Service Properties Trust, which just removed more than 100 hotels from IHG to Sonesta (read more here) due to IHG’s failure to remit Owner’s Priority Returns, is now threatening to do the same with Marriott.
Marriott has failed to make agreed-upon payments to Service Properties Trust that can now end its affiliation set to run until 2035, and reflag 122 hotels under Sonesta.
Here’s the announcement from Service Properties Trust:
Service Properties Trust (Nasdaq: SVC), or SVC, today sent a letter to Marriott International, Inc. (NYSE: MAR), or MAR, requesting MAR advance $11.0 million to cover the shortfall between the payments SVC has received to date from MAR and 80% of the priority returns due to SVC for the eight months ended August 2020. MAR has 10 days from receipt of the letter to make the payment, or SVC will have the right to terminate its agreement with MAR.
SVC’s agreement with MAR covering 122 hotels (2 Marriott®, 2 Springhill Suites®, 12 TownePlace Suites®, 35 Residence Inns®, 71 Courtyards®) in 31 states currently requires annual minimum returns of $194.6 million and currently expires in 2035. Both the security deposit that SVC previously held to secure the minimum return payments under this agreement and the $30 million guarantee provided by MAR have been fully utilized.
If MAR does not make the requested payment and SVC terminates the agreement, SVC currently plans to transition management and branding of these 122 hotels from MAR to Sonesta International Hotels Corporation, or Sonesta. SVC owns approximately 34% of Sonesta and would share in the benefit of this new management agreement and in the hotels’ performance to the extent they ramp up in the post-pandemic recovery.
List of all Service Properties Trust properties:
Sonesta Travel Pass offers status matches:
It is interesting to see what will happen with Hyatt (22), Radisson (9), and Wyndham (20) branded properties owned by SVC. Have these three hotel companies failed to remit their Priority Returns too?
If these 122 Marriott branded properties are reflagged under Sonesta, the hotel company would have around 300 properties, mostly in the United States.
Sonesta is becoming a formidable brand in North America.