Skift Take
The implementation of the Marriott partnership can’t come soon enough for Sonder, and it won’t kick in until 2025.
Short-term rental company Sonder disclosed that it lost nearly $80 million more in 2022 than it previously reported.
The disclosure was in the 10-K report for 2023, which was released Friday after having been delayed because Sonder needed to restate results for prior years.
Sonder’s net loss in 2022 was more than $245.03 million – it had previously reported a loss of $165.7 million.
Sonder’s net loss in 2023, which was disclosed for the first time Friday, widened to nearly $295.6 million.
Sonder’s shares were trading at $4.69, down more than 10%, in mid-afternoon trading Friday.
Mariott, Marriott, Marriott
It’s clear from Sonder’s latest report that it is now focusing on the implementation of its new licensing agreement with Marriott, which was mentioned 140 times in the filing. Sonder plans to integrate its properties, which will be branded Sonder by Marriott Bonvoy, into the Marriott website and Bonvoy app by the first quarter of 2025.
“Particularly after we have integrated properties into Marriott’s systems and platforms, have invested in the integration process, and have realigned our technologies, staffing, and guest relationships and interactions due to the Marriott agreement, we may find it difficult to operate properties or build or maintain guest loyalty outside of the Marriott relationship in the future, even if permitted under the Marriott Agreement or after it has been terminated,” Sonder states in the risk factors section about its business.
Behind the Restatements
Sonder, which operates hotels as well as short-term rentals, said it found errors in the way it calculated valuations and impairments in its leases. All of the properties that Sonder offers are leased, and the number of “live units” grew 25.8% in 2023 to more than 12,200, the filing said.
Sonder said it didn’t have enough trained personnel to properly evaluate these issues, and it is hiring staff to address the problem.
While Sonder’s net loss for 2022 turned out to be $79.2 million greater than originally reported, its net loss in 2021 turned out to be $432,000 lower than originally stated ($294.3 million in the red as initially reported versus the restated loss of $293.95 million).
Cash Flow Positive?
While Sonder stated in 2023 that it hoped to achieve positive free cash flow that year without additional fundraising, it said Friday: “Our primary focus is to put the business on a solid path to achieving sustainable positive free cash flow (“FCF”) as soon as possible.”
Sonder free cash flow in 2023, which doesn’t count restructuring and the costs of terminating leases, was negative $119.6 million. That was a $56.4 million impovement over the prior year.
Sonder said it continues to face headwinds in 2024 in signing up new high quality properties because of uncertainty about development costs, financing risk, and “landlord sentiment surrounding our stock price performance.”
New York City Still Strong
While there is a defacto ban of short-term rentals in New York City, Sonder is taking advantage of a loophole because it operates there in buildings that are exempt from Local Law 18. As it did in 2022, Sonder listed New York City first among its five largest cities. The other four are Mexico City, Dubai, Los Angeles and Philadelphia. This quintet accounted for 35.4% of Sonder’s live units in 2023.