The Death Spiral of Vacasa’s Stock – 1 Year of VCSA IPO

Happy Anniversary!?It is the one-year anniversary of the #Vacasa IPO where the #VCSA stock opened at $11 per share and is now at $1.30 per share - a 86% loss of value. ? With a tanking stock, more likely massive layoffs, leadership turnover and cash flow issues, Vacasa is looking more like a gelding than a unicorn.

Since the Vacasa IPO in December 2021, the “technology” company has undergone various changes. Almost all have been negative and left a bad taste in the mouths of customers and investors alike. Vacasa focuses on the supply side of #vacationrentals, and while that made it easy for a slick IPO to investors, a reported fiscal fourth-quarter loss and a significant percentage decline proves that their business model is not endurable. At the end of December 2021, Vacasa’s current assets were $587 million vs. current liabilities of $507 million, or $80 million positive. Fast forward nine months, its assets dropped $117 million negative of current liabilities – not a positive sign for profits or market predictions.

Vacasa’s #technology and scale do not secure its position in North America. Its former CEO Matt Roberts told Skift a day after Vacasa reported its first financials as a public company that it lost $154 million in 2021 and is focusing on building a supply-centric business with the infrastructure to accelerate returns. Unfortunately, Vacasa’s position within the #hospitality industry is as defensible as a wall of snow in the hot sunlight. The company has a poor reputation because it lacks execution. With poor business strategies, a tanking stock, declining cash, and non-stop leadership turnover less than a year after going public, Vacasa’s operations may not be long for this world.?

Insufficient Integration & Finances

Vacasa added homes to manage in 2022 at half the pace of 2021, and without the big mergers and acquisitions of years past, it pressured its sales force to increase productivity or hit the road. However, one Vacasa sales executive, who declined to be identified, told Skift that Vacasa’s salesforce integration was a nightmare, with salespeople becoming inundated with outdated or otherwise irrelevant sales prospects, leading to a negative swing of almost $197 million in current liabilities vs. current assets.

Contrary to misguided beliefs, Vacasa isn’t reinventing the #propertymanagement industry. Vacasa’s churn rate is 20%, and given they have 37,000 properties, they needed to sign up over 7,400 units this year just to stay even. Vacasa needs to continually ramp up its organic game – which may be why it hired hundreds of sales representatives in 2021 to focus on adding individual homes to its platform.?

Meanwhile, in a Goldman Sach interview, Vacasa’s CFO Jamie Cohen acknowledged in a word salad answer that only 30% of Vacasa’s direct bookings come directly from their website. They were at 35% direct bookings in early 2021 vs. 30% in 2022 – a 16% reduction in direct bookings in 12 months. Meanwhile, VTrips is averaging 58% direct bookings in 2022, and many smaller vacation rental property managers have 60% or more direct bookings.

An Inevitable Swan Song?

Vacasa has come very close to singing its swan song over the years, but it seems it is still further for the company to fall.? After laying off 280 employees - the finance, human resources, legal, marketing, sales, product, and engineering are expected to bear the brunt. Due to the domino effect of poor decisions and planning, Q4 2022 and Q1 2023 for Vacasa are likely to have significantly negative cash flow. Without cash, the company will have difficulty covering its operating costs and could face the prospect of eminent bankruptcy.?

Companies like Vacasa used “technology” as a smoke screen to justify their unprofitable business models and to raise money for their IPO.? But, eventually, the truth of their poor business model and poor operations has come to light and the stock declined over 86% in just one year from their IPO.

As investors and employees of #VTrips know, it is possible to be highly profitable in this industry if you focus on employees, guest relations, owner relations, procedures, and expenses instead of maximizing revenue and organic new units at all costs.?

The vacation rental industry has so much potential, but it’s built on trust and execution.? Vacasa created a sketchy unprofitable business model designed to rake in cash with an initial IPO offering and then tried to modify their business model on the fly.

Companies with high burn rates like Vacasa set themselves up for bankruptcy, which isn’t good for shareholders or industries.?

Vacasa will inevitably have to make significantly more cuts and lay-offs to delay bankruptcy because they are so unprofitable with the inability to raise more money in this market.

Companies like Vacasa have given the industry a bad name by labeling themselves as a technology company to get valuation – which would not have happened if they were in hospitality, where you cannot receive valuation if not profitable. In a nutshell, Vacasa bypassed industry standards and is now paying the price.

Declining Numbers and Profits?

Deteriorating average daily rates and occupancies will make for a challenging future and force companies like Vacasa to redo forecasts for the remainder of the year and into 2023. Investors of these enterprises are becoming less patient, and it will be interesting to watch which company is the next to declare bankruptcy or shut down operations as they run out of cash.?

If Vacasa does not make corrections to industry trends of lower occupancy and declining daily rates in the fourth quarter of 2022 and first quarter of 2023 with an offset in reduction on their expenses, it will start to again miss their forecasted numbers and efforts to repair its profits will be similar to rearranging deck chairs on the Titanic.?

Vacasa will soon have to announce a revised forecast for its future 2023 earnings, and it will likely report a reorganization and start to hoard the remaining cash to try and prevent running out of money. In November, while nearly the whole stock market was up on lower-than-expected inflation, Vacasa (NASDAQ: VCSA) was a rare red dot on market screens after missing the mark in its third-quarter earnings report. Although the company beat top-line estimates and posted revenue, it also experienced higher local market and customer support costs.?

In a letter to shareholders, Vacasa said it would meaningfully reduce the capital it was spending on its "portfolio program," or the properties it owns instead of what it manages. Overall, earnings were lower than expected and indicated that momentum might be fading. The market is becoming impatient with technology platforms that are losing money and are out of touch with what investors want.?

What’s Next for Vacasa?

The most significant difference between VTrips and Vacasa is that we are exceedingly profitable. As we continue to grow, we will also gain synergies in our general and administrative expenses, allowing us to maintain revenue and expansion. Our company does well because it positions itself as a hospitality business and puts people at the center of everything we do – as opposed to Vacasa, which labels and acts as a technology company to the detriment of the customer experience.

Despite Vacasa’s crafted outlook, it is not likely that business will be booming for them. Expect to hear of more company staff departures, falling stock prices, and perhaps shareholder lawsuits against the board of directors.