Go Back  FlyerTalk Forums > Miles&Points > Hotels and Places to Stay > Marriott | Marriott Bonvoy
Reload this Page >

Service Trust terminates Marriott management agreement : 122 hotels to leave

Service Trust terminates Marriott management agreement : 122 hotels to leave

Old Sep 24, 20, 8:08 pm
  #1  
FlyerTalk Evangelist
Original Poster
 
Join Date: Nov 1999
Posts: 23,268
Service Trust terminates Marriott management agreement : 122 hotels to leave

The agreement between the companies covers 122 hotels in 31 states, including 71 Courtyards, 35 Residence Inns, 12 TownePlace Suites, two Springhill Suites and two Marriotts.

If Marriott doesn’t make the requested payment, Service Trust said it would transition management and branding of the properties to Sonesta International Hotels, which it has a 34% stake in.
craz is offline  
Old Sep 24, 20, 8:58 pm
  #2  
Marriott Contributor Badge
 
Join Date: Jan 2009
Location: BTR
Programs: AA LTPlat; Marriott Titanium (LTP); Hilton Dia; Hyatt Explorist; Vistana 5* Elite; Nat'l Exec Elite
Posts: 6,157
Here's some detail:

https://www.businesswire.com/news/ho...ing-122-Hotels
controller1 is offline  
Old Sep 24, 20, 9:27 pm
  #3  
 
Join Date: Jan 2006
Location: Atlanta but Washington DC will always be home.
Programs: Marriott Ambassador & LTP, Hilton Diamond, Accor Gold, Airlines with non-stops to where I'm going
Posts: 1,792
COVID must've really hit these hotels hard for Marriott to already to be in default. Marriott and Service just reupped this agreement in January 2020 to 2035.

https://www.businesswire.com/news/ho...-with-Marriott
dcstudent is offline  
Old Sep 24, 20, 9:40 pm
  #4  
 
Join Date: Mar 2011
Location: Window Seat
Programs: National Executive, HHonors Gold, IHG Platinum, Hyatt Visitor
Posts: 2,009
Good- Service Trust is taking this opportunity to build up the Sonesta brand. More competition in the hotel business is good given the consolidation that has taken place. When all the dust settles from COVID, more loyalty programs that will be fighting for travelers will be a net win for the traveler. I wish Sonesta well, hope they create a compelling loyalty program, and hope they have high brand standards for their properties. Plus I think Sonesta is a good name. It just sounds good.

I am a little concerned by some of the variable level properties they are getting (older Candlewood Suites and Town Place Suites concern me the most- but there is a market for those concepts).
Temedar and CO-PLAT like this.
storewanderer is offline  
Old Sep 25, 20, 3:41 am
  #5  
 
Join Date: Feb 2007
Location: PVG, FRA, SEA, HEL
Programs: UA Premier Gold
Posts: 4,277
SVC’s agreement with MAR covering 122 hotels .. in 31 states currently requires annual minimum returns of $194.6 million
Ouch! Marriott has entered a contract with SVC where Marriott seems to guarantee revenues of almost USD 200m. Wow! This sounds insane. I guess Coronavirus is the "Black Swan" event that risk managers have not anticipated, at all.
warakorn is online now  
Old Sep 25, 20, 7:15 am
  #6  
 
Join Date: Apr 2011
Programs: Marriott Ambassador, AA Plat, Amtrak Select Exec, former WN apologist
Posts: 395
The prior link didn't work for me but here is another one: https://onemileatatime.com/marriott-...se-122-hotels/

This is fascinating to me - I had no idea that Marriott guaranteed revenue levels as part of their brand agreements. Seems like a risky move; perhaps foolish in hindsight.
Mr. BoH is offline  
Old Sep 25, 20, 7:33 am
  #7  
 
Join Date: Jan 2006
Location: Atlanta but Washington DC will always be home.
Programs: Marriott Ambassador & LTP, Hilton Diamond, Accor Gold, Airlines with non-stops to where I'm going
Posts: 1,792
Originally Posted by Mr. BoH View Post
This is fascinating to me - I had no idea that Marriott guaranteed revenue levels as part of their brand agreements. Seems like a risky move; perhaps foolish in hindsight.
I have to imagine a COVID type destruction of travel was never even contemplated. Would love to see the Force Majeure clause. Wonder if brands will still enter into these types of agreements after COVID.
dcstudent is offline  
Old Sep 25, 20, 7:49 am
  #8  
A FlyerTalk Posting Legend
 
Join Date: Sep 2009
Location: Minneapolis: DL DM charter 2.3MM
Programs: A3*Gold, SPG Plat, HyattDiamond, MarriottPP, LHW exAccess, ICI, Raffles Amb, NW PE MM, TWA Gold MM
Posts: 91,854
Losing more than seventy Courtyards could be a good thing, right?

Can anyone comment on the general quality level of the Service Trust Marriott properties? Would any important locations be lost with no alternative Marriott family hotels nearby?

BTW, are the 22 Hyatts next?
MSPeconomist is offline  
Old Sep 25, 20, 7:51 am
  #9  
TBD
 
Join Date: May 2010
Location: MCO
Programs: All The Programs
Posts: 1,695
Rebranding to Sonesta won't make the pandemic go away. If they were losing money with Marriott, they aren't going to suddenly be profitable with Sonesta.

