Alloggio IPO: Increasing demand for short term rental accommodation

With the travel sector set to boom, short-term rental accommodation (STRA) platform Alloggio Group is looking to raise $16.5 million in capital before it lists on the ASX on November 29th.

Alloggio will issue 82.5 million new shares at $0.20 per share.

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It will have been heartened by the response to the Siteminder IPO this week, another travel tech business looking to cash in on the reopening of international borders and the widespread resumption of international tourism. Siteminder ended its first day of trading up 38.5 per cent from its IPO price of $5.06, having at one point surged to $7.77. However, it has drifted back to $6.92 through the week.

The company’s cloud based solution for travellers and property owners on the east coast of Australia has a proven operating model, and the business is focussed on organic growth opportunities as well as acquisition, as the tourism industry recovers in Australia post COVID.

According to chair John Murphy’s prospectus letter, “The fundamentals for Alloggio are attractive as it has a proven business model in a large addressable market where there will be increasing demand for short term rental accommodation.”

The business operates through two divisions, the Holiday Property Management business division, covering 879 homes, units and apartments in Australia as well as the Mid-market Hotels division, with 13 hotels under management, according to the prospectus.

The platform’s property management division revenue model consists of booking fees, property management fees, marketing and services fees, accounting and reporting fees as well as ancillary fees, and the mid-market hotel division draws 100 per cent of its revenue from accommodation services.

According to the prospectus, “During 2021, Alloggio has also been able to secure significant revenues from a number of regional NSW local health districts through the short term licensing of regional hotels for COVID-19 accommodation purposes.”

The company says that the funds raised will be directed towards future acquisition opportunities, business development and marketing, on-going in-house tech and platform development as well as working costs.

Alloggio’s growth strategy also includes procuring stand-alone hotel leases.
The company estimates that the total addressable STRA market across all revenue streams in Australia is $7.3 billion per year.

Airbnb, Alloggio’s greatest competitor and leader of the home-sharing market is currently valued at USD $75 billion according to Statista. Airbnb's third-quarter results saw bookings down seven per cent but revenues way up strongly due to price increases, producing a 500 million in operating cash flow for the quarter.

According to Tech Roundup, a monthly investment newsletter by North Ridge Partners, the travel sector looks set to boom on the back of an almighty burst of revenge spending as "consumers who have been locked up at home for months going on years, are now looking to spend up on experiences instead of things."