Alternative hospitality company Sonder Holdings will immediately wind down operations and plans to file for Chapter 7 bankruptcy, it announced Monday.
The operator of short-term rentals, which had about 8,300 units at 152 properties as of June, cited “severe financial constraints” from factors including challenges integrating its systems and booking arrangements with Marriott International.
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Marriott announced Sunday that it ended its licensing agreement with Sonder “due to Sonder’s default,” canceling future reservations and sending guests scrambling. Marriott and Sonder had struck a deal in August 2024 to integrate Sonder units into the Marriott Bonvoy brand.
“We are devastated to reach a point where a liquidation is the only viable path forward,” Sonder interim CEO Janice Sears said in a news release.
Launched in 2014, Sonder sold short-term stays in hotels and apartments. Its business model has been to enter long-term leases with apartment and hotel owners, taking up blocks of rooms or whole buildings, then renting those out as short-term rentals on its platform.
A guest staying at the Sonder Flatiron in New York received an email Sunday afternoon asking him to vacate the property by 8 a.m. Monday, Business Insider reported. Other guests reported being asked to check out “as soon as you are able.”
Marriott didn’t immediately respond to Bisnow’s inquiry about whether it asked current guests to leave Sonder properties.
Marriott said online that those who booked a Sonder property through Marriott's channels would get a full refund, and customers with future reservations would receive an email about the “potential to rebook at another Marriott Bonvoy property,” according to Business Insider.
Facing insolvency and “substantial doubt” about its ability to continue, San Francisco-based Sonder last month pursued an out-of-court agreement with creditors in an effort to avoid a bankruptcy filing.
The company listed its integration with Marriott as something it hoped would improve its bottom line in a Securities and Exchange Commission filing last month. Sonder cited a history of net losses, negative operating cash flows and inability to ensure liquidity to cover obligations in the filing.
Sears said the Marriott integration was delayed due to challenges aligning the companies’ technology frameworks, which resulted in significant costs and a sharp decline in revenue.
“These issues persisted and contributed to a substantial and material loss in working capital,” Sears said in the release. “We explored all viable alternatives to avoid this outcome, but we are left with no choice other than to proceed with an immediate wind-down of our operations and liquidation of our assets.”
Sonder in June 2024 shuttered about 25% of its short-term rental portfolio as it faced class-action securities fraud complaints and said its earlier financial reports were unreliable.
The Marriott Bonvoy agreement came shortly after that, when Sonder also announced that it secured commitments for $43M in preferred equity and had another $83M in liquidity from its existing lenders.
Sonder also indefinitely delayed its annual shareholder meeting, which was scheduled for Nov. 6. The company has operated under an interim CEO since Francis Davidson resigned and left the board of directors in June.
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