Marriott may be losing up to 122 hotels in the coming months, which represents around 1.5% of its global portfolio.
Continue reading: Marriott Loses Up To 122 Hotels In Contract Dispute
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"One might assume that there’s no way that these hotels will perform as well with Sonesta as with major brands like IHG or Marriott, but history tells a different story. In 2012, 16 IHG properties were already rebranded as Sonestas, and after conversion the total annual revenue and EBITDA at these hotels improved significantly."
That's from a press release put out by SVC. What they don't mention is that the period they compare (starting as the US came out of a recession and ending with a booming business travel economy) had overall US hotel RevPAR grow almost 50% higher than their revenues at these reflagged hotels (20% vs 14%).
@ Ben -- It is awesome to see a reversal of hotel-industry consolidation, especially away from the worst of all major hotel companies, Marriott. Less Marriott and more competition is good for consumers.
I don't see this as a Marriott loss. If they wanted to keep then they would have paid their dues.
Same as IHG.
Perhaps this portfolio of hotels isn't oerforming as well as Marriott expected them to and this is their way of getting rid of them with little or no fuss.
Indeed Sonesta obviously don't want too much fuss either else they would be suing Marriott.
TBH the vast majority of people don't care about hotel brandings or points or status (heresy on blogs like this). They just want a reasonably priced hotel close to where they need to be.
I imagine there's some "unforseen circumstances"/pandemic clause that Marriott is using not to pay these minimums. If it actually goes to trial, it may be interesting to see what's in these agreements.
This is factually wrong — “Marriott doesn’t actually own most of its hotels, but rather they’re owned by investment companies, and then Marriott just has a contract to manage them.“
Marriott does not manage most or even a majority of it so callous at least within North America. The majority of its hotels across all brands in North America or managed either buy a third party operator or the franchisee/license holder. Internationally, Marriott managers most of its high-end branded properties.
2 Marriotts
2 Springhill Suites
12 TownePlace Suites
35 Residence Inns
71 Courtyards
=> NO LOSS AT ALL
"Perhaps this portfolio of hotels isn’t oerforming as well as Marriott expected them to and this is their way of getting rid of them with little or no fuss."
Nonsense. Under a management or marketing/branding deal Marriott makes money for every hotel they cover, there's no incentive for them to get rid of hotels.
"I don’t see this as a Marriott loss. If they wanted to keep then they would have paid their dues."
Also nonsense. These short payments to hotel owners are likely happening all over the US right now. There's no revenue to pay the owners! The only reason Lucky knows about these is the ownership group *wants* to move to new management/branding and is using this opportunity to do so.
@Reaper - Of course there are situations where Marriott would have incentive to dump properties.
Within 5 miles of the Austin Arboretum, there 15 Marriott properties. If those properties are not running at a high occupancy, they are effectively going to be cannibalizing themselves. By dumping properties, they can collectively raise the occupancy in the area and raise the average revenue.
There's only so many people looking for an $80/night room at any given time.
@Business Guy, Marriott doesn't own most of its "properties". Except for a negotiated management or branding fee, all the profit goes to the owners.
Marriott gets a negotiated fee per hotel, along with some incentives. They make money from every one of their "properties". Reduced "properties" = reduced Marriott revenue.
@business guy, there are two ways that your theory could actually be true. Lets say that of those 15 properties, 5 were owned by a group that decided to leave marriott. The only ways that Marriott benefits is if either those 5 hotels cease to exist (because otherwise, those $80/night rooms are still there, they are just not getting that $80 for Marriott), or for some reason, people are required to stay at a Marriott, so they have to switch from the now Sonesta hotel to another Marriott. Neither of this possibilities seems likely, so yes, Marriott loses when hotels leave them, even in markets where there are lots of marriotts.
Sonesta may find that there are customers, like me, who have never stayed at their hotel but might like it. Before, I never heard of Drury but like it after I stayed there. Drury's are like Holiday Inn Express except they have dinner. Technically, snacks, not dinner, but with macaroni, hot dogs, beer, chips, soup, fried chicken, and similar, it can serve as dinner.
