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Amazing. Marriott Just Lost 122 Properties In North America (Including a Major Hawaii Resort)


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Service Properties Trust, a company that owns over a hundred properties that are currently operating under various Marriott brands, has announced that it is terminating all of its agreements with Marriott effective 31 January 2021. There doesn’t look to be any going back so from 1 February next year, Marriott’s North America portfolio will have noticeably fewer properties in it than it did the day before.

A Bit Of History

At the end of August, we discovered that IHG had been withholding payments due to a company that owns 103 properties flagged with various IHG brands. As IHG was showing no sign of paying up, the company in question terminated its agreements with IHG and moved all of its properties over to Sonesta. That company was Services Properties Trust (SVC).

At the time, a lot of people (including me) found it more than a little incredible that a global hotelier like IHG would simply ignore its contractual obligations and default on payments due to the owner of properties that it held in its portfolio. But that’s exactly what happened and history has just repeated itself with Marriott.

The Marriott Story

On 24 September 2020, SVC sent Marriott a notice claiming that the hotelier was in arrears in its payments and requesting $11m that SVC said was needed to “cover the shortfall between the payments SVC has received to date from MAR and 80% of the priority returns due to SVC for the eight months ended August 2020“. Marriott was given 10 days to respond and was warned that failure to pay would see SVC move its properties from Marriott to Sonesta.

The 10 day notice period expired on Monday and no payment from Marriott has been forthcoming (according to SVC) so, yesterday afternoon, SVC announced that it was terminating all 122 of the management agreements it has with Marriott. Here’s the relevant part of the statement issued yesterday:

“Service Properties Trust (Nasdaq: SVC), or SVC, today announced that it has terminated the management agreements for 122 hotels with Marriott International, Inc. (NYSE: MAR), or MAR. As previously announced, SVC sent a letter requesting MAR advance $11.0 million to cover the cumulative shortfall between the payments SVC had received to date and 80% of the cumulative priority returns due to SVC for the eight months ended August 2020. MAR had until October 5, 2020 to avoid termination by making payment to SVC. SVC did not receive any payment from MAR, and based on discussions with MAR, SVC does not expect MAR to pay the cumulative shortfall for the balance of 2020. Accordingly, on October 6, 2020, SVC sent MAR a letter exercising its termination right. The effective date of the termination is January 31, 2021 and SVC currently plans to transfer the branding and management of 98 of these hotels to Sonesta.

Not only has Marriott not yet paid the $11m that SVC says it is due but it also, apparently, has no intention of paying it going forward.

As Marriott doesn’t appear to have made any comment on its dispute with SVC (at the time of writing there’s nothing pertaining to this issue on Marriott’s press releases page nor is there anything on Marriott’s investor relations site) and as Marriott has not come out and denied SVC’s claims (something I’d expect a publicly traded corporation to do if it was falsely accused of breaking a contract), we can only assume that SVC’s version of events is correct and that Marriott, like IHG, is happy to ignore its contractual commitments in this case. That’s mindblowing.

What Happens Now?

When IHG defaulted on its payments to SVC, the company confirmed that it would be moving all 103 IHG branded properties across to Sonesta effective 30 November 2020. In the case of the Marriott branded properties things aren’t quite that straightforward.

It would appear that SVC was already in the process of disposing of 33 properties (with Marriott’s agreement) and the sale of 24 of those properties will go ahead. SVC has not been able to find a buyer for the remaining 9 properties so these will be transferred over to Sonesta effective 15 December 2020.

The remaining 89 properties will be transferred over to Sonesta effective 31 January 2021.

The Properties

I’ve extracted the 122 Marriott properties from the list of all of SVC’s holdings and I’ve put them in a table below. The key takeaways are as follows:

