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In this episode of Get Paid For Your Pad, Kaye Putnam (Head of Marketing at Freewyld and Freewyld Foundry) sits down with Eric Moeller (CEO of both companies) to unpack the shocking collapse of Sonder, once valued at over $2B, and what its downfall means for every short-term rental operator.
If you’re an STR CEO who wants to avoid catastrophic risk, improve profitability, and build a durable business model, this episode is a must-listen. Eric and Kaye break down how Sonder grew to 9,000 units, why their economics never worked, how the arbitrage model collapsed at scale, and what smaller operators can learn from one of the biggest failures in hospitality.
You’ll hear:
- Why Sonder’s rental-arbitrage model couldn’t survive at 9,000 units
- What their true cost structure revealed about long-term profitability
- How chasing occupancy over margins led to dangerous cash burn
- Why custom tech and internal PMS development added massive operational drag
- What every STR operator should learn about fixed costs, liabilities, and scaling
- How a single point of failure can break even the biggest companies
We also talk about:
- What really happened inside Sonder as revenue fell and liabilities skyrocketed
- Why the company became dependent on cheap capital and hyper-growth
- How market changes, debt, and operational spread pushed them over the edge
- What the collapse means for operators: hiring opportunities, landlord negotiations, and new inventory availability
- Why “profit over scale” is the new survival rule for STR operators
🎯 Mentioned in the Episode:
Freewyld Foundry – Revenue & Pricing Management for STR Operators
Sonder (case study discussed throughout)
Industry discussions on LinkedIn and Reddit from former employees and guests
🔥 Favorite Takeaway:
“Just because a company scales fast and raises a ton of money doesn’t mean they’re better at business. Profit is the lifeline. Without it, size doesn’t matter.”
📍 Want us to audit your pricing strategy?
Get your free, personalized revenue report at FreewyldFoundry.com/report.
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Kaye Putnam | Freewyld:
Welcome back to Get Paid For Your Pad. I’m Kaye Putnam, Head of Marketing at Freewyld and Freewyld Foundry. I’m here with Eric Moeller, our CEO. Today we’re breaking down the news that has shaken the entire short-term rental industry: the complete collapse of Sonder. This company was once valued at more than two billion dollars, operating nine thousand units in over forty cities, and suddenly shut down. Guests were literally kicked out of their rooms mid stay during a snowstorm in Chicago. The industry is reeling and we want to talk about what happened and what operators can learn from this.
Eric Moeller | Freewyld:
Hello. Yeah, this is crazy news. I am not shocked by it. Everyone in the short term rental space has watched Sonder walk a fine line between ultimate scale and ultimate collapse. They have been on that line many times where everyone wonders what is happening with this model.
During COVID, when all the big rental arbitrage companies with VC backing shut down, Sonder kept growing. They kept pushing. So I am not totally shocked, but I am shocked by the speed and how it fell apart. There are so many lessons in this. I have been doing a ton of research. I have spoken to a lot of their former employees to understand what was happening inside the company. And I am shocked and not shocked at the same time. I expected it, but the speed is surprising.
Kaye:
Yeah. I am newer to the STR industry. I saw Sonder as a great example of brand building and design forward properties. I thought they were a really interesting case study. What informed your opinion? Why did it not surprise you that they were in so much trouble?
Eric:
The rental arbitrage model is still new for the short term rental space. That is how I got into STRs. I rented vacancies from investors and got approval to rent them out. We made good money. The first Airbnb unit I ever had was arbitrage and we made two thousand a month in profit off a small two bedroom in La Mesa, California, which is not even a destination. I was blown away.
As we grew the model, I got nervous about how much capital you have to put out and how much risk you take on with arbitrage. I saw that early. That is when we switched to property management. You make less, but there is no risk. No leases, no furniture purchases. Arbitrage works, but at scale it has shown again and again that it does not work well.
When Sonder grew and came into San Diego, they leased everything. All the big apartment buildings, brand new condo buildings, boutique hotels. Their operations and branding were great but their pricing was always terrible. They focused on occupancy over profitability. They slashed prices to show investors that their units were eighty percent occupied. They used those numbers to raise more money. It worked for a long time. They got to a two billion valuation. Built an amazing brand. The Marriott partnership seemed incredible. But that became the demise of their brand.
Anyone with arbitrage experience knows the risks. At small scale it works. At nine thousand units, it is unproven and probably impossible.
Kaye:
Yep, nine thousand units.
Eric:
Nine thousand units is a massive liability. They raised a lot of money and had to deploy it. They had to show growth. They kept growing while the industry watched, wondering if this is going to work or collapse. It collapsed. It is sad because they were pioneers. They built a brand, scaled markets, built a massive team, raised VC, went public, partnered with Marriott. They hit every milestone. And then it fell apart six months after the founder left as CEO.
