SVC ends management agreements for Marriott hotels

8th October 2020 (Last Updated October 8th, 2020 15:23)

Service Properties Trust (SVC) has terminated the management agreements with Marriott International for 122 hotels as the latter failed to meet 80% termination threshold for cumulative owner’s priority returns to SVC through August this year.

SVC ends management agreements for Marriott hotels
Typical newer SpringHill Suites by Marriott hotel, Wixom, Michigan. Credit: Tkefan29.

Service Properties Trust (SVC) has terminated the management agreements with Marriott International for 122 hotels as the latter failed to meet 80% termination threshold for cumulative owner’s priority returns to SVC through August this year.

As announced earlier, the company sent a letter requesting $11m advance from MAR to cover the cumulative shortfall between the payments it had received till date.

SVC also requested the advance 80% of the cumulative priority returns due to the company for the eight months ended August 2020.

MAR had time until 5 October 2020 to avoid termination by making payment to SVC.

The termination will be effective from 31 January 2021 and SVC plans to transfer the management of 98 of the 122 hotels to Sonesta.

SVC’s agreements with MAR were signed for two Marriott, two Springhill Suites, 12 TownePlace Suites, 35 Residence Inns and 71 Courtyards in 31 states.

Pursuant to its existing agreement with MAR, SVC is set to go ahead with the sale of 24 of these Marriott branded hotels.

The company will sell a portfolio of eight TownePlace Suites hotels with 834 rooms in four states for $45.3m and a portfolio of 16 hotels with 2,155 rooms in nine states for $107.8m.

These sales are expected to be completed by the end of this year.

Service Properties Trust president and CEO John Murray said: “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.”

The company could not sell nine additional Marriott branded hotels pursuant to its existing agreement with MAR.

Their management will be transitioned to Sonesta on 15 December 2020. Sonesta will assume the management of the balance of the portfolio on 31 January 2021.

Once transferred to Sonesta, the 98 Marriott branded hotels not being sold are expected to be operated under the Royal Sonesta, Sonesta, Sonesta Select and Sonesta ES Suites brands.