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In the next 10 days, we could see a large exodus of hotels from the Marriott brand as it appears Marriott has fallen behind on a few bills.
Have these hotels been “Bonvoyed?”…the loving moniker making reference to the hotels loyalty program and given by members because of canceled bookings, point grabs and poor customer service by the behemoth hotel brand Marriott.
MARRIOTT LOSING 122 HOTELS?
Generally, hotels are not owned by the brand (Marriott in this case) but are rather owned by an investment group, with the hotel brand having management rights.
Well, Service Properties Trust (SVC) is one such investment group and yesterday the group sent a letter to Marriott International requesting $11 million to cover the shortfall between the payments SVC had received up to this point (from Marriott) and 80% of the priority returns due to SVC since the beginning of the year for 122 Marriott properties.
In other words, Marriott guarantees a certain minimum return to the SVC owners (and yes this is standard practice), but since Marriott has fallen short of their contract obligations, there is trouble on the horizon.
If Marriott does not make the requested payment, SVC currently plans to transition management and branding of the 122 hotels from Marriott to Sonesta International Hotels Corporation.
The 122 hotels being rebranded belong to five different Marriott brands, and the breakdown is as follows:
- 2 Marriotts
- 2 Springhill Suites
- 12 TownePlace Suites
- 35 Residence Inns
- 71 Courtyards
MARRIOTT IS NOT ALONE
Marriott isn’t the only brand that is in hot water with SVC.
A month ago, SVC ended its management and branding agreement with IHG for 103 hotels. The contract will end as of 30 November 2020, at which point:
- 3 InterContinentals
- 3 Holiday Inns
- 5 Kimptons
- 11 Crowne Plazas
- 20 Staybridge Suites
- 61 Candlewood Suites
…will all be run by Sonesta instead.
SONESTA…THE NEW “IT” HOTEL BRAND?
If you’re asking “who the heck in Sonesta?” you’re not alone. I am unfamiliar with them as well.
Sonesta has approximately 80 properties right now (and more since it is transitioning the IHG hotels above).
Interestingly, according to Sonesta, the investment group manages 16 hotels that were rebranded from IHG in 2012 and since then total annual revenue at these hotels improved 14.4% which is a considerable improvement.
Understanding that Sonesta could potentially acquire 225 Marriott hotels, is Sonesta the new “IT” hotel brand?
Marriott hasn’t followed through in its obligation to pay their hotel(s) and has 10 days from receipt of the letter to make the payment, or SVC will have the right to terminate its agreement.
Obviously, I do not work for Marriott Corporation so I have no idea what the balance sheet looks like, but this is one heck of a bill and I assume if they had it, they would pay it.
Given the unfortunate situation that hotel brands are facing with the pandemic, I don’t foresee this bill being paid.
I totally understand why an investment group would transition to a new brand. If someone was $11 million short on a bill they owed me, I’d probably do the same thing but I’m not sure if rebranding these hotels as Sonesta, given they have little name recognition, is the best solution.
I would’ve said the same thing with the IHG hotels in 2012 but the numbers appear to support they are doing better.
It’s A SOLUTION but is it the BEST SOLUTION?
What do you think of this development? Why do you think Marriott hasn’t run specials or promotions to generate revenue?