Kaye:
For background, they were founded in 2014. They scaled to nine thousand units. They were in forty plus cities. They went public via SPAC in 2022 with a two billion dollar valuation. In 2024 they partnered with Marriott for a long term licensing deal that was supposed to give them liquidity and distribution support. And everything fell apart on November 10, 2025.
From their 2024 financials, for every dollar of revenue, they spent sixty cents on rent and direct unit costs. Then thirty cents on operations and support. Twenty percent on corporate. Fifteen percent on sales and marketing. Three percent on product and engineering. All of that is more than a dollar. They were always spending more than they made. Do those numbers surprise you?
Eric:
Not at all. The liabilities in arbitrage are enormous. Arbitrage only works when you are centralized. Hotels have been doing it for decades. But STR units are spread out everywhere. And Sonder scaled insanely fast.
We recently talked about profitability at Freewyld. We set out to build a company focused on profit instead of scale. We rejected VC because we want a real business. That is the trap companies fall into. They raise money, grow fast, and take their eyes off profit. They keep raising more and more to fund the model. Eventually they hit a wall.
Founders at big companies deal with the same problems as small operators. Bigger numbers, same issues. Upside down liabilities are unsustainable. And like you said, their corporate overhead was massive. Directors, senior managers, VP level roles. Extremely expensive.
When they filed Chapter 7, they had six hundred twenty one million in revenue but one point four billion in liabilities.
Kaye:
In 2024, they still lost two hundred twenty four million, even with all that revenue. They were addicted to easy money, VC and cheap debt. But when the market shifted, the economics no longer worked.
Eric:
Exactly. Their fixed costs were through the roof. Arbitrage at scale is terrifying. I am curious to hear from operators doing arbitrage successfully today because I am out of that game. Some people still believe in the model. It can work small, with the right deals. But the risk is enormous.
What finally broke Sonder was the Marriott deal. It was seen as the biggest win in the industry. But the cost and time to integrate into Marriott’s systems destroyed them. When Marriott pulled the deal, the company collapsed. They filed Chapter 7 almost immediately afterward.
This shows that just because something looks good on paper does not mean it is the right move. You have to weigh the lift, cost, risk, and time.
Kaye:
When I researched the deal, it looked great on paper. Huge brand recognition. But Sonder built their own PMS from the beginning so they could claim a tech valuation. That made integration extremely hard. That custom tech became a liability.
And if they were relying on Marriott to save them, no single partnership was going to fix their cash flow problems. It became a single point of failure.
Eric:
Exactly. You have to know what business you are in. Sonder tried to be both a hospitality operator and a tech company. That is multiple businesses. You spread your focus too thin. There are major opportunities in STR, but you have to pick your lane.
They got amazing at raising money. VC loves a fast growth story. But then you become a hyper growth model that needs constant capital. If you take your eyes off profit, scale becomes dangerous.
Companies like Stay Alfred collapsed for similar reasons. Arbitrage is not broken, but the way these companies scale it is broken. You have to restructure deals, lower fixed costs, or move to revenue share.
Kaye:
This is leaving a huge vacuum. Thousands of empty units, fourteen hundred employees without jobs. What opportunities do you see?
Eric:
Huge opportunities. First, the talent. Sonder had incredible people. Revenue managers, business development, operations. Anyone hiring should be reaching out to them.
Second, landlords now have turnkey properties with no operator. Some will go back to long term, but many will look for new STR partners. This is where operators can negotiate better deals. Ideally revenue share instead of taking on full lease liability. Reduce fixed costs as much as possible.
Operators should move fast because bigger companies are already reaching out.
Kaye:
There is also a lesson here about knowing your numbers. If your fixed costs are sixty percent and operations take thirty percent, there is no room left for anything. Profitability is everything.
Eric:
Exactly. Arbitrage has a hard ceiling. You can only sell one night per door. Your liabilities scale faster than your revenue potential. One market shift can destroy you. That is what scared me early on. Before COVID I was nervous about the model. Then COVID hit and everything confirmed those fears.
Operators need to know their risk points. Diversify. Protect profit. Focus on the business they are actually in. You cannot scale forever without profit.
Kaye:
Any final words of wisdom?
Eric:
Profit first. Know your business model. Avoid single points of failure. Stay focused and disciplined. Big companies are not better companies. Profit is the lifeline.
Kaye:
Thank you for listening to Get Paid For Your Pad. If you enjoyed this episode, please leave a five star review. We appreciate every single one. See you next time.
Eric:
Thanks everyone.
