Short-term rental specialist Sonder Holdings has sealed a deal for more than 9,000 of its units to join the Marriott International portfolio by the end of this year.
Under what is being described as a "long-term strategic licensing agreement," a further 1,500 units are expected to join the Marriott system going forward.
Sonder will also have access to $146 million to enable profitable growth as well as help with the integration of its properties into the Marriott system. The funds include $43 million from an investors' consortium as well as $83 million from existing Sonder noteholders.
Janice Sears, lead independent director of the Sonder board, described the deal as the "result of deliberate and thoughtful planning by the board and the management team to best position Sonder to deliver value for all stakeholders."
"Sonder has been relentlessly focused on operational efficiency to deliver long-term profitability, and these actions are the next step in achieving that goal," she added. "With significantly improved financial flexibility from the support of our lenders and investors, Sonder now has a stronger balance sheet to fuel its value creation strategy as it embarks on its next chapter, including the strategic licensing agreement with Marriott.”
Sonder's properties, which include boutique hotels and apartment-style accommodations, will be integrated into Marriott's distribution channels as well as be available to book on its website and loyalty program mobile application under the banner of Sonder by Marriott Bonvoy.
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Sonder has had a tough ride in recent years with the company at risk from a delisting from the Nasdaq in 2023 and again earlier this year. The company, which has not reported quarterly earnings since the third quarter of 2023, has undergone a number of job cuts and restructuring since its public market listing in early 2022.
In the middle of 2022, Sonder lost 22% of its workforce as part of a restructuring. Earlier this year it shaved 17% of the workforce with the aim of saving $11 million.
Commenting on the Marriott deal, Francis Davidson, co-founder and CEO of Sonder, said, “We're delighted about our strategic agreement with Marriott. Benefiting 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 expects its properties to be full integrated with Marriott's digital channels and platform over the course of 2025. The company believes the increased demand driven by being part of the Marriott system and loyalty program will increase revenue per available room over time. Sonder also anticipates cost savings around customer acquisition as a result of the deal.
Tim Grisius, global officer for mergers and acquisitions, business development and real estate at Marriott International, said, “We are excited about this new agreement, which is set to expand our portfolio of longer-stay accommodations in key markets around the world. Marriott has long believed in providing the right product at the right price point for all trip purposes and generations of travelers. With the planned addition of Sonder by Marriott Bonvoy, we will be able to provide guests seeking apartment-style urban accommodations with even more options in the Marriott Bonvoy portfolio.”
Sonder, which was founded in 2014, raised more than $800 million prior to its Nasdaq listing. The amount includes $210 million in Series D in mid-2019 and $170 million Series E about a year later.
The company is not the only of the newer accommodation concepts to struggle, with Selina recently facing insolvency and looking for buyers.