Owners decry fools, take centre stage 

This April Fool’s Day will see John Murray make the move from CEO of Reit Service Properties Trust (known as SVC) to CEO of Sonesta, the brand in which SVC holds a 34% stake.

And there’s nothing foolish about that. SVC and Sonesta were the pairing which gave the big brands the yips during the pandemic and which made the rest of us think thoughts of trends. Trends in which owners also had brands and with them ALL THE POWER.

Murray is, as one would expect, excited and thrilled about the role and happy that Sonesta is expanding. Such comments, innocuous as they are, may yet grasp the hearts of the brands with a chilly grip, given Sonesta’s land grabbing of the past two years. 

It began in early 2020 when SVC transferred the branding and management of 103 hotels from InterContinental Hotels Group to Sonesta International Hotels Corporation. Then it cut its management agreements with Marriott International across 122 properties.

SVC said it planned to change 98 of the hotels to the Sonesta International Hotels portfolio, with the remaining 24 properties set to be sold for just over $153m.

At the time, Murray said: “SVC and Marriott have had a long relationship which began in 1994, but because of Marriott’s current non-payment and our understanding that Marriott does not intend to pay SVC any shortfall amounts in the future, we have terminated our agreements with Marriott and we plan to rebrand these hotels with Sonesta. We believe that the rebranding of these hotels with Sonesta will benefit SVC as an owner of Sonesta, create greater flexibility in managing these hotels through these challenging market conditions and have a positive impact on this portfolio’s performance in the future.”

“Service, quality and safety are of primary focus for hotel guests at this time and most of Sonesta’s managed hotels have been recognised in the top 10% of TripAdvisor hotels worldwide, demonstrating that Sonesta has established a high standard of service in its hotels that we believe will be essential as it grows.”

SVC was able to swoop in and do what no-one else has done – and certainly not the banks – but stamp its feet about non payment because of non guests during the pandemic and take back hotels. And, because it had somewhere to put them – Sonesta – it was all OK. IHG and Marriott went on to say that the lost hotels didn’t really matter and they had no more and that was fine and did anyone fancy a new brand?

Which takes us back, as everything must, to the Quarter of Reckoning. SVC was not the only owner to suddenly feel an emptiness in its pockets, but it was the only one to act. In the UK we enjoyed the Summer of Travelodge, where there looked to be a loud sucking noise and the removal of the brand from the motorway service stations of the land, but it was all OK when Secure Income Reit suddenly looked more favourably on the flag. The Reit’s results last month showed that Travelodge had been paying its rent, so one assumes a certain chumminess for the foreseeable. 

The Quarter of Reckoning cannot, however, be avoided and we feel its breath on our necks. Or at least those who have been suffering through lockdowns, patchy government support and the occasional costly refinancing have done. Look again at Murray’s comments about how well the hotels did on Tripadvisor. He didn’t seem so fussed about their being a member of Bonvoy.

For the Reit, what matters above all is the value of the property. Everything else is secondary. And this has been a quirk of the pandemic. Values should have fallen, but they haven’t. In the meantime, it’s been a rollercoaster for the brands’ share prices. It is clearer than ever that the value of a hotel lies in the bricks. What will this mean for the relationships which hold them together? 

Scroll to Top