Canadian-founded short-term rental firm expects to benefit from Marriott’s distribution.
Canadian-founded, San Francisco-based alternative lodging company Sonder Holdings has struck a series of deals to secure fresh financing and integrate its listings into hotel giant Marriott International’s system.
These include a 20-year strategic licensing agreement with Marriott and $146 million USD in additional liquidity from various investors to strengthen Sonder’s balance sheet. They come as the short-term rental provider navigates multiple challenges, including accounting issues and lawsuits, in its push to become profitable and recoup some of the stock value it has lost since its peak.
In an Aug.19 LinkedIn post, Sonder co-founder and CEO Francis Davidson called the Marriott tie-up “a pivotal moment” for the firm, which he believes stands to benefit from the larger hospitality company’s distribution network. He expects Sonder’s latest capital infusion to fuel its efforts to integrate with Marriott and continue the company’s progress towards profitability.
These deals come as Sonder navigates multiple challenges on its push to become profitable and recoup some of the value its stock has lost.
These deals come months after Sonder postponed the release of its fourth-quarter and full-year 2023 earnings, citing recently identified accounting errors in past statements. Since then, in response, multiple class-action lawsuits have been filed against the Nasdaq-listed company. Nasdaq has warned Sonder about its late filings, and given the company until Aug. 30 to submit an update to its original plan to regain compliance with the stock market’s listing rules.
Sonder still has yet to publish financial results for any period since Q3 of last year, when it released its earnings in November. The company said it intends to submit an updated plan to regain compliance “as soon as practicable,” but added that it “can provide no assurances as to [the] timing” of when it will file its delayed reports.
Sonder currently operates over 9,000 rental properties, from apartment-style accommodations to boutique hotel rooms, across 10 countries.
Though it is now based in the United States (US), Sonder has strong Canadian roots. On the back of Airbnb’s success, Sonder was founded in Montréal in 2012 by Davidson, Martin Pecard, and Lucas Pellan under the name Flatbook. In search of international investors, Sonder moved its headquarters to San Francisco two years later and incorporated in the US. But in recent years, Sonder has begun to expand its presence in Montréal once more.
The hospitality industry was hit hard by the COVID-19 pandemic, which led many customers to cancel, postpone, or scale back their travel plans, a crisis that affected both traditional hotels and companies like Sonder and Airbnb.
RELATED: Sonder faces class action investigation after delaying financial results due to errors in past statements
Though travel demand has rebounded, Sonder has struggled since going public in early 2022 at a $1.9-billion USD valuation via a special purpose acquisition company. As macroeconomic conditions have deteriorated and investor priorities have shifted, the unprofitable Sonder has seen its stock price on the Nasdaq nosedive by nearly 97 percent.
In a push to reshape its business and become profitable, Sonder has undergone multiple rounds of layoffs, trimmed its portfolio, and renegotiated leases. Per Davidson, Sonder has closed down the vast majority of its unprofitable sites over the past six months, leaving the company with a more healthy portfolio of leased assets.
Through this licensing deal, Sonder’s inventory will join Marriott’s portfolio under the “Sonder by Marriott Bonvoy” banner, and in exchange for making its units bookable through the larger Marriott’s website and loyalty program, Sonder will pay royalties to Marriott.
“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,” Davidson said in a statement.
RELATED: Sonder lays off 14 percent of staff as it targets cash flow positive in 2023
In a statement, Tim Grisius, Marriott’s global officer of mergers and acquisitions, business development, and real estate, noted that the deal will expand Marriott’s portfolio of longer-stay accommodations in key markets globally.
“Marriott has long believed in providing the right product at the right price point for all trip purposes and generations of travelers,” Grisius said. “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’s $146 million in additional liquidity consists of $83 million from existing lenders, commitments for $43 million in preferred equity from existing noteholders, and $20 million from other sources. Sonder expects to have access to this funding “over the coming months.”
Investors have reacted favourably to these deals. Since they were announced Aug. 19, Sonder’s shares have more than doubled, rising 150 percent to $6.55 at time of publication.
Feature image courtesy Sonder.