SAN FRANCISCO – Apartment accommodation company Sonder Holdings Inc. has entered into a long-term strategic licensing agreement with Marriott International. Under the Sonder by Marriott Bonvoy brand, over 9,000 units will be added to the Marriott portfolio by the end of 2024. An additional 1,500 Sonder units are expected to be added at a later date.
With the deal, Marriott now expects net room growth of 6 to 6.5 percent for the full year 2024. Under the agreement, Marriott will receive a royalty based on a percentage of Sonder’s gross room revenue.
At the same time, NASDAQ-listed Sonder announced that it has increased its liquidity profile by approximately $146 million to support its long-term profitable growth and integration efforts under the strategic agreement with Marriott. Sonder is expected to have access to these additional funds in the coming months.
With Sonder’s market cap down to $29 million at the close on Friday (it peaked at $2.3 billion in February 2022), the deals provide both short-term liquidity support and the potential to re-accelerate growth. Sonder shares rose about 20% in premarket trading on Monday following the announcement.
Founded in 2014, Sonder now has approximately 200 hotels worldwide and is expected to fully integrate with Marriott’s digital channels and platforms in 2025. However, Sonder expects that Marriott.com will provide links to Sonder’s digital platforms to support the shopping, booking, earning and redemption of Marriott Bonvoy members and customers before the end of 2024. Sonder expects the strategic agreement to provide significant revenue opportunities, increase RevPAR over time and improve operational efficiencies.
Sonder also believes the strategic agreement with Marriott will enhance the value proposition for property owners who can benefit from the unique combination of Sonder’s product and Marriott’s distribution. These properties appeal to key target groups, including younger travelers, utilize a digital operating model and are geared toward longer stays.
Equity deal for Sonder
With the equity deal with Sonder, a consortium of investors has committed to purchase approximately $43 million from a newly designed series of convertible preferred shares from Sonder.
Sonder’s existing noteholders have provided approximately $83 million of additional liquidity, including $4 million in financings funded on August 13, 2024 and approximately $79 million in the form of a 30-month extension (through the end of 2026) of the in-kind performance of the Note Purchase Agreement (21 months of which are at Sonder’s option). In addition, there are additional sources of liquidity totaling $20 million.
The above amount is in addition to the previously announced $16 million financing from Sonder’s existing noteholders.
The investor syndicate and existing holders of Sonder’s notes purchased approximately $14.7 million of preferred stock on or about August 13, 2024 and have agreed to purchase approximately $28.6 million of additional preferred stock, subject to Sonder’s settlement of its past-due filings with the Securities and Exchange Commission and satisfaction of customary closing conditions, which are expected to occur in the fourth quarter of 2024.
Holders of more than 50% of Sonder’s outstanding common stock have agreed to vote their shares in favor of certain proposals related to this transaction at a meeting of Sonder’s stockholders expected to be held later this year.
Janice Sears, lead independent director of the Sonder Board, said, “Today’s announcement is the result of deliberate and careful planning by the Board and management team to best position Sonder and create value for all stakeholders. Sonder has been relentlessly focused on operational efficiencies to achieve long-term profitability and these actions are the next step in achieving that goal. With significantly improved financial flexibility through the support of our lenders and investors, Sonder now has a stronger balance sheet to advance its value creation strategy as it embarks on its next chapter, including the strategic licensing agreement with Marriott.”
