Sonesta to franchise 114 managed properties following SVC sale

SONESTA INTERNATIONAL HOTELS will franchise 114 hotels it currently manages, following their sale by Service Properties Trust or SVC. The Massachusetts-based REIT plans to sell 14,925 keys across 28 states for $850 million in 2025 to repay debt.

The trust plans to sell 31 Sonesta Select, 44 Sonesta ES Suites and 39 Sonesta Simply Suites, which will convert from Sonesta-managed to franchised properties upon sale. Following the deal, Sonesta will manage 39 full-service, 14 extended-stay and six select-service hotels owned by SVC, which will retain a 34 percent stake in Sonesta, SVC said in a statement.

“Given the slow recovery of our hotel portfolio, along with our capital improvement program and deteriorating leverage metrics, we believe it is prudent to reduce the distribution to increase SVC’s liquidity and enhance financial flexibility,” said Todd Hargreaves, SVC’s president and chief investment officer. “The reduction from the previous level will preserve about $127 million in liquidity annually. We also plan to sell 114 hotels to generate additional liquidity and focus the Sonesta portfolio on full-service and select focused-service hotels. These sales are expected to reduce capital expenditures and leverage, improve portfolio performance, and position the portfolio for the long term.”

Sonesta stated that the franchise conversions will expand its portfolio to more than 862 properties and 58,095 rooms. It will continue managing 44 full-service and 22 extended-stay and select-service hotels across the U.S. and Canada.

“The transition to an asset-light, franchise-forward strategy is a natural next step in Sonesta’s evolution, allowing us to focus on our larger full-service hotels and growth opportunities in key markets,” said John Murray, Sonesta’s president and CEO. “One fundamental aspect of Sonesta that won’t change is our commitment to owning and managing both full-service and focused-service hotels, in addition to being a brand owner and franchisor.”

In August, Sonesta launched a 2 percent rebate program for franchisees using its procurement system with contracted suppliers and signed 19 franchise agreements across six of its 13 brands, adding over 1,600 keys to its pipeline.