Marriott is facing complications that could see the hotel corporation lose up to 122 locations in just days. An investment company with a significant stake in Sonesta is demanding compensation from Marriott immediately for payment shortfalls and threatening to rebrand their properties if Marriott fails to comply. Here’s what you need to know about the issue and why Marriott may lose over one hundred properties next week.
SVC Threatens Marriott Over Payment Shortfalls
While the Marriott Bonvoy program includes hundreds of properties and dozens of brands, Marriott doesn’t actually own many of its hotels. Instead, investment companies, like hedge funds, own most hotels in the Marriott ecosystem.
Service Properties Trust (SVC) is one such investment firm. SVC owns 122 properties that bear the Marriott name. These include not just Marriott hotels, but also other names in the Bonvoy program such as Courtyard Inn & Suites, TownePlace Suites, Residence Inns, and more.
SVC recently sent a request to Marriott demanding immediate payment for shortfalls, according to a press release through Business Wire. The demand includes an advance of $11 million to cover shortfalls for the first eight months of 2020. It also requests 80% of the priority returns for the same period.
If Marriott International does not make these payments within ten business days, SVC says they will terminate their contract with the brand and switch the hotel’s branding to Sonesta International Hotels Corporation.
SVC and Sonesta
The proposal to move 122 Marriott Hotels to the Sonesta brand is no idle threat. SVC owns a 34% stake in Sonesta, making a move a logical decision from a financial standpoint. IHG recently lost 103 hotels to Sonesta in similar circumstances. The owner of those 103 properties: Service Properties Trust.
While the Sonesta brand (and the Sonesta Travel Pass loyalty program) has a much smaller foothold in the marketplace compared to IHG or Marriott, the addition of several hundred properties is a sign that the company is on the rise. Sonesta stands to go from less than 100 properties in January 2020 to over 300 by December, potentially.
Whether Marriott makes the $11 million payment remains to be seen. Either way, expect SVC and Sonesta to continue making waves in the hotel industry.
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