Marriott International has inked a long-term licensing deal with Sonder, a provider of apartment-style accommodations, which will add more than 9,000 rooms to Marriott’s portfolio by this year-end and roughly 1,500 rooms to its pipeline.
As part of the agreement, Sonder’s open and pipeline properties, which are mostly located in urban markets worldwide, will join the Marriott system under a new collection called Sonder by Marriott Bonvoy. Marriott will receive a royalty fee based on a percentage of Sonder gross rooms.
With the addition of Sonder’s 9,000 rooms, Marriott anticipates its full year 2024 net rooms to grow by 6-6.5%. The pipeline rooms under Sonder are expected to join Marriott in the next few years.
Beginning later this year, Marriott Bonvoy members will be able to earn and redeem points on their stays at about 200 Sonder by Marriott hotels. In 2025, Sonder’s properties are expected to be fully integrated with Marriott’s digital channels, including Marriott.com and the Marriott Bonvoy app. However, Sonder expects that Marriott.com will feature link-offs to Sonder’s digital platforms to support shop, book, earn and redeem by Marriott Bonvoy members by the end of this year.
“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,” said Tim Grisius, global officer, M&A, business development and real estate, Marriott International.
The deal has helped Sonder to strengthen its balance sheet as well. The group has enhanced its liquidity profile by around $146 million to support its long-term growth and the integration efforts (besides its previously announced $16 million in financing from Sonder’s existing noteholders).
A consortium of investors has committed to $43 million of a newly designated series of convertible preferred equity of Sonder. Sonder’s existing noteholders have provided additional liquidity of $83 million, which includes $4 million in financing funded on August 13 and approximately $79 million through a 30-month extension (through the end of 2026) of the paid-in-kind feature of the note purchase agreement (21 months of which is at Sonder’s option). Sonder also has other sources of liquidity totaling $20 million.
The deal is expected to deliver significant revenue opportunities and operating efficiencies for Sonder. In a release, Sonder’s Co-Founder and CEO Francis Davidson said the group will benefit from Marriott’s extensive distribution system, loyalty program and sales capabilities. “We look forward to welcoming Marriott Bonvoy members to our approximately 200 properties worldwide, creating new opportunities for guests to enjoy Marriott’s award-winning loyalty program. Thank you to all our employees, guests, partners and stakeholders as we launch this exciting new chapter.”
The agreement will help Sonder in the following ways:
- Increase revenue by integrating with Marriott’s commercial engines: Following the full integration with Marriott’s sales and marketing capabilities, these sources of enhanced demand will drive RevPAR over time.
- Deliver cost savings through synergies and scale: The full integration will complement Sonder’s existing technology. Sonder expects to realize significant customer acquisition cost savings through improved distribution channel mix and preferred distribution channel rates.
- Fueling more growth: The association with Marriott will enhance Sonder’s value proposition to real estate owners who can expect to realize the combination of Sonder’s product and Marriott’s distribution.
Founded in 2014, Sonder has a collection of apartment-style accommodations and small boutique hotels in urban markets in North America, Europe and the Middle East. Popular among young travelers, the properties leverage a digital-first operating model and cater to longer stays.
“Today’s announcement is 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,” said Janice Sears, lead independent director of the Sonder Board of Directors. “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.”
Moelis & Company LLC served as financial advisor to Sonder and Kirkland & Ellis LLP served as legal counsel.