By Kristy Dorsey

Vacation rental platform TravelNest has secured £1.8 million in government-backed funding to grow its customer base following what its founder has described as a fundamental shift in the travel market.

Like the wider industry, the Edinburgh-based start-up saw a plunge in bookings in the weeks immediately after the first national lockdown in the spring. But as restrictions loosened through the summer, founder Doug Stephenson said the firm noticed distinct trends taking hold that are expected to drive demand for its service, which automates the marketing for vacation rental properties on sites such as Airbnb, Expedia and TripAdvisor.

"What we are beginning to see is a re-distribution in travel," Mr Stephenson said. "If you look at things now, the preference is very much for people to drive in their car to somewhere within a couple of hours of where they live.

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"There is much less demand for staying in hotels, where everyone has to share the same common spaces like elevators. Rural locations are also more popular than the urban destinations where the majority of demand used to be. People still want to travel, but they want to be safe."

The funding includes a £1.5m coronavirus business interruption loan through the UK arm of Silicon Valley Bank, plus £300,000 from the early stage growth challenge fund run by Scottish Enterprise. Both programmes have been set up to assist companies whose trading has been impacted by Covid-19.

Launched in 2018, TravelNest has a predominantly rural portfolio of properties using its listing automation service to increase profile and cut down on the administration required by property owners. About half of these are located in the UK, with the remainder spread across approximately 60 countries throughout the world.

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Bookings "fell off a cliff" in March and hit their lowest in April before what Mr Stephenson described as an "incredible V-shaped rebound" as lockdown measures eased. The company responded to the worst of the downturn by cutting its costs and accessing the Government's furlough programme, but has not had to make any redundancies among its 50 staff.

TravelNest is backed by Pentech, Mangrove Capital Partners and Frontline Ventures, which invested an initial £3m of seed funding into the company in 2017. That was followed by a £5.1m funding round at the end of last year.

Among its board members is former Skyscanner chief operating officer Mark Logan, author of the recent Scottish Technology Ecosystem Review commissioned by the Scottish Government, who is a non-executive director. Another Skyscanner veteran, Rebecca Moore, joined TravelNest last year and is now the firm's chief operating officer.

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"We've had amazing support from Silicon Valley Bank, first as a banking client and now as the recipient of a CBILS loan," Ms Moore said. "The bank's team has a deep understanding of the high-growth start-up sector and also understood the market dynamics we were faced with earlier in the year.

"We're also incredibly grateful for the ongoing support we've had from Scottish Enterprise."

Mr Stephenson said that prior to the pandemic, about 38 per cent of personal trips were to rural destinations. That figure currently stands at more than 50%.

Similarly, about 60% of personal trips in January included at least one airline flight, but that percentage now sits in the mid-20s. The domestic share of the travel market has increased by 45%.

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"It has been a very difficult year, but it is also very exciting," Mr Stephenson said. "When you look at these macro trends and the way the market is going, the opportunity for our industry is huge."

In 2019, vacation rentals were 14% of the global travel accommodation market, and were forecast to reach more than £150 billion by 2021. There are approximately 8.3 million homes hosted globally, with about 65% owned by independent hosts with less than 5 properties, and 82% of properties listed on a single channel.

Mr Stephenson said the company intends to continue its internationalisation push that began before the pandemic. Although the UK is TravelNest's biggest market, the digital nature of its service means the firm can capitalise on the staycation trend in countries around the world.

He added: "2021 is looking like a really good year for this industry, for our customers and for TravelNest as well."