Marriott International struck a long-term licensing deal with Sonder Holdings that will expand the Marriott portfolio by more than 9,000 units by year’s end.
Sonder has more than 200 apartment-style accommodations in mostly gateway cities in North America, Europe and the Middle East that will join the Marriott system under a new collection called “Sonder by Marriott Bonvoy.” Sonder has more than 1,500 rooms in its pipeline, which will join the Marriott system over the next few years.
By year’s end, guests can earn and redeem points on Sonder by Marriott Bonvoy properties. Full integration of Sonder into Marriott’s digital and sales systems is expected in 2025, according to a Marriott news release.
Under the deal’s terms, Marriott will receive a royalty fee based on a percentage of Sonder gross room revenues. Sonder CEO Francis Davidson said he expects the partnership to unlock “significant opportunities for increased revenue and cost efficiency.”
Sonder's Challenges
Sonder has navigated challenges in recent years since going public in January 2022 through a merger with a special-purpose acquisition company. In 2023, Sonder Chief Real Estate Officer Martin Picard told Hotel News Now the company was focusing on unit growth and operational efficiencies to boost its free cash flow.
“We need to add more scale to the system for it to reach profitability … so we want to open as many properties as possible,” Picard told Hotel News Now at the time.
Sonder leases, operates and manages units in hotels and apartment buildings, listing units for rent on its own site and Airbnb. In late 2023, the company launched a portfolio optimization program to mitigate losses related to underperforming properties and assess its rents portfolio.
In recent months, it has been strengthening its balance sheet “to support long-term profitable growth and the integration efforts under the strategic agreement with Marriott,” according to the Sonder news release. Through existing noteholders, new investors and other sources, Sonder grew its liquidity profile by approximately $146 million.
Marriott says it now expects full-year 2024 net rooms growth of 6% to 6.5%.
Growth Through Partnerships
This type of expansion-through-partnership growth has been a recent strategy for large hotel companies seeking fast net-unit and distribution growth.
Last summer Marriott signed a long-term strategic licensing agreement with MGM Resorts to add 17 MGM properties to Marriott's booking platforms and loyalty programs.
Earlier this year Hilton struck similar strategic partnerships with Small Luxury Hotels of the World and Autocamp.