'We are devastated': Sonder to file bankruptcy, liquidate after Marriott ends deal

Sonder Holdings, which manages premium apartments and boutique hotels, has announced that it has lost its key partner, Marriott International, which left immediate liquidation as its only option. Following the announcement, Sonder’s stock price plummeted more than 60% yesterday, November 10. The hotelier’s market capitalization, which was $1.9 billion at the time of the IPO in 2022, is down to just $2.7 million.

Sonder’s announcement of its immediate liquidation and bankruptcy triggered a collapse in its share price. The stock plunged more than 60% yesterday to $0.20 per share. In premarket trading today, November 11, the decline continued, with shares losing another 16%. Investors traded nearly 23.6 million Sonder shares yesterday – 23.6 times the company’s average annual trading volume, according to Yahoo Finance data.

The decision to file for bankruptcy came a day after Marriott International terminated its 20-year licensing agreement with Sonder due to “prolonged challenges” in the integration of its technology. Those led to higher integration costs, a sharp decline in revenue from Sonder’s participation in Marriott’s reservation system, and a significant loss of working capital, according to the Sonder statement.

Sonder guests told CNBC that news of the breakup with Marriott came as a shock, with some being asked to vacate their rooms in less than 24 hours. One traveler said she found Sonder’s onsite staff in tears as “they knew nothing.”

“We are devastated to reach a point where a liquidation is the only viable path forward,” interim CEO Janice Sears said. She added that the company had explored all possible alternatives.

While a university student, Sonder cofounder Francis Davidson began managing several apartments, greeting guests with wine and parking their cars. Thus he was creating a new approach to hospitality, as the company’s website states. Over the next few years, Davidson experimented with various business models before cofounding Sonder with Martin Picard in 2014. The company positioned itself as something between Airbnb and a traditional hotel chain, offering long-term stays in tech-enabled properties popular with remote workers, CNBC reported.

For a time, the business expanded rapidly. In the first quarter of 2021, when Sonder reported its first public financial results, revenue grew 11% versus the fourth quarter of 2020. In January 2022, the hotelier went public through a merger with a SPAC at a valuation of $1.9 billion, with its market value later peaking at $2.3 billion.

However, the company’s shares soon began to slide. In its 2021 year-end letter to shareholders, published in March 2022, Sonder reported that while revenue was increasing, so were losses. The company operated many of its hotels under long-term leases, resulting in an asset-heavy strategy, i.e., one that provided control but also created high management, maintenance, and depreciation costs. The hospitality sector has increasingly moved away from this model, CNBC noted.

In August 2024, Sonder and Marriott signed a licensing agreement that allowed its boutique hotel rooms to be booked through Marriott’s Bonvoy platform. Many viewed the deal as a lifeline for the struggling micro-cap company, CNBC wrote. But it ultimately failed to help. In its second-quarter earnings this year, Sonder warned that it might not have sufficient liquidity to meet its financial obligations, raising “substantial doubt” about its ability to continue as a going concern, Bloomberg reported.