What was once positioned as a category-defining disruptor (and briefly a $1.9 billion hospitality darling) collapsed in real time this week, leaving guests stranded and landlords suddenly without an operator.
Sonder’s unraveling didn’t just expose the fragility of a business model dependent on abundant venture capital. It also raised deeper questions about whether the broader hotel industry has become too enamored with unit growth at the expense of consistency, oversight and the guest loyalty that underpins enterprise value.
While Sonder’s downfall is the industry story du jour, it’s also a referendum on a decade of “grow-at-all-costs” thinking.
Whispers about Sonder’s financial instability had been circulating for months. Its stock had plunged below $1 ahead of this week’s collapse, down dramatically from a 2022 high above $200. Marriott — which announced a Sonder partnership in 2024 and began integrating properties onto the Bonvoy platform earlier this year (as well as providing Sonder with $15 million in key money, per regulatory filings) — had already paused fees, a move typically reserved for distressed owners during black-swan events a la during the worst of the pandemic.
Marriott abruptly severed the partnership on Sunday.
"Marriott terminated its license agreement with Sonder because Sonder informed us they were headed imminently for Chapter 7 bankruptcy, with no plans to continue operating," a company spokesperson said in a statement to Hospitality Investor Friday evening. "As a result, Marriott felt it had no choice but to terminate the agreement, which would facilitate communication with Sonder's guests, whose safety, security, and welfare would be impacted by Sonder’s sudden liquidation."
But the fallout was immediate: guests told to get packing, overwhelmed landlords and a scramble to determine who — legally and operationally — controlled what.
“There is a lot of pressure on all of these public companies — Marriott certainly included — for net rooms growth,” said Patrick Scholes, managing director of lodging and leisure equities at Truist Securities. “Targets were put out one, two, three years ago, and even though construction is soft today, those targets still exist. You have to find creative ways to grow, and occasionally when you push the envelope, you may strike out. Unfortunately, this was that case.”
Of course, one company’s downfall can be another’s opportunity, and many see Sonder’s collapse as a way for others to quickly scale their own enterprises. One of the first operators to move was Lark, an operator of boutique hotels across the East Coast and California.
The company saw Sonder’s distress coming far earlier — “maybe six months ago,” founder and chairman Rob Blood told Hospitality Investor this week. But even he was surprised at the velocity of the collapse.
“We saw the writing on the wall,” Blood said. “But I was just as surprised as everyone else in the world when it shut off in one day.”
Because Lark had already been modeling what a Sonder failure would mean for landlords, the company moved quickly by reaching out to owners, identifying viable assets and assessing where Lark had resources to plug in. The company has already onboarded two previously Sonder-affiliated properties and looking for further deals.
Still, the work ahead is substantial.
“These are essentially white boxes at this point,” Blood said. “They’re ready to be open as hotels, but they’re not existing businesses anymore.”
To reopen a former Sonder asset, owners first need to reclaim their property, which often means issuing a formal default notice, giving Sonder a window to cure (which one must assume the bankrupt company likely won’t), and then securing lodging licenses and staff.
Lark can onboard a property in as little as two weeks, but only after the legal and regulatory resets. More challenging than operations is rebuilding the digital footprint.
“We’re creating new brand identities, reclaiming OTA listings, Google listings — all of that,” Blood noted. “It’s clunky but possible if you move quickly.”
Lark has spoken with at least six ownership groups so far but is not aiming to snap up the entire Sonder portfolio. Geographic and operational fit matter. Lark is focused on New York City, Greater Boston, select Florida markets and Seattle while avoiding Sonder’s multifamily, serviced apartments enterprise, Blood said.
Some former Sonder properties, like 907 Main in Cambridge, Massachusetts, are strong fits for Lark’s soft-brand portfolio. Others will operate independently until the company determines whether a full integration makes sense.
As Sonder’s landlords field a rush of phone calls from would-be rescuers, Blood cautioned that speed is not the only priority.
“My advice is don’t sign anything today,”he said. “Make sure you’re getting to know the character of the group you’re working with. The best term sheet isn’t always the best fit.”
Has Hospitality Become Too Addicted to Growth?
Sonder’s collapse has reignited an uncomfortable conversation among developers, lenders and asset managers. Has the industry pushed too hard to scale inventory without reinforcing operational guardrails?
For hotel brands, the vulnerability lies in outsourced consistency. Marriott’s decision to plug Sonder into its loyalty ecosystem offered reach, but the reputational risk boomeranged back when stays collapsed.
“The good news is this is a pretty small relationship in the context of Marriott’s global footprint, but you’ve got some unhappy customers out there,” Scholes added.
Marriott still anticipates net rooms growth for 2025 “to approach 4.5 percent.” There’s further speculation this is more of an isolated incident instead of a signal partnerships are not a viable source of growth for hotel companies.
Scholes noted that while this incident might tighten due diligence practices, it won’t fundamentally change the pressures public companies face.
“At the end of the day, doesn't stop the pressure that people like myself and investors put on these companies to continually grow, grow, grow,” he said.