  • The 122 properties are spread across 5 brands:
    • 2 x Marriott branded properties
    • 2 x Springhill Suites branded properties
    • 12 x TownePlace Suites branded properties
    • 35 x Residence Inn branded properties
    • 71 x Courtyard branded properties
  • Marriott is losing a total of 17,085 rooms
  • The best known property that Marriott is losing is the Marriott Kauai Resort & Beach Club (356 rooms)
  • The largest property Marriott is losing is the Marriott Nashville Airport (392 rooms)
Property Name Town/City State
Courtyard Birmingham Colonnade Birmingham AL
Courtyard Phoenix Camelback Phoenix AZ
Courtyard Phoenix Chandler Phoenix/S. Chandler AZ
Courtyard Scottsdale @ Mayo Clinic Scottsdale AZ
Courtyard Tempe Downtown Tempe AZ
Courtyard Camarillo Camarillo CA
Courtyard Los Angeles LAX El Segundo El Segundo (LA AP) CA
Courtyard Oakland Emeryville Emeryville CA
Courtyard Huntington Beach Fountain Valley Fountain Valley CA
Courtyard Laguna Hills Irvine Spectrum Laguna Hills CA
Courtyard San Francisco Airport Oyster Point Waterfront Oyster Point/San Francisco CA
Courtyard Pleasant Hill Pleasant Hill CA
Courtyard San Jose Airport San Jose CA
Courtyard San Ramon San Ramon/Oakland CA
Courtyard Los Angeles Torrance South Bay Torrance CA
Courtyard Wilmington Newark Christiana Newark (Wilmington) DE
Courtyard Boca Raton Boca Raton FL
Courtyard Miami Lakes Hialeah (Miami lakes) FL
Courtyard Jacksonville Mayo Clinic Beaches Jacksonville FL
Courtyard Atlanta Cumberland Center Atlanta (Cumberland) GA
Courtyard Atlanta Midtown Georgia Tech Atlanta (Midtown) GA
Courtyard Atlanta Airport North Virginia Avenue Hapeville (Atlanta AP 2) GA
Courtyard Macon Macon GA
Courtyard Atlanta Norcross I 85 Norcross (JC Blvd) GA
Courtyard Bettendorf Quad Cities Bettendorf (Quad City) IA
Courtyard Chicago Arlington Heights North Arlington Heights IL
Courtyard Chicago Elgin West Dundee Chicago/W. Dundee IL
Courtyard Indianapolis Carmel Indianapolis IN
Courtyard Boston Danvers Danvers MA
Courtyard Boston Foxborough Mansfield Foxborough MA
Courtyard Boston Lowell Chelmsford Lowell MA
Courtyard Boston Milford Milford MA
Courtyard Boston Norwood Canton Norwood MA
Courtyard Boston Stoughton Stoughton MA
Courtyard Boston Woburn Burlington Woburn MA
Courtyard Columbia Columbia MD
Courtyard Greenbelt Greenbelt MD
Courtyard Detroit Auburn Hills Auburn Hills MI
Courtyard Detroit Novi Detroit/Novi MI
Courtyard Minneapolis Eden Prairie Eden Prairie MN
Courtyard Kansas City Airport Kansas City AP MO
Courtyard Kansas City South Kansas City Holmes MO
Courtyard Charlotte University Research Park Charlotte University NC
Courtyard Durham Research Triangle Park Durham NC
Courtyard Fayetteville Fayetteville NC
Courtyard Raleigh Durham Airport Morrisville (Raleigh Durham) NC
Courtyard Mahwah Mahwah NJ
Courtyard Tinton Falls Eatontown Tinton Falls NJ
Courtyard Hanover Whippany Whippany (Hanover) NJ
Courtyard Las Vegas Summerlin Las Vegas West/Summerlin NV
Courtyard Fishkill Fishkill NY
Courtyard Syracuse Carrier Circle Syracuse NY
Courtyard Oklahoma City Northwest Oklahoma City OK
Courtyard Allentown Bethlehem Lehigh Valley Airport Allentown PA
Courtyard Pittsburgh Airport Coraopolis (Pitt AP) PA
Courtyard Philadelphia Airport Philadelphia AP PA
Courtyard Philadelphia Willow Grove Willow Grove PA
Courtyard Newport Middletown Middletown RI
Courtyard Charleston North Coliseum Charleston/North SC
Courtyard Spartanburg Spartanburg SC
Courtyard Chattanooga I 75 Chattanooga TN
Courtyard Dallas Central Expressway Dallas Northpark TX
Courtyard Dallas Richardson @ Campbell Dallas/Richardson TX
Courtyard Fort Worth Fossil Creek Fort Worth (Fossil Creek) TX
Courtyard Houston Hobby Airport Houston Hobby TX
Courtyard Arlington Rosslyn Arlington Rosslyn VA
Courtyard Dulles Airport Chantilly Fairfax (West Dulles) VA
Courtyard Richmond Northwest Richmond VA
Courtyard Williamsburg Busch Gardens Area Williamsburg VA
Courtyard Seattle Bellevue Redmond Bellevue WA
Courtyard Milwaukee Brookfield Brookfield (Milwaukee) WI
Marriott Kauai Resort & Beach Club Lihue Kauai HI
Marriott Nashville Airport Nashville TN
Residence Inn Birmingham Homewood Homewood AL
Residence Inn Scottsdale Paradise Valley Scottsdale AZ
Residence Inn Tempe Tempe AZ
Residence Inn Huntington Beach Fountain Valley Fountain Valley CA
Residence Inn Fresno Fresno CA
Residence Inn San Francisco Airport Oyster Point Waterfront Oyster Point/San Francisco CA
Residence Inn San Diego Rancho Bernardo San Diego (Rancho Bernado) CA
Residence Inn Atlanta Alpharetta Windward Alpharetta GA
Residence Inn Atlanta Kennesaw Town Center Atlanta Town (Ken) GA
Residence Inn Atlanta Alpharetta North Point Mall Atlanta/Northpoint Mall GA
Residence Inn Chicago Dwntn Magnificent Mile Chicago IL
Residence Inn Chicago Waukegan Gurnee Chicago/Waukegan IL
Residence Inn New Orleans Downtown New Orleans LA
Residence Inn Boston Westborough Westborough MA
Residence Inn Annapolis Annapolis MD
Residence Inn Baltimore Washington Airport BWI Airport MD
Residence Inn Detroit Warren Warren MI
Residence Inn Durham Research Triangle Park Durham NC
Residence Inn Raleigh Durham Airport Raleigh Airport/Morrissville NC
Residence Inn Raleigh Cary Raleigh/Carey NC
Residence Inn Parsippany Parsippany NJ
Residence Inn Albuquerque Albuquerque NM
Residence Inn Reno Reno NV
Residence Inn Syracuse Carrier Circle East Syracuse NY
Residence Inn Allentown Bethlehem Lehigh Valley Airport Allentown PA
Residence Inn Philadelphia Willow Grove Horsham (Willow Grove) PA
Residence Inn Nashville Brentwood Brentwood (Nash Farms) TN
Residence Inn Dallas Market Center Dallas Mkt Ctr TX
Residence Inn Dallas Central Expressway Dallas Nrth Prk TX
Residence Inn Dallas Richardson Dallas-Richardson TX
Residence Inn Fort Worth Fossil Creek Fort Worth (Fossil Creek) TX
Residence Inn San Antonio Dwntn Alamo Plaza San Antonio (Alamo) TX
Residence Inn Charlottesville Charlottesville VA
Residence Inn Fair Lakes Fairfax Fairfax VA
Residence Inn Charleston Charleston WV
Springhill Suites Nashville Airport Nashville AP TN
Springhill Suites Seattle South Renton Renton WA
TownePlace Suites Scottsdale Phoenix/Scottsdale AZ
TownePlace Suites Atlanta Northlake Atlanta/Northlake GA
TownePlace Suites Atlanta Norcross Peachtree Corners Norcross GA
TownePlace Suites Chicago Elgin West Dundee Chicago/W. Dundee IL
TownePlace Suites Boston North Shore Danvers Danvers MA
TownePlace Suites Detroit Novi Detroit/Novi MI
TownePlace Suites Chantilly Dulles South Fairfax/Chantilly VA
TownePlace Suites Falls Church Falls Church VA
TownePlace Suites Newport News Yorktown Norfolk/Newport VA
TownePlace Suites Richmond Richmond/Glenn Allen VA
TownePlace Suites Virginia Beach Virginia Beach VA
TownePlace Suites Seattle South Renton Renton WA

