Marriott adds special rooms to the system through strategic licensing agreement
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Diving certificate:
- Marriott International today announced that it has entered into a long-term licensing agreement with Sonder Holdings Inc. that will add thousands of rooms to the company’s offerings and portfolio and support future growth for both companies.
- Marriott will add Sonder’s open and planned portfolio – primarily apartment-style accommodations in urban markets – to its system under a new collection called “Sonder by Marriott Bonvoy.” About 9,000 rooms are expected to be added to Marriott’s portfolio by year-end, and about 1,500 rooms will be added to Marriott’s pipeline. As a result of the deal, the hotel company raised its full-year 2024 net room growth forecast.
- The partnership is expected to increase revenue, generate cost savings and drive future growth for Sonder, the company said in a statement Monday. The deal comes as Sonder is in legal trouble after reporting “accounting errors” in March that discredited its financial statements for fiscal years 2022 and 2023. The company has also been running a “portfolio optimization program” since November to “mitigate losses” on select properties.
Diving insight:
Sonder’s properties, consisting of condominiums and boutique hotels, will be fully integrated into Marriott’s distribution channels and can be booked under the Sonder by Marriott Bonvoy collection on Marriott.com and the Marriott Bonvoy app. Full integration is expected to occur in 2025, according to Sonder.
Following the integration, Sonder expects “new and improved demand” to drive a “significant increase” in RevPAR as a direct result of Marriott’s “extensive global sales and marketing capabilities” and its loyalty platform.
Sonder also expects “significant savings in customer acquisition costs through an improved distribution channel mix and preferred distribution channel rates,” the company said.
“By benefitting from the comprehensive distribution, loyalty and sales capabilities of a global hospitality leader, we can focus on our key value drivers, including the unique guest experience, while unlocking significant opportunities for revenue growth and cost efficiencies,” Sonder CEO Francis Davidson said in a statement.
Sonder was founded in Montreal, Canada in 2014 and has been based in San Francisco, California since 2016.
The company has been in a tight spot with investors since March, when it announced that it had identified “accounting errors related to the measurement and impairment of right-of-use assets from operating leases and related items for fiscal years 2022 and 2023.”
A class action lawsuit was subsequently filed against Sonder on behalf of investors who say they lost money because the company failed to disclose problems with its internal controls, financial services firm Morningstar reported.
Meanwhile, Sonder implemented a portfolio optimization program last November to “mitigate losses associated with select underperforming properties and evaluate the company’s rental portfolio relative to current operations and existing market rents.” As of June 10, the company had signed agreements to exit or reduce rent on approximately 105 buildings, or 4,300 residential units.
For Marriott, the new merger offers the opportunity to “expand its portfolio of extended-stay accommodations in key markets around the world,” according to Tim Grisius, Marriott’s global officer for M&A, business development and real estate.
Marriott now expects net room growth of 6 to 6.5 percent for the full year 2024, the company said on Monday. Earlier this month, Marriott forecast net room growth of 5.5 to 6 percent for the full year 2024 in a second-quarter earnings report.
