A $2 Billion Bid Is Shaking Sonesta’s Best Hotels Loose

An unsolicited bid is putting a large slice of Sonesta’s best hotels in play. TKO, a South Dakota hotel investor, offered $2 billion in cash for the hotel portfolio of Service Properties Trust, which owns 34% of Sonesta. The portfolio includes 68 Sonesta-run hotels with 17,013 rooms, among them 17 Royal Sonestas and 22 Sonesta Hotels & Resorts.

TKO’s October 9 letter required SPT to terminate every Sonesta management and franchise agreement before closing, which one analyst estimated would cost about $500 million in separation fees. On October 15 TKO softened its stance, saying it was open to keeping Sonesta as franchisor. SPT carried the Sonesta hotels at $3.98 billion in its second-quarter filings, and says its board would review the proposal.

Sonesta has meanwhile begun layoffs, according to Skift’s reporting, which cites an anonymous employee and LinkedIn posts. Cuts reportedly touched communications, marketing, loyalty, quality assurance, training, food and beverage, and accounting, and the chief brand officer left in recent weeks. Sonesta did not respond to requests for comment.

The stakes for guests are in the brand. Sonesta has about 1,100 properties, so the 68 hotels are a minority by count but a large share of its upscale inventory. If they are sold or debranded, Sonesta could be left as a franchisor of mostly economy and midscale hotels, with a loyalty program short on aspirational places to redeem points.

Sources: Skift, Hotel Management