I smell a bluff. They need to balance their books and threatening Marriott is the easiest way to do it.
TBD is offline  
Old Sep 25, 20, 8:07 am
  #10  
FlyerTalk Evangelist
 
Join Date: Jun 2006
Location: IAD/DCA
Posts: 31,595
cutting costs, seeing if they can get money from chains, then seeing if they can sell eventually sell sonesta
Kagehitokiri is offline  
Old Sep 25, 20, 8:10 am
  #11  
FlyerTalk Evangelist
Original Poster
 
Join Date: Nov 1999
Posts: 23,268
Originally Posted by TBD View Post
Rebranding to Sonesta won't make the pandemic go away. If they were losing money with Marriott, they aren't going to suddenly be profitable with Sonesta.

I smell a bluff. They need to balance their books and threatening Marriott is the easiest way to do it.
Its NO bluff as the title states, I take it you dont spend any time on The IHG Forum; https://www.flyertalk.com/forum/inte...30-2020-a.html
craz is offline  
Old Sep 25, 20, 8:17 am
  #12  
 
Join Date: Feb 2010
Programs: MR-Amb, Hyatt-Globalist, AA-EXP
Posts: 1,618
If Marriott was clearly in default and they were owed all this money, they would almost certainly be suing for the money and not just terminating the agreement. Why would a company give up a guaranteed minimum return in this environment? It's not often that I stick up for Marriott, but if there is a bad guy in the story it seems like its Service Properties Trust. If Marriott was defaulting on payments and attempting to screw over property holders, I imagine we would be hearing about more hotels suing Marriott for defaulting on payments.

I'm sure the agreement had some sort of force majeure clause that Marriott is pointing to as a reason for not making the payments, and Marriott will just let them terminate the agreement rather than argue and sue each other over the provision.

Losing options is not positive, but more competition is probably good in the long run and it looks like there are still MAR options in most of these places.
SPN Lifer likes this.
spgplat21 is online now  
Old Sep 25, 20, 8:28 am
  #13  
A FlyerTalk Posting Legend
 
Join Date: Apr 2013
Location: PHX/SFO
Programs: AA EXP; AS 75K; WN A List; UA 1K 1MM; Hyatt Globalist; Marriott AMB; Hilton Diamond (Aspire)
Posts: 45,795
Originally Posted by spgplat21 View Post
I'm sure the agreement had some sort of force majeure clause that Marriott is pointing to as a reason for not making the payments, and Marriott will just let them terminate the agreement rather than argue and sue each other over the provision.
Force majeure clauses rarely excuse payment of monies due under the contract. I haven't seen one yet that gives any relief due to COVID.
Kacee is offline  
Old Sep 25, 20, 8:29 am
  #14  
 
Join Date: Mar 2008
Location: Fort Lauderdale, FL
Posts: 2,962
Originally Posted by warakorn View Post
Ouch! Marriott has entered a contract with SVC where Marriott seems to guarantee revenues of almost USD 200m. Wow! This sounds insane. I guess Coronavirus is the "Black Swan" event that risk managers have not anticipated, at all.
Originally Posted by Mr. BoH View Post
This is fascinating to me - I had no idea that Marriott guaranteed revenue levels as part of their brand agreements. Seems like a risky move; perhaps foolish in hindsight.
The guaranteed revenue numbers are neither insane nor risky when place in context of normal operations. Or, even operations during a recession like 2007-2009.

I don't have time to look up the total number of rooms for each of these 122 hotels. But, here's a quick and dirty analysis.

Split equally, it's a guaranteed profit of $1.6 million per hotel. Any hotel that can't make a profit of that amount shouldn't be open. That's a paltry $4,370 profit per night.

In days of yore, I was a revenue manager at a full-service hotel. My revenue goals for transient rooms (aka all non-group rooms) were significantly higher than $1 million every month.

Without getting into proprietary information, that hotel where I worked could have knocked out virtually all of any $200 million guaranteed revenue agreement on our own. Adding in another 100+ hotels would have meant meeting that goal within a single month, if not weeks.

Originally Posted by TBD View Post
Rebranding to Sonesta won't make the pandemic go away. If they were losing money with Marriott, they aren't going to suddenly be profitable with Sonesta.

I smell a bluff. They need to balance their books and threatening Marriott is the easiest way to do it.
This isn't about making the pandemic go away. Rather, this is about using the current economic reality to get out of existing contracts en masse.

Franchises have some fixed fees and some variable fees (i.e. per reservation) that are paid to the hotel group. By removing hundreds of hotels from IHG and (possibly) Marriott, the hotel owner will no longer be paying those fixed fees to IHG/Marriott.

Instead, those fees will get paid to Sonesta, which is partially-owned by the hotels' owner. As such, they are potentially saving money by forcing their way out of the existing contracts.

(I use the qualifier "potentially" because there are costs associated with changing franchises.)

While I personally don't think it is ethical to use a global pandemic to break contracts, it almost certainly is a smart move.
SPN Lifer, Jon Maiman and markko like this.
writerguyfl is offline  
Old Sep 25, 20, 8:44 am
  #15  
FlyerTalk Evangelist
 
Join Date: May 2012
Location: MCO
Programs: AA, B6, DL, EK, EY, QR, SQ, UA, Amex Plat, Marriott Tit, HHonors Gold
Posts: 10,897
Originally Posted by MSPeconomist View Post
Losing more than seventy Courtyards could be a good thing, right?

Can anyone comment on the general quality level of the Service Trust Marriott properties? Would any important locations be lost with no alternative Marriott family hotels nearby?

BTW, are the 22 Hyatts next?
By all means, they can axe all the select service dumps they want. The only two full service hotels are the Nashville Airport Marriott and some resort property on Kauai.

I wish them the best of luck rebranding as Sonesta though. That's one of the brands I don't even consider when looking for hotels. Old Courtyards should fit perfectly with their brand vision.
fotoflyer88 and tcdtcd like this.
cmd320 is offline  

Thread Tools
Search this Thread
Search Engine: