Sonesta Hotels plans to enter into a long-term franchise agreement for 114 hotels that it currently manages, after current owner Service Properties Trust (SVC) sells the properties, according to a Sonesta release obtained by Hotel Dive.

SVC, a Newton, Massachusetts-based real estate investment trust, will sell the 114 hotels, representing 14,925 keys, to repay debt, SVC announced Wednesday. According to the trust, the portfolio is valued at $850 million. SVC expects to sell the hotels in 2025, after which, the existing long-term management agreements will convert to long-term franchise agreements with Sonesta, the hotel company detailed in the release. The deal will expand Sonesta’s franchise hotel portfolio of select-service and extended stay hotels, building on portfolio growth the Newton, Massachusetts-based hotel company has seen so far this year.

SVC plans to sell the Sonesta hotels to “generate additional liquidity and concentrate [its] Sonesta portfolio on full-service hotels and certain higher performing focused service hotels,” SVC CEO Todd Hargreaves said in a statement. The trust plans to sell 31 Sonesta Select properties, 44 Sonesta ES Suites and 39 Sonesta Simply Suites. Upon their sales, these properties will convert from being managed by Sonesta to being franchised by the hotel company.

Following the deal, Sonesta will continue to manage 39 full-service hotels, 14 extended stay hotels and six select-service hotels owned by SVC, the trust detailed in its release. SVC will continue to own 34% of Sonesta. In total, Sonesta will continue to manage 44 full-service and 22 extended stay and select-service hotels throughout the U.S. and Canada, according to the hotel company.

“[O]ne fundamental characteristic of Sonesta that will not change is that we will continue to own and manage both full service and focused service hotels in addition to being a brand owner and franchisor,” Sonesta CEO John Murray said in a statement. With the franchise conversions, Sonesta will grow its portfolio of franchised hotels, which currently spans more than 862 properties, or 58,095 rooms, across all of its brands, the company detailed in the release.

“The transition to an ‘asset-right’ and franchise-forward strategy is a natural, next step in Sonesta’s evolution and increases management attention on our existing larger, full-service hotels and growth opportunities in other key markets,” Murray said.

Sonesta made moves earlier this year to expand its franchise portfolio, adding 23 franchised hotels during the first six months of 2024. “Our owner-centric approach has been instrumental in expanding Sonesta’s footprint,” Brian Quinn, Sonesta’s chief development officer, said in an August statement. Last year, Sonesta added several extended stay hotels to its global portfolio in addition to 13 properties spanning multiple chain scales. The company launched two soft brands, Classico and Mod, in June 2023 to fortify its presence in the upper upscale and upscale segments.

SOURCE: Hotel Dive