Digital, Fast, Risky? Lessons from Sonder’s Development for Europe’s Hospitality Tech Scene

Financial and technical difficulties, cost-cutting and layoffs, and now the leadership change recently carried out by the company. The former pioneer of tech-based design accommodations is no longer among the top performers within its niche.

Financial and technical difficulties, cost-cutting and layoffs, and now the leadership change recently carried out by the company. The former pioneer of tech-based design accommodations is no longer among the top performers within its niche. In stark contrast, the serviced apartment brand Limehome regularly makes headlines with high occupancy rates of over 90 percent, repeated acquisitions, or its consistently strong expansion across Europe combined with very good performance in the hotel industry. But what if Limehome and its followers such as Numa and others are facing a similar path as Sonder?

Founded in 2014 in Montreal by Francis Davidson and Lucas Pellan, the company positioned itself in the niche between private accommodation and classic hotel and quickly became a pioneer in digital service and design-oriented spaces. With its concept of apartments and boutique hotels in a uniform look, operated via a technology platform and guest services (check-in, communication etc.) handled entirely through its own app, it targeted design- and tech-savvy travelers seeking reliability and style. Today, Sonder operates in 40 cities worldwide, primarily on the American continent. After rapid expansion up to the COVID-19 pandemic, the company went public in 2022 and entered a strategic partnership with Marriott two years later.

But why did Sonder enter into this deal with Marriott in the first place? 

After going public in 2021, Sonder came under increasing pressure. The company struggled with rising losses, delayed financial reporting and operational challenges. In 2022 and 2023 alone, Sonder posted net losses of around 250 million US dollars. The company’s ambitious growth goals clashed with the reality of high rental obligations, lack of profitability and growing investor skepticism. The cooperation with Marriott provides Sonder with much-needed stability and access to Marriott’s extensive infrastructure. However, Sonder’s independent, design-oriented identity risks dissolving within the Marriott universe, potentially endangering its previous core target group. New real estate projects must be offered to Marriott, and Sonder has to pay license fees and comply with exclusivity clauses. Growth and guest loyalty now depend on Marriott’s platforms and priorities, which limits Sonder’s entrepreneurial independence.

Yet when it comes to “design-oriented apartments with fully digital operation,” many, especially in this country, also think of the brand Limehome as a pioneer in the serviced apartments sector. Limehome was founded in 2018 by former management consultants Lars Stäbe and Dr. Josef Vollmayr, emerging from their desire for a more comfortable and efficient accommodation option. The company’s digital, contactless concept contributed to its growth during the pandemic, as traditional hotels struggled with lockdowns and travel restrictions. Guests sought alternatives, which benefited tech-driven models like Limehome. The company took the opportunity to expand, open new locations and raise additional funding. Limehome doubled its revenue and expanded abroad, for example to Spain. In Germany, the company now has 5,250 apartments under contract in over 80 cities and, with around 90 active locations, is one of the largest hospitality companies in the country.

What differentiates the two tech-apartment operators?

Despite similar core ideas, Sonder and Limehome differ in several key aspects regarding their company structures as well as their technological and strategic orientation. In terms of growth strategy, Sonder pursued an aggressive, often unprofitable expansion course over many years, aiming to secure market share quickly, which ultimately contributed to the current crisis. Limehome, in contrast, grows in a controlled, partnership-based and market-selective manner. Instead of pushing into prestigious big-city locations, Limehome also focuses on inner-city locations in B and C cities, where it can secure market share early on. Sonder and Limehome also differ in how they handle revenue. While Sonder, despite high revenues, was unable to operate profitably for a long time and repeatedly needed capital injections, Limehome is sustainably profitable with above-average rent coverage ratios. Regarding the guest experience, both brands can be characterized as design-oriented and digitalized. Nevertheless, Sonder still offers a more hotel-like experience and includes hotel rooms in addition to serviced apartments. Limehome, on the other hand, consistently relies on automation and standardization, which brings efficiency but can sometimes be perceived as impersonal, especially when the technology does not function smoothly. Another success factor for the Limehome brand is its lean operational structure. Thousands of units can be operated with relatively little staff, keeping costs low and margins high. At the same time, Limehome is less vulnerable to drops in demand in individual regions or cities due to its geographic diversification.

However, Limehome’s model is not without weaknesses. Fully digital guest service can become a disadvantage when technology fails and there is no physical or personal support on-site. Accordingly, reviews of Limehome often mention issues regarding cleanliness, defective equipment or problems with check-in that could not always be resolved promptly. A lack of accessibility has also been criticized at times. Additionally, converting non-hotel properties such as former offices or retail spaces is operationally complex. Around 40 percent of the properties assessed are, according to the company’s own information, considered unsuitable. And while automation facilitates scaling, it reaches its limits when guests expect classic hotel standards like personal service or immediate problem resolution. Finally, with further expansion, regulatory pressure is also increasing for Limehome, especially in new markets with complex permitting and usage regulations.

Conclusion:

Sonder’s integration into the Marriott system demonstrates both the potential and the risks of fast, technology-driven expansion in the hospitality industry. As impressive as Limehome’s independent and profitable growth may be, the model is not free of operational challenges and risks regarding the guest experience. In a changing industry, the providers who will succeed are those who manage to combine digital efficiency with reliability, adaptability and genuine guest satisfaction. For hospitality professionals, investors and tech pioneers, the story of Sonder and Marriott serves as a warning, while Limehome’s path is an instructive example of both the opportunities and the limits of automation in hospitality.

Susann Sparwasser is a consultant at Horwath HTL Germany. Her areas of expertise include feasibility studies, project management, conception and long-term strategic planning for hotels and destinations. Connect with Susann on LinkedIn.

This article originally appeared on Horwath HTL.