Short-term rental company Sonder announced Monday that it plans to file for bankruptcy, a day after Marriott International announced the licensing agreement between the two companies had ended.
The deal, signed in August 2024, allows Sonder hotels to be booked through Marriott’s Bonvoy website and was widely considered a lifeline for the San Francisco-based company, which struggled financially during the COVID-19 pandemic and went public in a SPAC merger in 2022.
Marriott said in a statement Sunday that the 20-year license agreement is “no longer in effect” and cited Sonder’s “default” as the reason.
In his own statement Monday, Sonder said he had made “comprehensive efforts” to improve the company’s financials in the wake of Marriott’s announcement, but to no avail.
“Given the failure of these efforts and in light of (Mr. Sonder’s) financial condition, the board of directors has made the difficult decision to wind down the business and immediately enter into a court-supervised liquidation of the U.S. operations,” the statement said.
Janice Sears, Sonder’s interim chief executive officer, said technology integration issues with Marriott’s Bonvoy website “incurred significant unexpected integration costs and sharply reduced revenue.”
Sears added: “We are devastated that we have reached the point where liquidation is the only viable path forward.”
The former unicorn, which was valued at $1.9 billion at its IPO, said it also plans to file for bankruptcy overseas.
The company, which operates in 40 cities around the world, is billed as a combination of Airbnb and hotels, offering long-term stays in popular tech-enabled properties for remote workers. The company operates many hotels on long-term leases, resulting in an “asset focus” strategy that many in the hospitality industry currently avoid.
“People were panicking.”
Guests at the Sonder Hotel CNBC spoke to said they were caught off guard by the news, and some said they were ordered to leave their hotel rooms with less than 24 hours’ notice.
One of the travelers, Connie Yang, told CNBC that she prepaid for her stay at New York’s Sonder Battery Park from Nov. 7 to Nov. 17.
He said he received an email on Sunday, Nov. 9, telling him he had to vacate the hotel by 9 a.m. the next day.
“The reason was the termination of the licensing agreement between Sonder and Marriott,” she said. “We were asked to vacate the entire building.”
“My neighbor is helping my husband with his cancer treatment and even pays for his treatment for the month,” she added. “It’s beyond comprehension.”
She also said she found some of Sonder’s field staff in tears, saying they “didn’t know anything”.
On Monday morning, “people were rushing to get out before the building was locked down,” she said.
Other travelers have posted stories about Sonder’s closure on social media, including attempts to get assistance from Marriott customer service.
Yang said she also contacted Marriott. “When I called Marriott and spoke to a manager, I was told that they were not allowed to give me more and that they were not going to find me a room,” she said. “We were all left to scramble.”
Marriott did not immediately respond to CNBC’s request for comment.
A statement from the company on Sunday said Marriott’s “immediate priority is to support guests currently staying at Sonder properties and those making future reservations,” adding that Marriott would reach out to guests who “booked directly through Marriott channels.”
Yang, who booked her stay through Booking.com, said a representative from the platform “promised to refund her money.”
Eventually, she said she found herself an alternative accommodation, the Hilton.
