On paper, Justin Miller was a man sitting right where he belonged. He and his partners had sold Pillow, a San Francisco startup that managed short-term rentals sold over Airbnb and sites like VRBO, to Expedia, and Miller wanted to do something like it again. Airbnb was right there in the South of Market district, practically down the street. Easy, right?

So why is the 34-year old sitting 1,250 miles away in Denver?

The answer, he says, is that his new company, Showplace, will benefit from what he sees as the emergence of a small technology cluster for travel tech companies, many of them focused on short-term rental properties, in the Rocky Mountains. The first was Exclusive Resorts LLC, now 20 years old, and the biggest startup is likely closely held Evolve, which has raised $224.2 million in venture capital but doesn’t disclose its sales and earnings publicly. There’s AirDNA, which does business analytics for investors in short-term rental properties and was sold to a private equity firm in March, and Inspirato, a luxury vacation club that went public through a special purpose acquisition company, or SPAC, in February.

And now there is Showplace, which raised $2 million in venture capital in a deal announced on June 7. The so-called seed round, the earliest stage of venture capital, will let Showplace add engineers and begin building a sales team, Miller said in an interview.

“We view Denver as a travel technology hub,” Miller said. “Being in Denver provides Showplace with access to industry brainpower to partner with and share best practices. Denver is also home to a lot of short-term rentals, so it’s a good testing ground.”

Technology clusters are hard to build, and good for young companies when they happen, said Natty Zola, a venture capitalist at Matchstick Ventures in Denver who led Showplace’s investor group. They tend to promote virtuous cycles of hiring, as people with relevant skills live near each other, and idea generation that result in growth and jobs.

And they are the holy grail of economic development leaders around the nation. Harvard’s William Kerr and Frederic Robert-Nicoud count 25 different efforts by public officials to brand their local tech clusters as Silicon This or That, and 238 cities that bid on Amazon’s HQ2 proposal, all of which collectively have made little dent in Silicon Valley’s supremacy. The Valley still gets 48 percent of U.S. venture capital, versus 1.1 percent for Denver, which sits between Miami and Austin in 9th place among U.S. tech clusters overall, say Kerr and Robert-Nicoud.

It’s not hard to imagine why the cities try so hard. Seattle has four times more high-paid workers in R&D intensive industries per capita as Denver does, according to the Harvard team’s 2019 paper.

Even though Zola’s last job was running a business incubator in nearby Boulder, he says there hasn’t been an organized effort to make Denver into Travel Tech Central. But he does see some signs of workers moving between local firms in the industry, beginning with Exclusive Resorts, majority-owned by former America Online CEO Steve Case, where Evolve CEO Brian Egan worked for seven years.

“When you have a lot of experience and success, it builds on itself,” Zola said. “You don’t have to be where the incumbents are to build a great company.”

For Miller, Denver doesn’t have to dislodge the Valley to add value to Showplace. For starters, he only has a team of 10 right now, so even a relatively small pool of people with highly relevant expertise will help build his team. And he found his lead investor in nearby Boulder, though Showplace is Matchstick’s first travel tech play. Zola’s own startup, before he went into coaching and investing in startups, developed tools for travel bloggers, Zola said.

Showplace’s business is basically to help new short-term rental owners get their properties in condition to be noticed, and rented often, Miller said. He compares the process to helping home sellers “stage” their houses by picking furniture, colors and other elements that will attract buyers, and photograph them in a way that grabs shoppers’ attention. Once the unit is set up, he says, most owners will move on to hiring a management company to help them run their unit as an ongoing business..

This means using standardized design plans Showplace is developing, and taking advantage of discounts it has arranged with leading furniture companies. The deals let owners shave as much as 80 percent off the price of Airbnb-friendly design, Miller said.

Like interior designers he hopes to displace, Showplace will take a design fee that varies by the size and design of the house, plus a cut of the savings offered by furniture sellers and other vendors.

“We help onboard a property in half the time, and we help the owner save money,” Miller said. “Most owners are new to the business.”

The goal is to move fast, snagging 100,000 new Airbnbs and and similar units as clients within 18 months, or about 10 percent of the million units a year he expects Airbnb alone to add. Software-driven design templates will help the business scale, he said. With valuations in his sub-industry as high as 30 times revenue in some cases, he says Showplace can be a billion-company within a few years.

To do all that, Miller will need help. He’s hoping — and betting — that he can get some of it from his new neighbors, like a digital cup of sugar exchanged over the back fence.

Here’s More of What Skift Has Had to Say About Travel Tech Hubs

— Why Barcelona Is Becoming a Hub for Travel Startups : A new study highlights Barcelona’s recent growth as a hub for travel startups. A rich tourism history, a sun-dappled location, and a favorable cost-of-living. The pitch is certainly attractive.

— Brazil’s Travel Tech Scene Is Blossoming Despite the Pandemic : Brazil is fostering dozens of travel tech companies. Developing homegrown digital clout could help the country resist incursions from foreign heavyweights as it leans into a post-pandemic recovery.

