Even amid the pandemic, this newly funded travel startup is tackling the stodgy timeshare market

The world is rife with me-too startups, which makes it all the more refreshing when a founder comes along that manages to find a broken market that’s hiding in plain sight.

That’s what Mike Kennedy appears to be doing with Koala, a young outfit determined to update the stodgy world of property time-share management, wherein people acquire points or otherwise pay for a unit at a timeshare resort that they intend to regularly use or swap or rent out (or all three).

It’s a big and growing market. According to data published last year by EY, the U.S. timeshare industry grew nearly 7% between 2017 and 2018 to hit $10.2 billion in sales volume.

It’s a market that Kennedy became acquainted with first-hand as a sales executive at the Hilton Club in New York, which, at least in 2018, was among 1,580 timeshare resorts up and running, representing approximately 204,100 units, most of them with two bedrooms or more.

Despite this growth, timeshares don’t jump to travelers’ minds as readily as hotel rooms or Airbnb stays, and therein lies the opportunity.

Part of the problem, as Kennedy see it, is that timeshares are harder to rent out than they should be. If a timeshare owner wants to reserve a week outside of the week that he or she purchased, for example, that person has to go through an antiquated exchange system like RCI (owned by Wyndam) or Interval International (owned by Marriott). Kennedy, who spent 10 years with Hilton, says he saw a number of his customers grow frustrated over time with their inability to better control their units’ usage.

The timeshare industry has also managed to alienate younger users, who it will eventually need and who might happily consider timeshares were they more visible and accessible. Not only is much of the timeshare market largely comprised of existing timeshare owners who are upgrading their timeshares over time, but outsiders aren’t really being marketed to or offered much control when they do discover timeshares.

Indeed, Koala’s biggest independent competitor is a timeshare rental marketplace called Redweek that primarily caters to existing timeshare owners, asking visitors to pay nearly $20 to merely view listings, without even featuring pictures of the listings.

It’s not a great experience for someone looking to travel somewhere new.

Travelers using Redweek are also asked to pay timeshare owners directly via either checks or through PayPal at the time they are booking, and the charges are nonrefundable. Though it’s hardly rocket science, Koala says it secures every transaction through Stripe and that it also only pays the host once someone has checked in to ensure the renter is getting what they booked.

Kennedy says Koala — which charges timeshare owners between 8% and 10% of each sale to list and market these listings —  is further verifying every one so that travelers don’t get scammed by paying someone upfront for a timeshare that they don’t own.

It all sounds great. The question begged is: If this particular vacation rental category is so easy to solve, why isn’t Airbnb more focused on it?

Invariably, it will be, concedes Kennedy, whose board features Sean Stewart, a former executive at Expedia and Waymo who also spent two years as the head of vacation rentals at Airbnb and knows first-hand that timeshare units are of growing interest to the accommodations giant.

Still, like any scrappy founder, Kennedy believes that Koala has some advantages over its powerful competitor, including that Airbnb can’t verify each listing (a timeshare resort can have 20,000 owners, which makes verification tricky for a company with so many other fish to fry). Because of the specific nature of timeshare rentals, timeshare listings that do appear on Airbnb can also sometimes slip past travelers looking for dates that aren’t precisely the same as the dates listed by their owners.

Of course, Koala — like all travel and accommodations companies — have far less control over the impacts of COVID-19 on their industry. While Airbnb’s woes have been covered extensively, still-nascent Koala has suffered, too. The company managed to close on $3.4 million in seed funding in mid-March led by real estate investors Lubert-Adler, but it had to put a pin in its plans to drum up inventory for the site because of the pandemic.

It could have been a lot worse, Kennedy observes. “It’s not like we got the money six months ago and started ramping up and then the shit hit the fan. We have a pretty core team so we just kind of hibernated [when the virus shut down the U.S.] and worked on SEO strategies and content and delayed our launch by a few months.”

Now, to see if it sinks or swims.

Koala, which is just now launching, will only be offering timeshare units domestically to start, many of them driving destinations, including in Arizona, South Carolina, Florida and California.

Assuming that the economy continues to open up as more COVID-19 testing is conducted, Kennedy thinks that by winter, the company should have far more inventory lined up. He’s eyeing properties in Mexico, the Caribbean, Hawaii and Japan.

He’s thinking that there’s “just a massive global opportunity here, and it’s been under the nose of timeshare owners all along.”