From what sources are the revenues primarily derived for Sonesta Select Sonesta Essential?

According to Sonesta Select Sonesta Essential's 2025 Franchise Disclosure Document, the company's revenues are primarily derived from two main sources: franchise contracts with third-party hotel owners and individual hotel guests and corporate patrons at owned and leased hotels. The compensation received for these services is either variable or fixed consideration from franchise contracts or fixed transactional guest consideration through owned and leased hotels. Sonesta Select Sonesta Essential recognizes variable fees as the related services are delivered and may defer consideration, recognizing it over time as performance obligations are met.

For franchised hotels, Sonesta Select Sonesta Essential identifies several services as part of its performance obligations under franchise contracts. These include granting Intellectual Property (IP) licenses for the use of Sonesta RL Hotels Franchising Inc. (SRLHF) trademarks and hotel names. Additionally, they provide manual and training services that offer operational assistance specific to the SRLHF brands, business model, and standards. Reservation services are also provided through direct or indirect system access, and marketing services and arrangements benefit the overall hotel network through brand promotions, direct guest marketing, and various other advertising programs.

For company-operated hotels, revenues are generated from room reservations and ancillary services, with revenue recognized as the goods or services are transferred to the hotel guest, typically when the room stay occurs. Other ancillary goods and services, such as food and beverage sales and parking, are also purchased independently of room reservations at standalone selling prices and are considered separate performance obligations. Revenue from these is recognized when the related good or service is provided to the hotel guest. Payment terms generally align with when the goods and services are provided.

It is important to note that Sonesta Select Sonesta Essential also collects certain taxes and fees from customers on behalf of governmental agencies. These amounts are not included in the company's measurement of transaction prices, as Sonesta Select Sonesta Essential acts merely as a collection agent. The company presents revenue net of sales taxes and other similar taxes, recording a liability when the amounts are collected and relieving the liability when payments are made to the appropriate taxing authority.