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Sonder has recently struggled, having not been profitable since going public in a blank check deal in 2022. The heft of Marriott’s distribution system will boost the company. Marriott will gain access to Sonder’s units, many of which are roomy apartment-style lodging and in neighborhoods where it’s hard to build hotels.
Marriott International and Sonder Holdings said Monday they had signed a 20-year strategic licensing deal. The deal will expand the portfolio of places where members of the Marriott Bonvoy loyalty program can earn and redeem points.
Sonder offers about 9,000 units with hotel-style professional stays, although roughly half of the properties it manages are apartment buildings.
“We will be able to provide guests seeking apartment-style urban accommodations with even more options in the Marriott Bonvoy portfolio,” said Tim Grisius, Global Officer of M&A, Business Development and Real Estate at Marriott International.
Sonder separately said on Monday it had secured about $146 million in additional liquidity to strengthen its balance sheet and support long-term growth.
Key Points of the Partnership
- The deal says Marriott will receive a royalty fee based on a percentage of Sonder’s gross room revenues.
- It’s a loyalty licensing deal similar to one Marriott arranged last year with MGM Resorts. Marriott said the Sonder deal would enable it to maintain its goal of having at least 6% net room growth of its portfolio for the full year. Sonder will contribute about 0.5 percentage points, analysts at Bernstein estimate.
- Full integration with Marriott’s digital platforms is expected next year.
- Sonder’s ability to run apartment buildings as licensed hotels has enabled it to operate in some neighborhoods where there are few hotels. Marriott will be gaining added reach with this deal.
- “Given Sonder’s short-term rental and aparthotel focus, this deal also raises the question of how the “Sonder by Marriott Bonvoy” brand will compare with the newly developed Apartments by Marriott Bonvoy brand,” noted analyst Richard Clarke of Bernstein Research. “Together with Homes & Villas by Marriott Bonvoy, the company now has three different brands in vacation rental type of offerings.”
Turnaround for Sonder
Sonder went public through a special purpose acquisitions company, or SPAC, merger in January 2022. It hasn’t been profitable, has had some accounting difficulties and for over a year has been trimming its portfolio.
Marriott’s heft serves as an endorsement in Sonder, enabling it to receive funding from unnamed investors. The fresh financing includes:
- An approximately $43 million convertible preferred equity investment.
- $50 million in new real estate debt financing.
- $53 million from the monetization of existing security deposits.
“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,” said Francis Davidson, co-founder and CEO of Sonder.
Accommodations Sector Stock Index Performance Year-to-Date
What am I looking at? The performance of hotels and short-term rental sector stocks within the ST200. The index includes companies publicly traded across global markets, including international and regional hotel brands, hotel REITs, hotel management companies, alternative accommodations, and timeshares.
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