Short-term rental specialist Sonder Holdings filed its delayed third-quarter earnings report, the company announced late Wednesday, and in the filing with the United States Securities and Exchange Commission noted that Marriott International has agreed to pay the company $15 million as part of a recent licensing deal.
Marriott in November 2024 paid Sonder half of that total as part of the agreement, announced in August 2024, to incorporate Sonder's inventory in Marriott's portfolio, making them bookable through Marriott's channels. Marriott is scheduled to pay the remaining $7.5 million in "key money"—an industry term that refers to a payment by a chain or management company to an owner or developer to select a particular hotel brand—by March 31.
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The deal is set for 20 years, but both Marriott and Sonder can terminate the deal after five years by paying an undisclosed termination fee, according to the filing. Sonder will also pay Marriott an undisclosed royalty fee.
Sonder pointed to the deal as one of its strategies to address its financial losses and negative cash flow, and in the filing acknowledged its "substantial doubt" about its ability to remain a going concern for the next year. Sonder "has a history of net losses and negative operating cash flows and expects to continue to incur additional losses in the future," it said in the filing.
Sonder additionally has reduced its portfolio throughout 2024, exiting 70 buildings representing 2,800 rentable units by September 30 with plans to exit 10 more. Sonder at the end of the third quarter had 10,100 live bookable units systemwide, down from 11,800 one year prior, more than a 14% decline. The company in the filing said its growth primarily would come from converting real estate agreements it already has signed into live bookable units.
Sonder's third-quarter earnings report was tardy following prior delays in filing first- and second-quarter reports after discovering "accounting errors related to the valuation and impairment of operating lease right of use assets and related items. The company filed Q1 and Q2 reports in November, and this filing of the Q3 report should satisfy Nasdaq's listing standards.
In Q3, Sonder's revenue per available room increased 22 percent year over year to $176. Average daily rate also increased 22 percent to $207. Its occupancy rate was 84.8%, up from 82% one year prior, though its total occupied nights declined nearly 10% to 783,000 due to the downsizing of the portfolio.
Third-quarter revenue increased 1% year over year to $162.1 million. Sonder's Q3 net loss was $179.4 million, compared with a net loss of $57.6 million the year prior. The 2024 loss includes "a $58 million loss on preferred stock issuance and an $87 million change in fair value of the forward contract" related to the $43 million it secured from a consortium of investors in August.
"The third quarter was pivotal for Sonder," co-founder and CEO Francis Davidson said in a statement. "Our results demonstrate the meaningful progress we're making to advance our core value drivers and generate increased revenue and cost efficiency."
*This story originally appeared on Business Travel News.