The owner of more than 100 Marriott hotel properties is threatening to terminate its agreement with the chain and re-brand the properties with another company due to a payment shortfall.
Service Properties Trust announced on Thursday that Marriott International owes millions of dollars, and that the trust sent a letter to the hotel chain requesting an $11 million advance to cover the shortfall on payments.
|SVC||SERVICE PROPERTIES TRUST||5.77||-0.22||-3.67%|
|MAR||MARRIOTT INTERNATIONAL INC.||152.64||-5.32||-3.37%|
Marriott is due to pay a minimum return of $194.6 million per year through 2035 under the deal, according to Service Properties. But Marriott has allegedly fallen below the 80% level in a preexisting agreement that would allow Service Properties to take the properties to another company.
Marriott has 10 days to make the payment or Service Properties can terminate its agreement, the trust said.
A Marriott representative said it had received the letter from Service Properties and was reviewing it, but declined to comment further.
The agreement between the companies covers 122 hotels in 31 states, including 71 Courtyards, 35 Residence Inns, 12 TownePlace Suites, two Springhill Suites and two Marriotts.
If Marriott doesn’t make the requested payment, Service Trust said it would transition management and branding of the properties to Sonesta International Hotels, which it has a 34% stake in.
Marriott has more than 7,000 properties spread across 30 brands and 131 countries, but the company has struggled as the coronavirus pandemic has chilled travel worldwide. In its last quarterly report, Marriott reported a 72% year-over-year drop in revenue for April-June.
CEO Arne Sorenson said at the time that the “business continues to be profoundly impacted by COVID-19.”
Earlier this month, Marriott said it was planning to lay off hundreds of workers as a result of the drop in travel. However, Marriott also said it expected a “significant portion” of its furloughed employees would return to work by the end of the month.