— 6 French Travel Startups Thriving Despite the Pandemic : Travel bookings will get worse before they get better. But we found a half dozen French travel startups defying the odds. They appear to be setting themselves up well for the post-crisis rebound. Bonne chance!

— Can Scotland Create a Regional Travel Tech Hub for a Post-Coronavirus World? : Countries lack a playbook in coping with the pandemic’s effect on tourism, but Scotland is one to watch when it comes to its new effort to boost its travel tech sector.

Boutique hotels remain a relatively preferred asset for investors in real estate. But in the past few months, it’s become tougher to close deals, and some types of projects are winning more favor than others.

“For boutique hotels, we’re really positive about the outlook,” said Amanda Hite, president of hotel data tracker STR, when speaking on Wednesday at the Boutique Hotel Investment Conference in New York.

Many boutique hotels have seen their profitability surpass 2019 levels. In April, U.S. boutique hotels had an average gross operating profit per available room of about $113 — or 19 percent above the level of April 2019, according to STR data.

“Even if there’s a recession, you have business travel coming back and layering into boutique hotel performance,” Hite said. “You also have a recovery of international travel. Both will support the segment.”

Hite also dismissed worries that rising gas prices would chill demand.

“We have more than 30 years of data showing no correlation between rises in gas prices and demand for hotels,” Hite said.

Inflation Becomes a Drag

Yet while the broad tailwinds for boutique hotels remain bullish, the positivity isn’t spread evenly.

Rising construction costs have caused hiccups.

“For 26 years, I’ve been underwriting hotels in front of investment committees, and no one has ever asked, ‘What’s your inflation assumption on your expenses?’” said Clark Hanrattie, a partner at HEI Hotels & Resorts. “Now that’s the first or second question.”

Inflation uncertainties are adding friction to construction financing.

A case in point: Cedar Capital Partners, which has invested in hotels that collectively have nearly 2,000 rooms in the U.S. and Europe, had recently spent 10 months pursuing a condo-hotel development in Miami Beach’s South Beach neighborhood. In February, it was ready to begin the final renovation work. But then bids for the work came in from contractors much higher than forecasted.

“We decided to hit ‘pause’ on the project,” said Ben Leahy, a partner at Cedar Capital, while speaking at the event. “It was a tough decision to hit pause because the fundamentals of Miami have so massively outperformed other markets.”

Leahy’s team is betting that a cooldown in the U.S. economy will help bring construction prices down by roughly 10 percent, or a similarly more acceptable level, by the fall or year-end.

The super-hot market for hotel construction may cool off as lenders worry about a potential economic slowdown crimping their performance.

“Some lenders are still brokering construction debt, but it feels like the pricing has gotten wider, and they generally tend to be fairly selective,” said Adam Maisel, principal at Ramsfield Hospitality, specialists in hotel financing.

In the last two months, it has become a more challenging credit environment for hotel acquisitions and refinancing, said a few panelists at the conference. The change hasn’t been a stumbling block for experienced players, but it has caused delays.

In recent weeks, Apollo Global Management faced a lender balking at financing terms for a hotel deal, said Apollo partner Jason Ourman. The lender had concerns despite Apollo having the expertise learned from having invested billions in hotels over the years and having the support of financial titan Brookfield.

In some cases, unusual trends in demand are putting investors and hotel developers at odds with each other.

“The cycle has been so tilted toward leisure demand growth that you have some developers saying we should get rid of meeting space for good,” said Robin Kennedy, executive vice president, and chief development officer, at Montage International.

“But what if business travel fully rebounds?” asked Kennedy. “You need to make your real-estate decisions based on long-term term trends.”

Hunting for Bargains

Some investors are hunting for bargains because of the market turmoil.

One opportunity is the handful of urban hotels that are dropping the flags of global brands and going independent, Clark said.

Franchise contracts typically have a provision limiting damages for termination if a hotel’s revenues drop below a certain multiple of franchise fees. The pandemic cratered revenues for many hotels, enabling them to break their franchising contracts for what is effectively a lower kill fee than would be customary otherwise. In some cases, a property may become more attractive to some investors as a free agent.

In Europe, some families have held hotels for generations but are now facing financial difficulties. For these hotel owners, patience is running out for full recoveries in profitability.

“It presents a once-in-a-generation opportunity for investors to get ahold of these properties at relative discounts,” said Eric Jafari, chief development officer at hotel developer Edyn.

More broadly, some boutique hotels may benefit from the recent market disruptions. A slowdown in financing that reduces the pipelines for development or conversion could lead to less competition in 2023, helping to support the pricing power of already existing boutique hotels.

“Supply has a massive impact on hotel performance,” said Adam Maisel, principal at Ramsfield Hospitality. “A slowdown in the pipeline would be beneficial. That’s Econ 101.”