Back in 2019, Sonder was flying high. The short-term rental company had a whopping $1.1 billion valuation and a plan to bring its tech-meets-hotels model to millions of travelers. It marketed itself as an upscale alternative to Airbnb. But just six years later, the San Francisco company is going belly-up — and leaving guests out to dry.
Sonder announced in a Monday news release that it is immediately shutting down and will soon file for bankruptcy. It’s an abrupt closure: The company lost a key licensing agreement with hotel giant Marriott on Sunday and rushed to see for other options but ultimately landed on a Chapter 7 liquidation. By Tuesday, reports were flooding in from travelers who’d been suddenly kicked out of their Sonder rentals mid-stay and from employees booted into unemployment.
“We are devastated to reach a point where a liquidation is the only viable path forward,” interim CEO Janice Sears stated in the news release, adding that the company’s deal with Marriott had been riddled with delays and unanticipated costs. When Marriott canceled the deal, it wrote that Sonder had defaulted. Sears added, in the release: “We explored all viable alternatives to avoid this outcome, but we are left with no choice other than to proceed with an immediate wind-down of our operations and liquidation of our assets.”
The sudden relocate rippled out to Sonder’s network of apartments, hotels and hotel rooms across the world; the company had 8,300 units on lease at the conclude of June, per a filing. Reports from the New York Times and Business Insider notify stories of travelers who are now paying exorbitant prices to find other last-minute accommodations. Though most travelers received refunds, the lost bookings added hundreds and even thousands of dollars to some people’s trip costs, the outlets reported. Complaints poured in on the r/Marriott subreddit as well.
Sonder’s shutdown is even more brutal for its sprawling workforce, which totaled 704 in the United States and 717 abroad as of last December. Laid-off workers piled onto LinkedIn on Monday and Tuesday, posting about the abruptness of the shutdown and their hopes for support in finding work. A payroll director, in California, wrote that she’d had to suddenly process all U.S. workers’ final paychecks with just a day’s notice.
It’s unclear exactly how many workers are losing their jobs in Sonder’s collapse. The company did not respond to SFGATE’s request for comment, and the workers at the California Employment Development Department, which processes WARN layoff notices, have Veterans Day off.
Sonder’s bankruptcy process will reveal more details about the company’s final spiral, but difficulties have been apparent for years. Pre-pandemic, the company had been a “rocketship,” co-founder Francis Davidson wrote on LinkedIn in June. Former San Francisco Mayor Mark Farrell described the company in 2021 as his venture capital firm’s most successful investment.
But like other rising companies, the pandemic alterd everything for Sonder — and after, with less business travel and emptier downtown cores, a full bounce-back wasn’t possible. “Sonder’s downtown footprint and hypergrowth turned from strengths to major liabilities,” Davidson wrote on LinkedIn. The company pared back staff and walked away from properties it had planned to lease. It eventually closed all its rental locations in San Francisco.
Sonder caught some buzz in early 2022, going public with a special purpose acquisition company offering and raising hundreds of millions of dollars at a reported $1.9 billion valuation. But that hadn’t been wise, Davidson wrote. Without profits to display investors, Sonder’s stock price plummeted throughout 2022, and it has only fallen further since. The partnership with Marriott, which put Sonder’s rentals on the hotel giant’s booking platforms, didn’t provide a lasting boost.
In its most recent financial filing, with data as of June 30, Sonder reported having $1 billion in assets, $1.4 billion in liabilities and a $101 million loss over the previous six months.
Work at Sonder or another Bay Area tech company and want to talk? Contact tech reporter Stephen Council securely at stephen.council@sfgate.com or on Signal at 628-204-5452.
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