The one small oddity here comes in the form of the best known property on the list above – the Kauai Beach Club – which, as far as I can tell, is a timeshare resort that’s part of the MVCI portfolio. If the Kauai Beach Club is a timeshare resort it must be owned by the people who own the timeshares (to the best of my knowledge, all of Marriott’s timeshare properties in the United States are deeded properties) so what is it doing on a list of properties owned by SVC?

There must be something that I’m missing here (perhaps the hotel and timeshare resort share a common piece of land but are actually separate entities?) so I’ll have to look into this more – I’ll report back if I get any more information.

Apart from the resort on Kauai, there aren’t any obvious big-name losses for Marriott here but it is losing a significant number of airport hotels. That will probably be disappointing to the legions of business people for whom Marriott is their primary hotelier and who make up the overwhelming majority of returning guests at these properties.

From SVC’s point of view, Sonesta already has a “suites” brand (Sonesta ES Suites) so it’s easy to see where the Residence Inn, TownPlace Suites and Springhill Suites properties will fit in while, presumably, the Courtyard properties will just fit in with the rest of Sonesta’s regular portfolio.

The big question here, however, is the one that asks if Sonesta is actually up to managing all of these additional properties? As things stand, Sonesta operates just 84 properties (mainly in North America) but it’s about to take on 103 former IHG properties at the end of November, 9 former Marriott properties in mid-December, and a further 89 former Marriott properties at the end of February. That’s 201 new properties in the space of just two months which will see Sonesta’s portfolio increase by ~239%.

It’s hard not to question where the resources are going to come from to scale up Sonesta’s operations so dramatically and so quickly. Given time the integrations can probably be done, but I wouldn’t be surprised to see quite a bit of chaos surrounding Sonesta in the short term.

