With $100M In Annual Rentals, Luxury Retreats Takes Its First Round Of Funding, $5M Led By iNovia

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The rise of online accommodation booking services like Airbnb and HomeAway has given way to a lot of attention to, and faith in, the idea of giving up your private home to total strangers. One early mover in this area, Montreal’s Luxury Retreats, is today announcing that it is also riding this wave: it has picked up $5 million in funding, led by iNovia Capital, to further build out its business. Although Luxury Retreats has been around since 1999, this is the first round of VC money for the startup — which has up to now been self-funded, and profitable, as it has grown to take in $100 million in rental revenues annually.

As part the deal, Chris Arsenault, a partner at iNovia, joins the board. Other new board members joining Luxury Retreats points to how the company is positioning itself going forward. They include Bertrand Cesvet, founding partner of Cirque du Soleil Lifestyle Group and chairman of global agency Sid Lee; and Hugh Crean, entrepreneur in residence at General Catalyst Partners, and former GM of Bing Travel, the Microsoft-owned airfare prediction site.

The success of Luxury Retreats points to a couple of interesting trends in the market.

First of all, while sites like Airbnb and even HomeAway are focused on offering users cheaper and more flexible alternatives to staying in hotels, Luxury Retreats takes a very different approach, catering to people who are not adverse to spending a bit of money. That’s a mark of how the “collaborative consumption” market is segmenting into different price bands, even despite wider worldwide economic uncertainty. “Our niche is not price sensitive,” says Joe Poulin, the founder and CEO.

And like car service company Uber, it’s one of those tech companies that is using tech to solve a problem in an area that is not that techie by nature. (Or as David Sacks of Yammer has described it, innovating at the “edge of the forest.”)

“It has everything to do with user engagement,” Arsenault at iNovia says. “We’ve seen a lot of ecommerce already around the travel industry, but it continues to need a complete overhaul,” despite the advances of companies like Airbnb, he notes.

The Luxury Rentals villa service is aimed specifically at the higher end of the market. The 2,000 villas in 50 destinations on its books (total market value: $6 billion+) have been hand-picked and personally vetted by Luxury Retreats’ staff, including Poulin — who I spoke to while he was on Maui checking out some of the stock. (The company is in the process of adding 50 more properties to its books.) Average prices are around $2,000 a night net, with the commission taken on those prices in the range of 20%-30%. In addition to high-end accommodation, Poulin’s company offers pre-rental consulting and post-arrival concierge services.

So if Luxury Retreats has been profitable up to now on its own steam, why raise money now? It looks like it’s about positioning the company for its next stage of life — “a strategic move that puts us out there in the marketplace,” says Poulin. That positioning could be used for acquisitions to round out its portfolio and expand into other market segments, but — although Poulin didn’t say this — it could just as easily be to help position the company as a target itself for a rapidly-growing accomodation/rentals business that wants a stronger play in the higher end of the market.

“Luxury Retreats has been under the radar, growing by word of mouth,” notes iNovia’s Arsenault. “But it has big ambitions.” Part of what Arsenault and iNovia have been doing is helping Poulin build up his team to take the business “to the next level.” Combining that with the strong revenue growth, and profitability, of Luxury Retreats, that implies the company may be more likely to be an acquirer rather than the acquiree.