Dive Brief:
- Marriott International announced today it has entered a long-term licensing agreement with Sonder Holdings Inc. that will add thousands of rooms to its pipeline and portfolio, driving future growth for both companies.
- Marriott will add Sonder’s open and pipeline portfolio — primarily apartment-style accommodations in urban markets — to its system under a new collection dubbed “Sonder by Marriott Bonvoy.” Some 9,000 rooms are expected to join Marriott’s portfolio by year-end, and approximately 1,500 rooms will be added to Marriott’s pipeline. The hotel company raised its net rooms growth outlook for full-year 2024 based on the deal.
- The partnership aims to increase revenue, deliver cost savings and drive future growth for Sonder, the company detailed in a Monday statement. The deal comes as Sonder faces legal trouble after reporting “accounting errors” in March that discredited its financial statements for the fiscal years of 2022 and 2023. The company has also been underway on a “portfolio optimization program” since November to “mitigate losses” at select properties.
Dive Insight:
Sonder’s properties, consisting of apartment-style accommodations and boutique hotels, will be fully integrated with Marriott’s distribution channels, becoming available for booking on Marriott.com and the Marriott Bonvoy app under the Sonder by Marriott Bonvoy collection. The full integration is expected to take place in 2025, according to Sonder.
Following the integration, Sonder expects to see “new and improved demand” drive a “substantial uplift” in RevPAR as a direct result of Marriott’s “extensive global sales and marketing capabilities,” as well as its loyalty platform.
Sonder also anticipates “substantial customer acquisition cost savings through improved distribution channel mix and preferred distribution channel rates,” the company said.
“Benefitting from the extensive distribution, loyalty program and sales capabilities of a global hospitality leader will help us to prioritize our core value drivers, including our unique guest experience, while unlocking significant opportunities for increased revenue and cost efficiency,” Sonder CEO Francis Davidson said in a statement.
Sonder was founded in Montreal, Canada, in 2014 and since 2016 has been based in San Francisco, California.
The company has been in hot water with investors since March when it announced that it had identified “accounting errors related to the valuation and impairment of operating lease right of use assets and related items for the fiscal years 2022 and 2023.”
A class action lawsuit was subsequently filed against Sonder on behalf of its investors, who claim to have lost money as a result of the company failing to disclose issues with its internal controls, according to financial services firm Morningstar.
Meanwhile, last November, Sonder implemented a portfolio optimization program to “mitigate losses related to select underperforming properties and assess the company’s portfolio of rents relative to current operations and the existing market rents.” As of June 10, the company had signed agreements to exit or reduce rent for approximately 105 buildings, or 4,300 units.
As for Marriott, the new tie-up presents the opportunity to “expand [its] portfolio of longer-stay accommodations in key markets around the world,” according to Tim Grisius, global officer of M&A, business development and real estate at Marriott.
Marriott now expects full-year 2024 net rooms growth of from 6% to 6.5%, the company said Monday. Earlier this month in a second quarter earnings report, Marriott forecasted full-year 2024 net rooms growth of from 5.5% to 6%.