Bottom Line

Marriott is set to lose 122 properties from its North America portfolio and among them is the Marriott Kauai Resort & Beach Club. It will be interesting to see just how smoothly (or otherwise) the majority of these properties are integrated into the Sonesta portfolio as I’m yet to be convinced that Sonesta will be up to the task of integrating all the properties that SVC says it is about to dump in its lap.

Featured image: Kauai Beach Club courtesy of Marriott

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13 COMMENTS

  1. OK. I have no idea why IHG refused to pay SVC the monies they were owed. Nor have I any idea why Marriott would refuse to due so. (This presumes that SVC is correct in that they are owed “x” amount of money by these respective hotel chains. BUT…it makes me wonder WHY two large, multinational hotel chains would just *ignore* a bill that is owed…my suspicious mind says there has to be more to the story.

    Sonesta is not the world’s largest hotel chain, but going from 84 to 285 overnight (even though Sonesta won’t be managing the properties) is still a large “chunk” to swallow!

    • SVC has announed it as a done deal and based on how the IHG situation appears to have panned out, I’d be surprised to see a u-turn by either side here.

  2. In regard to the Marriott Beach Club in Kauai. The majority of the property is timeshare. One wing is a hotel. It is that one wing that will be effected. There are shared common areas, so this will be a very complicated to separate out.

    • Thanks very much for the information Linda, that’s very useful to know. It will be interesting to watch and see how the issues surrounding the common areas play out.

    • I am so distressed by this news as a 20 year deeded owner of 3 weeks at the Kauai Beach Club. VERY anxious to hear from Marriott on this!

  3. Let me propose something for consideration. First of all Marriott could have easily made the payment or gotten a restraining order to keep the properties while the matter was settled in court. Given COVID I wouldn’t be surprised if there was Force Majeur language that could have been invoked to invalidate SVC’s claim. Also, these are almost all mid-level properties and the Hawaii hotel (as has been noted) involves a time share and has some complications related to that.

    Also, Marriott still has hotels that are closed and the overall occupancy is well below normal. In addition, they probably have TOO MANY hotels after bringing in all the SPG properties. Therefore, I wouldn’t be surprised if Marriott was glad to let these go which would relieve them of any future financial obligations and allow them to focus on the remaining properties. It isn’t a black eye that SVC took these hotels and Marriott will do just fine.

    BTW, I am lifetime Titanium with a long history w Marriott and have no doubts about their financial standing or my ability to find a Marriott property next time I want one.

  4. Something tells me it was a “we promise this much profit” and failed to deliver (thank you covid) rather than a “we made the money but refuse to share it”. SVC is probably using this as a “get out of future contract years” opportunity and a as a way to show “growth” in an otherwise dismal year. It’s a stock boost marketing tactic and a way to save on flag fees through 2033 when I believe the contract was originally set to expire. They saw stocks jump by $8 after the IHG announcement. Likely the same after the Marriott finalization.
    Also, Svc will inherit the staffs of those hotels. The only thing svc has to do is replace anyone they don’t like, or that leaves because they want to stay with MAR. Considering how few openings MAR (or any brand) will have at this time, many employees will not be tempted to depart like they would in normal circumstances. The in-house paperwork will change a little bit, but not so much that SVC won’t be able to handle it unless they are a terrible management company. If they do their homework, they’ll be just fine.
    Business travel is going to be terrible for at least 3 years… and these brands aren’t the golden child of MAR business travel, they are the budget brands… Both business travelers and Marriott will survive.

  5. What is this going to have on all the time shares in this island ? If you own one you have nothing and are paying maintenance fees for nothing , this must be why they are turning them over to collection agencies ??? What’s the fax on that ? Pay or not to pay ☠️

  6. We have been Marriott Kauai Beach Club timeshare owners since it opened in 1995 so out understanding of the property hopefully carries some validity…

    Yes, each timeshare unit is a deeded property deeded by the week (eg, each unit has 52 owners). It is my understanding that the Timeshare units are leased from the hotel. The proportion is on the neighborhood if 2/3 timeshare occupancy, 1/3 hotel occupancy with the hotel owning all the public area (pool, bars, restaurant, public spaces).

    It will be interesting to see how that plays out since as a timeshare owner, we bought Marriott quality!

    Please advise as to how I can receive notice of response from you!

  7. I dont believe this one bit, that’s not the way their contracts work, the owners would owe money to the management company… not the other way around lol. This article is most likely a publicity stunt by one of the other companies mentioned.

    • You clearly know very little about the hotel industry and you clearly didn’t bother to do any research before posting here…but thanks for commenting nevertheless.

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