property managers to list their properties across multiple OTAs seamlessly, through an API, and have a direct relationship with renters that doesn't necessarily go through the OTAs. This makes Hostaway a huge driver of volume to the OTAs, which value the company for that.

In conclusion, Hostaway's massive funding round solidifies its position as a leader in the vacation rental software market, poised to capitalize on the recovering tourism industry. With its expanded capabilities and marketplace, Hostaway is well-positioned to drive growth and innovation in the short-term rental industry.