Sonder’s Fall, Market Shifts, and What It Means for STR Operators

Jamie Lane brings extensive experience in STR analytics as Chief Economist, with a particular talent for translating complex data into understandable insights. His perspective on the industry's consolidation is sobering: "Sonder was one of the last companies still afloat…now none of them are." Lane's analysis extends beyond individual company failures to broader market trends, noting that "the only location type in the country that's not at or above pre-COVID levels is urban."

Scott Sage offers deep operational knowledge and a practical perspective on industry developments. His personal connection to Sonder adds weight to his observations: "One reason I liked staying at Sonder was that I could earn Marriott points while enjoying a short-term rental for an extended stay." Sage's commitment to data accuracy reflects AirDNA's core values, emphasizing that "confidence in the data is crucial for AirDNA's projections, Rentalizer, or any other application use."

Sonder Bankruptcy 2025 and Industry Impact

The short-term rental industry received a significant shock in 2025 when Sonder filed for bankruptcy, marking the end of an 11-year journey that began with revolutionary promises. The company's wind-down of operations follows what Jamie Lane describes as "an unsuccessful partnership with Marriott," a collaboration that was meant to be Sonder's lifeline but ultimately accelerated its demise.

Sonder's story is particularly poignant when viewed in the context of the broader industry evolution. Founded in 2014 alongside companies like AirDNA, PriceLabs, and Guesty in 2013, Sonder emerged during what Scott Sage identifies as "the emergence of these professional companies aiming to elevate the industry." The company positioned itself as a tech-forward hospitality disruptor, promising to revolutionize how travelers experience urban accommodations through its app-based, contactless model.

The Rise and Fall of the Rental Arbitrage Model

The rental arbitrage model that Sonder championed—leasing properties long-term and renting them short-term for profit—has proven unsustainable in 2025's market conditions. As Jamie Lane explains, "It's a clear signal for the rental arbitrage model. Sonder was one of the last companies still afloat." This business model, which seemed revolutionary during the industry's growth phase, couldn't withstand the economic pressures and changing travel patterns of recent years.

The graveyard of rental arbitrage companies tells a sobering tale. Frontdesk, Stay Alfred, Lyric, and WanderJaunt all exited before Sonder, unable to overcome the fundamental economics of their business model. The survivors, like Mint House and Casai, have pivoted to management fee models that more closely resemble traditional hotel operations. Lane notes that while "many tried to switch to that model quickly," they "still couldn't overcome the cost structure" inherent in their original approach.

Immediate Effects on Guests and Partners

The immediate fallout from Sonder's bankruptcy created chaos for travelers in 2025, with guests receiving cancellation notices mere hours before check-in. Scott Sage highlights the broader implications: "That has downstream effects and damages the Bonvoy brand for anyone who booked through Bonvoy." The partnership with Marriott, which was supposed to provide stability and distribution, instead created a reputational crisis for both brands.

What's particularly striking is Marriott's apparent lack of contingency planning. Despite having hotel properties in every market where Sonder operated, the hospitality giant failed to implement a comprehensive plan to accommodate displaced guests. This oversight not only left travelers stranded but also raised questions about Marriott's commitment to its Bonvoy members who had booked Sonder properties through the platform.

Broader Implications for the STR Industry in 2025

Sonder's bankruptcy represents more than just the failure of a single company—it signals the definitive end of the rental arbitrage era in 2025. The underlying challenges that brought down Sonder continue to plague the urban short-term rental market. As Jamie Lane observes, "Short-term rental demand and even hotel demand in most urban markets haven't returned to 2019 levels."

The international travel component adds another layer of complexity. Lane reveals a startling statistic: "This summer, we saw a 16% decrease in international inbound demand to the US for short-term rentals." Since international travelers predominantly visit urban destinations—exactly where Sonder concentrated its inventory—this decline directly impacted the company's ability to generate sufficient revenue. The combination of reduced international travel, persistent urban market weakness, and an unsustainable cost structure created a perfect storm that even Marriott's resources couldn't weather.

October 2025 US Short-Term Rental Market Performance

Supply and Demand Trends in October 2025

October 2025 brought mixed signals for the US short-term rental market, with supply dynamics continuing to favor operators. Jamie Lane reports that "overall, in the US, we saw listing growth of about 3%, slightly higher than the 2% growth during the summer and right in line with the full-year average." This modest expansion reflects a market that's found its equilibrium after years of explosive growth.