Given the ownership stake in Sonesta I will bet the Marriott attorneys will claim bad faith and tortuous interference in order to block this move (especially given their prior actions w IHG). Also I’m not disputing the facts as you posted them but without reading the entire agreement between Marriott and SVC you don’t know if they would like prevail. For example, there could be force majeure language in the agreement that modifies the payment obligations which could be invoked due to COVID (especially if prior payments were all in accordance with the agreement).
Bottom line this will likely go through several rounds in court so I wouldn’t expect any action with respect to these properties in the near term.
Seems to me as though Marriott (and IHG) failed to install a "catastrophic event" clause in their contracts with SVC or SVC is playing a game of chicken to purposely reflag their properties.
While I'm a fan of Marriott hotels in general, my travel experiences the investor owned properties provide far inferior customer service .
Well all depends on what u like and where u wanna stay . U choose , a brand is a brand location matters
There’s also the horrible issue myself and hundreds of others are now in... Being terminated due to covid,
losing health benefits for family, life insurance and retirement etc. I have no idea what’s going to happen and there’s no work for bartending/ mixology in Chicago now.
Marriott is a horrible brand. After acquiring Starwood I lost my lifetime status which made me very upset. Marriott could have cared less, this is another example of big fortune 500 companies getting too big to care about the operators and customers that helped make the brand what it is and more about its share price for investors.
Is Sonesta going to be branding the full service and limited service properties all as "Sonesta"? Or do they have a family of limited service brand names as well?
I have experienced exceptional service at the Queen and Cresent hotel in NEW ORLEANS. While I have traveled extensively, there are few establishments that can match it.
Bummer if you happen to work for Marriott (and get their pretty excellent discount). I'm 6 years from my 25-year anniversary with them and that means free hotel rooms for the rest of my life! Can't argue with that. LOL
Marriott clearly never thought about putting a force majeure clause into the agreement with SVC... and now Marriott has to pay the price for it.
They learned their lesson the hard way... or, for some of the commenters here, the good way.
@derek, you must be hungry mate! Getting excited about hot dogs and fried chicken and even calling yourself "dinner" 😀
This is a terrible strategy. There isn't any way that Sonesta can compete with the power of the Marriott 1-800/online reservations system. I hope that there is a follow up article a year from now.
@PW That's 90K per in addition to the 245K per from the 30 mil guarantee and an unknown amount from the security deposit. I'd assume Marriott ran this letter by finance and legal and everyone had a good laugh before they sent SVC a case of champagne with their reply. They're not thrilled to lose the properties but they're ecstatic to not be on the hook for the 194.6 mil in 2021.
Once again, Ben fails to understand Marriott's model. This is false:
"Marriott doesn’t actually own most of its hotels, but rather they’re owned by investment companies, and then Marriott just has a contract to manage them."
MARRIOTT DOES NOT MANAGE MOST OF ITS HOTELS, PERIOD. THE VAST MAJORITY OF ALL MARRIOTT HOTELS ACROSS ALL MARRIOTT BRANDS ARE MANAGED BY FRANCHISEES OR THIRD-PARTY MANAGEMENT COMPANIES. MARRIOTT ONLY MANAGES A PLURALITY OF ITS UPSCALE AND LUXURY BRANDS INTERNATIONALLY.
to bad. I always like courtyards on my road trips. (or residence inn) Courtyards mostly have a pool and the breakfast is really good (with Starbucks coffee). For me they will be missed.
I like the luxury/ritz/st Regis and so on really much but when on the road 9 out of 10 times I choice a courtyard. (next best for road trips is Hampton Inn)
@ Eric
Not too bad.
These former Marriot properties will retain their pools no matter what they are branded.
As for the coffee, Starbucks or not it was usually cold or empty when I got to it. Maybe Marriot should have added to its standards a requirement t refill or replace the coffer every hour or two. It always demonstrates that the real Marriot customer is not us, it is the property owner that needs to be kept happy.
What effect will this have on the employees? I’m furloughed through a the end of December with Courtyard. A co-worker told me we were leaving Marriott in January.
@Ken Go to SPT website ( https://www.svcreit.com/portfolio/portfolio-overview/default.aspx ) then click the link to download a spreadsheet that lists ALL of their properties.
Many hotel owners, especially in Asia, are desperately searching for ways to sever ties with Marriott. Marriott doesn't really care about the hotel's bottom line as it doesn't affect them. They are still being paid even if the hotel is operating at a loss.