EDITOR'S COMMENT
• Casai is the latest casualty in the short-term rental market after ceasing operations in Mexico and Brazil, and while the impact of the pandemic and uncertain economic conditions may have been contributing factors to its demise, it also appears the company failed to heed many warnings beforehand.
Tracing back the story to its founding in 2019, Casai dreamed of becoming the next major hospitality and tech unicorn in Latin America, attracting a wealth of notable investors [including Andreessen Horowitz] before raising $5 million in seed funding and later $48 million in Series A funding. The round was said to be the largest Series A raised by a company in Mexico and one of the largest in the history of Latin America.
Since then, the fall from grace has been stark, leaving industry observers to question where the $53 million has gone.
Allegations [by Contxto] of cashflow mismanagement and informality in operations, from suggestions of employees not being properly contracted to buildings not having the required land use permits and expenses being handled in cash, went alongside what looks like a 'grow at all costs' expansion strategy through mergers and acquisitions [Roomin, LoopKey + the Brazilian operations of Q Apartments], designed to reassure investors rather than focusing on being profitable. Less than a year after its Series A round, it is reported that Casai tried - but failed - to raise $70 million in a Series B round, and a potential extension to the A round also did not materialise eight months later.
There are many takeaways we can extrapolate from this case but the most notable one is how the hospitality brand's rapid growth strategy came at the expense of effective scenario planning. A lack of business discipline has been the downfall of predecessors in uncertain economic periods, and in Casai's example, it was left unable to pay its staff and pivot effectively when other competitors such as Sonder entered the market. Not even a merger with Brazilian real estate platform Nomah could save it.
Now that the company has transferred its properties to other operators, the lessons that should have been learned by the likes of Domio and Hostmaker appear to have not been heeded. Casai is not the first, nor will it be the last, but its example should serve as an omen to other hospitality providers prioritising similarly ambitious yet risky expansion plans.
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