Sonder, a short-term rental company, recently disclosed in its 10-K report for 2023 that it had lost nearly $80 million more in 2022 than it had previously reported. The company’s net loss in 2022 increased to over $245.03 million, up from the previously reported $165.7 million. In 2023, Sonder’s net loss further widened to nearly $295.6 million. As a result, the company’s shares were trading lower, down more than 10%, on the day of the report’s release.
The company appears to be focusing on its new licensing agreement with Marriott, which was mentioned 140 times in the filing. Sonder plans to integrate its properties, branded as Sonder by Marriott Bonvoy, into the Marriott website and Bonvoy app by the first quarter of 2025. This partnership is seen as key for Sonder’s future operations, as stated in the risk factors section of the report. Sonder acknowledges that it may find it challenging to operate properties or build guest loyalty outside of the Marriott relationship after the integration process.
Sonder attributes its restated financial results to errors in calculating valuations and impairments in its leased properties. The company found that it did not have enough trained personnel to properly evaluate these issues and is actively hiring staff to address the problem. While the net loss for 2022 was greater than initially reported, the net loss for 2021 turned out to be slightly lower. Sonder is making efforts to achieve positive free cash flow but faces challenges due to restructuring costs and terminating leases, resulting in negative free cash flow in 2023.
Despite facing headwinds in signing up new properties in 2024, potentially due to uncertainty surrounding development costs and financing risks, Sonder is still operating strongly in New York City. The company is taking advantage of a loophole in the current regulation in the city to continue its operations in buildings exempt from Local Law 18. New York City remains one of Sonder’s largest markets, alongside Mexico City, Dubai, Los Angeles, and Philadelphia, which collectively accounted for 35.4% of the company’s live units in 2023.
Sonder’s partnership with Marriott is seen as a crucial step for the company’s future success, although it won’t take effect until 2025. The company’s financial disclosures in the 10-K report for 2023 revealed significant losses for 2022 and 2023, prompting a decline in share price on the day of the report’s release. Sonder is working to address restated financial results resulting from errors in valuation calculations and lease impairments, highlighting the need for additional trained personnel. Despite challenges in achieving positive free cash flow, the company is optimistic about its path forward and continues to operate in key markets such as New York City.
