Frontdesk’s Whole-Staff Layoffs Suggest Struggle to Break Through Consumer Inertia
With Frontdesk reportedly laying off its whole staff, it seems that amid ongoing financial challenges, short-term rental models may not present a needed enough solution to push past consumers’ tendency to stick with the familiar.
The startup, which managed 1,200 furnished units across 170 buildings for travelers to rent for short periods, laid off all 200 of its employees Tuesday (Jan. 2) in what one of the affected workers described as “a two-minute Google Meet call,” TechCrunch reported.
CEO Jesse DePinto reportedly explained the startup will file for a state receivership, a bankruptcy alternative. In the months leading up to this move, Frontdesk was seeking additional funds and posting new job openings as recently as two months ago, according to the report.
Frontdesk did not respond to PYMNTS’ request for comment.
It seems that the high cost of managing the properties may not have been sufficiently offset by consumer demand, especially given the existing competition in the space and the evolving regulations limiting businesses’ reach in the category.
The move can be understood within PYMNTS’ Karen Webster’s FIT framework, which looks at innovation and market fit in terms of friction, inertia and time.
As Webster defined it, “Is the Friction big enough to create enough value to sustain a business — and an investment? Is that friction big enough to overcome the user Inertia to move away from the status quo? Is the Time required of the user to make the change consistent with the timeframe needed to solve their problem — and is the new solution available in a Time frame that is relevant for the user to gain new efficiencies?”
If the ignition strategies are not enough to push through the inertia, a company cannot get off the ground.
“Sometimes, the force necessary to counter inertia in the economy is so massive that even though a platform should succeed because it can create substantial value for its participants, it can’t succeed without substantial outside help,” economist David Evans observed Wednesday (Jan. 3). “Entrepreneurs, corporates and investors should carefully examine what it will take to overcome inertia before wasting their time and money on pursuing a plan that can’t counter inertia and leave an ROI that’s worth the risk. You can’t count on a volcanic eruption.”
Still, firms continue to enter the short-term rental space. In November, for instance, private equity firm TPG made a move into the short-term rental market, acquiring single-family homes in Florida and offering them for nightly rates.
Overall, the travel market remains relatively strong, per “The Credit Economy: How Consumers Financed Their Summer Travel,” a study by PYMNTS Intelligence that drew from a survey of more than 3,300 U.S. consumers. The report revealed that among the roughly 60% of consumers paying for leisure travel, spending on these trips averaged out to $2,202 per person over the summer.
Yet the highest-value travelers may not be those turning to digitally-native startups to facilitate their travels. The study revealed that baby boomers and seniors spent $2,387 on average, while Generation Z consumers spent $1,703.
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