Hyatt May Lose 22 Hotels In The United States

Service Properties Trust (SVC) has operated hundreds of hotels under IHG, Marriott, Wyndham, Radisson, and Hyatt brands. They appear to be in the process of converting most of them to Sonesta, of which the company owns 34%.

Hyatt has informed SVC that it intends to hand over the keys of 22 Hyatt Place hotels back to SVC after exhausting the $50M minimum guaranty. Some of these hotels may continue trading under Hyatt brands in the future, however.

Here are the affected hotels (likely exit Hyatt system):

Here’s the announcement from the SVC:

Service Properties Trust (Nasdaq: SVC), or SVC, today announced that it has received a notice of termination from a subsidiary of Hyatt Hotels Corporation, or Hyatt, with respect to the management agreement for 22 Hyatt Place hotels owned by subsidiaries of SVC.

Hyatt’s obligations under the management agreement, which requires minimum returns of $22.0 million annually, is supported by a $50.0 million limited guaranty. While Hyatt is current on its payments to SVC at this time, it recently exhausted this $50.0 million guaranty and under the terms of the management agreement, Hyatt may terminate the agreement upon 90 days’ notice once the guaranty has been fully utilized. The effective date of the termination pursuant to Hyatt’s notice is April 8, 2021.

SVC and Hyatt are currently in discussions regarding possible changes to the management agreement which may enable some or all of the hotels to remain Hyatt Place hotels managed by Hyatt. However, if such discussions do not result in a mutually acceptable agreement, SVC expects to transition management of the 22 hotels to Sonesta International Hotels Corporation, or Sonesta, on April 8, 2021 under the Sonesta Select brand. SVC also owns 34% of Sonesta.

Here’s what happened with SVC previously in terms of IHG and Marriott:

Marriott Loses 122 Hotels In The United States Due To Failure To Pay Priority Returns

IHG Loses 103 Hotels In North America To Sonesta After Defaulting On Payments

Conclusion

SVC has reflagged hundreds of previously marketed hotels under IHG and Marriott brands under Sonesta that has become a formidable hotel company in the United States with close to 300 hotels.

These hotel companies have failed to remit owners’ priority returns to SVC based on previous agreements, and hence the “divorce.”

Let’s see if Hyatt and SVC can come to a mutually agreeable financial deal with some of these Hyatt Places, or they soon will all be under Sonesta’s flags.