Sonder’s Collapse Shows What Hospitality’s Future Really Requires

Sonder represented an ambitious vision for hospitality: modern design, seamless digital experience, and the belief that technology could streamline an industry overdue for reinvention. In many ways, they were directionally right. Guest expectations are changing, and the traditional hotel model hasn’t kept up.

But Sonder was ultimately pulled down by a structural issue as old as the American hospitality market itself: long-term fixed leases layered on top of short-term, cyclical demand. 

We know because we were there. Literally. Kasa has the distinction of taking over more Sonder properties than any other operator in the country. A few lessons from the front lines:

A model with precedence: History doesn’t repeat, but in this industry it often rhymes. New packaging, from extended-stay operators in the 1980s to lease-arbitrage firms in the 2000s, has never changed the underlying issue: long-term fixed leases sitting on top of short-term, cyclical revenue. When markets soften, the operator absorbs all the downside. The margin for error is razor thin.

Venture capital unintentionally ramps up the risk by rewarding rapid revenue growth which, in turn, introduces perverse incentives for lease-based operators to scale by signing more leases at higher fixed rents, even when the economics don’t work. The top line expands while the balance sheet bloats and profitability erodes.

Sonder felt innovative because they paired this model with strong design, appealing pricing, and a modern digital experience. These instincts were right, but they weren’t powerful enough to overcome the gravitational pull of the underlying economics.

Management agreements > long-term leases: Management agreements align incentives: Owners share in the upside, operators aren’t burdened by fixed liabilities, and both parties can adapt when markets shift. They scale responsibly, absorb volatility, and support consistent reinvestment in the guest experience.

Leases, by contrast, create the illusion of safety for owners. Rent may look certain, but when performance softens the operator typically seeks an exit or files for bankruptcy. When performance strengthens, the owner forfeits upside. And, because the operator has no economic stake in the long-term health of the asset, both owners and guests receive a worse product: Capital improvements are deferred, design ages, and service quality stagnates.

This pattern is consistent across the real estate industry. From WeWork-style office arbitrage to failed short-term rental operators, the common denominator has been the master-lease structure. The inverse is also true: Management and franchise agreements have produced the most durable and valuable hospitality companies of the past century.

Kasa’s front-row seat: Kasa stepped into more Sonder properties than any other operator, often with little notice, replacing master leases with management agreements. The experience offered a rare, unfiltered view of what happens when a lease-based operator collapses in real time.

These takeovers taught us how to steady the ship. But we also saw what Sonder got right. Guests do want flexible, well-designed accommodations supported by thoughtful technology. Their vision for a modernized hospitality experience resonated with the market.

What didn’t work is the model underneath. No amount of innovation can compensate for a contract structure fundamentally misaligned with property economics. 

Technology enhances hospitality: Sonder’s vision of a software-first hospitality model was bold and often inspiring. 

Guests enjoy digital touches like mobile check-in, but they value fast, competent help when something breaks. Owners appreciate analytics, but they measure success by margins, service quality and predictable operations.

The most resilient approach is “tech-enabled hospitality”: technology woven into the fabric of the guest and operational experience. AI handles routine interactions, automation removes friction for staff, and data guides pricing, maintenance and service delivery behind the scenes.

Hospitality won’t scale like software: Hospitality does not scale like software. It is not software as a service, generative AI, a social network or (certainly not) an asset-light marketplace. Growth in this industry is constrained by real buildings, real guests and real operating rhythms.

Companies that endure in hospitality scale differently: through disciplined expansion, deep local operating knowledge, and consistent, repeatable operational cadence. 

The contrast in cost structure makes the point. At its peak in 2022, Sonder’s general and administrative expenses reached approximately $237 million. Hilton’s that year was about $382 million, despite Hilton being more than 100 times larger in global footprint. 

That imbalance reflects a deeper truth: Sonder was directionally right about where the industry is headed, but structurally wrong about the model required to get there.

A phoenix moment: The future of the industry will materialize with operators who embed technology into hospitality, rather than use it to bypass industry norms. People looking to disrupt or innovate short-term stays will need to shift from trying to be the WeWork for hospitality to establishing a hospitality business designed to optimize for guest-experience differentiation with personalization at every step of the guest journey, from pricing to communications to on-property operations.

Sonder got many things right, including its conviction that hospitality would be reshaped by technology and that guests deserved better-designed, more flexible accommodations. But they also demonstrated a deeper truth: The winning model is one that pairs modern technology with the economic alignment that has powered hospitality for a century.

The next chapter of the industry will be written by operators who combine both — a lesson to carry forward.

Roman Pedan is the founder and CEO of Kasa, a national accommodations brand.