Sonder filed for bankruptcy in October 2025, and honestly, I'm not surprised. I stayed in one of their places in Mexico City a few months back—it was nice. The app was smooth, the apartment was clean, everything worked. So why did the company burn through $1+ billion and still fold?

Because the unit economics never made sense. Sonder built a beautiful interface on top of an impossible problem: you can't make money by leasing residential apartments long-term and renting them out nightly like a hotel without controlling the property itself.

Let me walk through what actually happened.

The business model that looked good on a pitch deck

Sonder's pitch was straightforward: apartments are cheaper to acquire than building hotels, and travelers want living spaces over hotel rooms. So lease apartments from property owners, standardize them (design, cleaning, maintenance), and rent them nightly through an app at hotel prices.

In theory, this works. Airbnb proved people want apartments for longer stays. Sonder would add hotel-style service (cleanliness guarantees, 24/7 support, professional management) and charge a premium.

The company launched in 2014, expanded to 37 cities across nine countries, and at its peak operated over 9,000 units. By 2024, they were doing $620 million in revenue. That sounds like success. It wasn't.

The fixed lease trap

Here's the core problem: Sonder signed multi-year leases with property owners. They committed to paying rent whether units were booked or not. This creates massive downside risk.

When demand shifts—pandemic hits, economy softens, competition emerges—you're stuck paying landlords regardless of occupancy. Sonder reported that by October 2025, they were "declining occupancy rates" while sitting on "fixed lease obligations." That's the death spiral.

Competitor Vacasa faced the same issue during the pandemic and actually survived, but barely. They pivoted to revenue-sharing agreements with property owners instead of fixed leases. That's more flexible, but it also means you capture less upside when business is good.

Sonder got caught between two worlds: committed to fixed leases they couldn't exit when demand dried up, but without the actual control that a real hotel company has. Hotels own or control buildings. Sonder didn't.

The Marriott partnership that didn't save them

In 2024, Sonder announced a partnership with Marriott International. Marriott would integrate Sonder's 9,000 rooms into its system, giving Sonder access to Marriott's 270 million members and corporate distribution. This was supposed to be the lifeline.

Marriott terminated the deal less than a year later, citing "Sonder's default." By August 2025, the company's CEO and CFO had both left. The company was burning cash, occupancy was falling, and the one major partnership that could've saved them bailed.

That tells you something. Marriott's the most experienced hospitality operator in the world. They saw the numbers and walked away. They didn't want the liability.

The capital intensity nobody wanted to admit

Sonder raised over $1 billion from investors. Benchmark, Sequoia, Salesforce Ventures, Silver Lake—serious money. And none of it was enough.

Why? Because running apartments at scale is capital-intensive. You need:

• Acquisition teams to find and lease properties
• Design teams to standardize units
• Operations to manage cleaning, maintenance, guest support
• Marketing to fill units
• Technology to run the platform

This is infrastructure cost. Real estate by another name. Airbnb gets around this by recruiting host-operators who handle the work. Sonder centralized everything, which meant higher service quality but also higher fixed costs.

The company reported Q2 2025 losses of $44.5 million on $147 million in revenue. That's a 30% loss rate. You don't grow out of that. You run out of money first.

Why this matters

Sonder's failure isn't just about one company getting capital structure wrong. It tells you something important about the limits of platform business models.

There's a fundamental difference between:

1. Platforms that aggregate supply (Airbnb, Uber, DoorDash): Supply-side providers (hosts, drivers, restaurants) handle the capital and execution. The platform takes a cut.

2. Businesses that control supply (Marriott, Hyatt, Hilton): They own or control properties, hire staff, manage operations. Higher capital requirement, but higher margins and more control.

Sonder tried to split the difference. They wanted platform economics but hotel quality. They wanted asset-light operations but also operational control. That middle ground doesn't exist profitably.

Airbnb got away with it because they stayed truly asset-light—hosts do 90% of the work. Sonder wanted to be Airbnb plus a managed service company, which meant carrying costs Airbnb avoids.

The leadership exodus makes sense now

Co-founder Francis Davidson stepped down as CEO in June after 11 years leading the company. CFO Michael Hughes left in August after just seven months. These weren't strategic retirements. These were people jumping off a sinking ship.

When your own executives are leaving, professional investors are terminating partnerships, and occupancy is declining—that's not a turnaround story. That's a company nobody believes in anymore.

What I think happens next

Sonder's properties will likely get acquired by larger operators, broken up, and reabsorbed into Marriott, Hilton, or Airbnb-style platforms. Some property owners will take losses. Employees will find work elsewhere. The technology platform might get bought and integrated somewhere.

The bigger lesson: just because you can build a better interface doesn't mean you can change the underlying economics of real estate. Hotels are expensive to run. Apartments are cheaper to operate when you don't have to standardize them. Sonder tried to bridge that gap and proved it's too wide.

The Mexico City apartment I stayed in was genuinely good. The design was thoughtful, the service was reliable, and it was better than a hotel room. The problem was never the product. It was always the math.

Sources: Sacra analysis of Sonder's business model, Hotel Dive on Marriott partnership termination