At Jefferies’ 2023 Private Internet Conference, serial entrepreneur Spencer Rascoff joined Cameron Lester, Global Co-Head of Technology, Media, and Telecom Investment Banking at Jefferies, to discuss shifts in the consumer landscape.
Rascoff – co-founder of Zillow, Hotwire, and most recently, Pacaso – shared insight into the booming Los Angeles startup scene, post-COVID transformations in consumer behavior, and the thriving market for second homes.
Rascoff expressed enthusiasm for LA’s surging startup ecosystem, where his latest digital real estate venture, Pacaso, is based. He highlighted the city’s unique convergence of media, entertainment, technology, and digital creators – all fueling a swell of local entrepreneurship.
“Post-COVID, we have a lot more latitude in where we live,” Rascoff said. “People are untethered from their homes in San Francisco, Seattle, or New York – places they had to live before the pandemic. Now, many of them are choosing LA, and the city is booming.”
Testra, in its second annual ‘Tech’s Great Migration’ report, found that Los Angeles now hosts more than 3,800 venture-backed companies, surpassed only by the Bay Area and New York. Since the pandemic, LA’s startup scene has emerged as one of the nation’s fastest growing.
The pandemic’s impact extends beyond lifestyle choices. COVID also triggered profound shifts in consumer behavior. Rascoff cited the revitalization of the ‘experience economy’ as among the most impactful and enduring changes. Drawing analogies to other global incidents of historic scale, he noted how such events tend to cultivate a ‘live for the moment’ mentality among consumers.
“Online travel companies were left for dead during COVID,” Rascoff observed. “Now, they’re just booming. Travel is going nuts for exactly this reason: people want to live again.”
Tourist arrivals worldwide in 2023 are projected to reach up to 95% of pre-pandemic levels, a significant increase from the 63% in 2022, according to data from the UN’s World Tourism Organization. This resurgence is mirrored in the rallying share prices of travel companies, which struggled during the pandemic.
Rascoff cited his own company, Pacaso, as another example of this shift. The platform facilitates fractional ownership of second homes, allowing buyers to invest in a share ranging from 1/8 to 1/2. In just their third year of operation, Pacaso crossed $1 billion in total revenue, as more people realized their long-held dream of owning a second home.
Turning to the broader housing market, Rascoff acknowledged that the sharp rise in mortgage rates from 2% to 7% has affected real estate transactions, with fewer this year than the last couple of years. However, he expects the second home market, where Pacaso operates, to see less impact.
“Second home markets tend to be more expensive, and buyers use more cash and fewer mortgages. They’re less susceptible to rising interest rates because the rest of their balance sheet is much stronger than your average consumer,” Rascoff explained. He added, “Second home markets appreciate faster than primary markets and are better insulated during downturns due to the low number of distressed sellers.”
Rascoff’s perspectives underscore the boundless potential of the ‘experience economy’ and the opportunities it offers to innovative ventures like Pacaso. As the pandemic continues to reshape lifestyle and consumption choices, businesses and regions that can tap into the consumers’ desire to ‘live in the moment’ are poised for substantial growth.