The low supply growth environment represents a significant shift from the pre-pandemic era when new listings flooded the market. Lane emphasizes, "We're still in a low supply growth environment, and we expect that to continue." This restraint in new inventory provides existing operators with less competition, though it hasn't been enough to offset other market challenges.

While supply growth remained controlled, demand in October 2025 told a more complex story. The market saw overall demand growth of 2.5%, which Lane notes is "roughly in line with what we had been seeing this summer but it is below the rate of supply growth." This mismatch between supply and demand growth resulted in another month of occupancy declines, with rates dropping approximately 1.5% in October 2025.

The comparison to previous months reveals a pattern of persistent weakness. Averaging the August and September 2025 numbers yields 2.3% demand growth, suggesting that October's 2.5% represents only marginal improvement. Lane's assessment is frank: "Not great, but it could be worse," acknowledging that while the numbers aren't encouraging, they're not catastrophic either.

Hotel Industry Comparison

The hotel industry's October 2025 performance provides important context for understanding short-term rental trends. Hotels experienced even more significant challenges, with Jamie Lane reporting that "overall hotel demand actually declined in October by about 1.5%, and with supply growing 1%, that's an occupancy decrease of about 2.5%."

Both sectors are also grappling with challenging year-over-year comparisons due to Hurricane Ian's impact in 2024. The storm displaced thousands of residents across Florida, Georgia, North Carolina, and Virginia, creating artificial demand spikes that inflated October 2024's numbers. These elevated comparisons make 2025's performance appear weaker than the underlying fundamentals might suggest.

Market Segment Performance

Location Type Analysis

October 2025's market performance varied dramatically by location type, with mountain and lake markets emerging as the clear winners. These destinations saw occupancy increase by 2.3%, driven by shoulder season travel and leaf-peeping tourism. As Jamie Lane explains, "In the mountains, October is shoulder season—leaf-peeping time," highlighting how seasonal patterns continue to drive performance in specific markets.

Coastal markets faced significant headwinds, with occupancy declining 2.4% despite the typically favorable fall weather. This reversal from summer 2025, when coastal markets saw modest gains, suggests that domestic leisure travel patterns are shifting. Urban and other location types also experienced occupancy declines, continuing their struggle to recover to pre-pandemic performance levels.

Importantly, Lane notes that "every location type saw increases" in demand, but "the impact is really from supply growth affecting overall occupancy." This distinction matters because it shows that traveler interest remains healthy—the challenge lies in balancing supply and demand dynamics.

Rate and Revenue Trends

Despite occupancy challenges, operators managed to push rates higher in October 2025. "Rates increased, with overall ADR up 1.7% in October," Lane reports, adding that this "aligns with what we saw in Canada and Mexico as well." This modest rate growth suggests that operators are successfully maintaining pricing power even in a softer demand environment.

The ability to increase rates while occupancy declines demonstrates the short-term rental market's resilience and operators' growing sophistication in revenue management. However, with ADR growth below inflation levels, real revenue growth remains elusive for many operators.

The most significant development affecting rates in late 2025 was Airbnb's service fee restructuring on October 27, 2025. This change shifted the fee structure from a 3% host fee to a 15% host fee, fundamentally altering the economics for hundreds of thousands of listings. Lane reveals that "we saw about 445,000 US listings change their service fee from 3% to 15%, but we didn't see 445,000 listings increase their rates to offset that 15% increase."

This failure to adjust pricing has profound implications for host revenue. As Lane explains, "Because we report rates without the service fee, the take-home amount for most hosts will be less if they haven't increased their rates." His prediction for the coming months is sobering: expect to see apparent rate decreases in November and December 2025 as the true impact of hosts' failure to offset the fee change becomes clear in the data.

International and Economic Context in 2025

The persistent weakness in international travel continues to hamper urban market recovery in 2025. The 16% decrease in international inbound demand for US short-term rentals during summer 2025 represents a significant headwind for urban operators. Urban markets, already struggling with oversupply from the pre-pandemic building boom, now face dramatically reduced demand from their core international customer base. The result is a market that remains stubbornly below 2019 performance levels, with little indication of near-term improvement.

