Two hotel brands that tried to carve out a niche in the hospitality industry with centrally managed short-term rentals failed to survive the year.
Bankruptcies for the firms, Sonder and LuxUrban, landed in the same place in recent weeks. Sonder headed straight to a liquidation Chapter 7, while LuxUrban started with a Chapter 11 case before pivoting to the same.
In November, Sonder announced it would be winding down its operations “immediately.” It planned to file for Chapter 7 liquidation of its business stateside and insolvency proceedings in other countries where it operates.
The company, which entrepreneurs Francis Davidson and Lucas Pellan launched in Montreal in 2014, said it considered a sale of its business and operations and looked into finding more liquidity, but it was unsuccessful in its pursuit.
The announcement came a day after a fatal blow: Sonder’s partnership with Marriott International collapsed. Marriott terminated its licensing agreement with Sonder in a weekend, claiming that the short-term operator was in default on an agreement signed only last year.
Details of how it all fell apart are still emerging, but in a bankruptcy court filing, Marriott argued that it ended the partnership “because Sonder informed Marriott that Sonder was headed for an imminent free-fall liquidation and was about to abandon thousands of hotel guests across three continents.” The hotel company further stated that it was trying to protect the “basic dignity” of Sonder guests.
Sonder signed the licensing deal with Marriott last summer, bringing approximately 9,000 rooms into Marriott’s system under the “Sonder by Marriott Bonvoy” brand. The integration was completed this summer, resulting in the exit of Davidson
The 20-year agreement provided Sonder with $126 million in financing when the company was craving capital after dealing with negative cash flow of $108 million and facing Nasdaq delisting notices.
But even as Marriott seemed to be a saving grace, the writing was being scrawled on the wall. In its last quarterly report, Sonder cited “substantial doubt” about its ability to remain as a going concern. As of the end of June, Sonder had $1 billion of assets and $1.5 billion in liabilities.
As of the end of June, Sonder had $1 billion of assets and $1.5 billion in liabilities.
Before its troubles, Sonder operated in more than 40 cities across 10 countries. It claimed to have hosted more than 1 million guests at its properties.
LuxUrban was facing its own scrutiny before switching from Chapter 11 to Chapter 7 proceedings. Federal officials accused company leadership of “gross negligence” and mismanagement.
It filed for bankruptcy in September after abruptly shuttering its leased hotels, including The Herald and The Tuscany in Manhattan, while still accepting online reservations and payments. Guests reportedly showed up to locked doors and dark lobbies.
Attorneys for the Office of the U.S. Trustee pushed for a takeover of LuxUrban in the aftermath of the initial bankruptcy filing, arguing that the company posed ongoing risks to the public and its creditors.
A court-appointed trustee, Kenneth Silverman, scheduled a December meeting with more than 400 creditors, who together are owed roughly $123.6 million. Nearly $119 million of that stems from unpaid state taxes and penalties owed to New York’s Department of Taxation and Finance.
In October 2023, the last time they shared room count, LuxUrban had about 2,000 rooms in operation.
It’s unclear what will be left after the creditors are done.
“We are devastated to reach a point where a liquidation is the only viable path forward,” said Janice Sears, Sonder interim chief executive officer, in a statement announcing the bankruptcy.
LuxUrban’s lawyers consented to the company’s liquidation order, acknowledging there were “no meaningful assets” to recover.
If the arc feels familiar, there’s a reason. The two hospitality flameouts look a lot like WeWork, only with faster endings and smaller balance sheets (WeWork declared bankruptcy, but it never went the route of Chapter 7).
WeWork grew into a global juggernaut by promising that long-term office leases could be transformed into a tech startup with infinite scale. Sonder and LuxUrban did the same in the lodging space, only with softer marketing and smaller footprints. And travelers wanted what they sold, proving the demand for flexible, hotel-like lodging in urban markets is real.
For real estate operators, the lesson cuts deeper than any single bankruptcy. The “asset-light” label has long been used to signal a modern, nimble operating model. But in practice, these companies were asset-light only in the way airlines are asset-light when they lease their planes.
They may not own the buildings, but they hold the risk just the same. If anything, Sonder and LuxUrban show a limit in hospitality that WeWork already exposed in office: Real estate obligations don’t vanish because you wrap them in software, branding or fast expansion.