The K-Shaped Recovery and Consumer Sentiment

The divergence between luxury and budget travel segments—the so-called K-shaped recovery—continues to define the market in 2025. "Luxury travel continues to grow, while midscale and economy segments have declined," Lane observes, highlighting how economic inequality shapes travel patterns. This trend particularly impacted companies like Sonder that targeted the midscale market segment.

Consumer sentiment remains surprisingly negative despite some positive economic indicators. The University of Michigan consumer confidence survey "came out recently and was almost at an all-time low," Lane notes, creating a paradox where objective economic measures like employment and stock market performance diverge sharply from how people feel about their financial situation.

The underlying factors driving this pessimism are complex. While affluent travelers benefit from stock market gains and robust investment portfolios, the majority face persistent challenges. "Housing affordability is at an all-time low, and people feel they can't make ends meet or improve their situation," Lane explains. The psychological impact of social media, where constant exposure to others' highlight reels creates feelings of inadequacy, may also contribute to this pervasive negativity.

European Market Insights from VRWS 2025

The Vacation Rental World Summit (VRWS) 2025 in Rome revealed a striking disconnect between European market performance and industry sentiment. Jamie Lane's analysis showed remarkably positive fundamentals: "Americans are traveling overseas at record levels, with an 8% increase this year," while "unemployment in Europe is at all-time lows, wage growth is strong, and occupancy continues to outperform."

Despite these encouraging metrics, industry pessimism runs deep. In a revealing moment, Lane asked a 750-person audience to raise their hands if they felt good about the economy and short-term rentals. "Only three people did," he reports, illustrating the profound disconnect between data and sentiment that characterizes the industry in 2025.

This pessimism paradox extends beyond Europe. Lane, who's been presenting at industry conferences for 15 years, notes that 2024 and 2025 mark the first years where universal negativity dominates, regardless of actual market performance. This shift in collective psychology may itself become a limiting factor, as pessimistic operators might underinvest in their properties or exit the market prematurely.

AirDNA Data Modeling and Technology Updates 2025

AirDNA's 2025 technology updates represent a significant leap forward in data accuracy and reliability. The company has fundamentally rebuilt two critical systems that underpin all market analysis. First, the booking versus blocking model now incorporates advanced machine learning techniques to better distinguish between actual bookings and owner-blocked dates.

"We updated the model to better capture longer-term stays, which is one of the hardest aspects of data modeling," Lane explains. This enhancement addresses a longstanding challenge in the industry: accurately tracking extended stays that might span months. The previous model often underreported revenue for properties catering to longer-term guests, a significant limitation as the market increasingly embraces extended stays.

The second major update involves cross-platform matching. AirDNA rebuilt its matching models from the ground up, leveraging modern photo analysis techniques to identify duplicate listings across Airbnb, Vrbo, and Booking.com. This prevents the double-counting that can inflate supply estimates and distort market analysis.

Impact on Data Accuracy and User Confidence

These technical improvements translate directly into enhanced user confidence. Scott Sage emphasizes that "confidence in the data is crucial for AirDNA's projections, Rentalizer, or any other application use." The reduction in duplicate listings means more accurate supply counts, while improved long-term stay modeling provides better revenue estimates for property investors.

The company's approach to technology sets it apart in the industry. "We've been doing machine learning at AirDNA before it was even cool," Sage notes, highlighting how these capabilities are embedded in the platform's DNA rather than being marketing buzzwords. This long-term commitment to data science has created a competitive moat that's difficult for newcomers to replicate.

Operational Scale and Future Developments

The scale of AirDNA's operation in 2025 is staggering. "We process about 60 million scrapes a day across those platforms, handling about a terabyte of data daily," Lane reveals. This massive data processing operation underpins the single numbers and insights that operators rely on for critical business decisions.

Managing this scale requires constant adaptation. Platform changes at Airbnb, Booking.com, and Vrbo necessitate daily adjustments to data collection methods. Lane acknowledges the complexity: "There's a tremendous amount of effort behind that, and huge props to the team for tracking accuracy, identifying areas for improvement, and implementing changes—all while making the app better."

Looking ahead, AirDNA continues to invest in improving its platform. While specific features remain under wraps, the foundation laid by these 2025 updates positions the company to deliver even more sophisticated analytics tools. For an industry grappling with unprecedented challenges—from Sonder's bankruptcy to persistent demand weakness—having reliable data has never been more critical.