Service Properties Trust (SVC): Business Model Canvas [Dec-2025 Updated]

You're looking at Service Properties Trust (SVC) making a major strategic pivot, and honestly, understanding this shift is everything for valuation right now. After years balancing a large hotel operation, they are aggressively selling down that segment-targeting $959 million in 2025 proceeds from dispositions-to lean hard into the steadier world of net lease properties. This isn't just shuffling assets; it's a deliberate move to lock in more predictable, bond-like income, evidenced by the $389 million in annualized minimum rents already coming from their net lease tenants as of Q3 2025, even while still managing 160 hotels. To see exactly how they are structuring this transformation across their key activities, resources, and revenue streams, dive into the full Business Model Canvas below.

Service Properties Trust (SVC) - Canvas Business Model: Key Partnerships

You're looking at the core relationships that keep Service Properties Trust (SVC) running smoothly, especially as they work through their strategic portfolio shift. These aren't just names on a contract; they represent billions in assets and critical operational agreements.

The management relationship with The RMR Group is foundational. As of September 30, 2025, The RMR Group manages approximately $39 billion in assets across all its clients, which includes SVC. This scale is important for sourcing expertise across buying, selling, financing, and operating commercial real estate.

The hotel operations hinge significantly on Sonesta International Hotels Corporation. Following recent portfolio adjustments, Service Properties Trust has a new 15-year management agreement, effective until July 31, 2040, covering the 59 hotels SVC plans to retain. This partnership is deep, as Service Properties Trust also maintains a defintely strategic 34% equity interest in Sonesta itself.

Here's a quick look at the specifics of the Sonesta operational partnership:

• Initial term of the management agreement runs through 2040.
• Sonesta receives a base management fee of 3.0% or 5.0% of gross revenues, depending on hotel type.
• An incentive fee equal to 20% of EBITDA above a specified threshold begins in the 2026 calendar year.
• Service Properties Trust must fund capital expenditures and maintain minimum working capital.

Financing activities rely on relationships with financial institutions to manage debt maturities and raise capital. In September 2025, Service Properties Trust priced an aggregate principal amount at maturity of $580 million of zero coupon senior secured notes due September 2027, which generated expected net proceeds of approximately $490 million after issuance costs. Service Properties Trust used a portion of this to redeem in full its outstanding 4.750% Senior Unsecured Notes due October 2026, which had a principal amount of $450 million.

The net lease segment showcases Service Properties Trust's diversification through its tenant base. As of September 30, 2025, the portfolio of service-focused retail net lease properties is leased to a diverse group of operators, which is a key strength for stable cash flow.

The tenants in this segment fund their own operating and maintenance costs, which generally means Service Properties Trust receives its rent payments directly from them, providing a clear revenue stream separate from hotel operating volatility.

Service Properties Trust (SVC) - Canvas Business Model: Key Activities

You're looking at the core actions Service Properties Trust (SVC) is taking right now to reshape its balance sheet and portfolio composition. It's a heavy lift, focusing on selling down one part of the business to strengthen the other. Here's the quick math on what's moving the needle in late 2025.

The primary activity driving the current strategy is the aggressive execution of the hotel disposition program. Service Properties Trust (SVC) remains on track to meet its goal, targeting approximately $959 million in total gross proceeds for the full year 2025 from selling 121 hotels, totaling 15,809 keys. Through the third quarter of 2025, SVC had already completed the sales of 46 hotels, generating gross proceeds of approximately $325 million. The plan involves closing the remaining 75 expected sales in the fourth quarter of 2025 to hit that target. This entire program is part of a larger, previously disclosed plan to sell 113 Sonesta branded hotels for approximately $913 million. This focus on divestiture is directly tied to enhancing the portfolio's stability by shifting the balance toward net lease assets.

To enhance portfolio stability, Service Properties Trust (SVC) is actively acquiring service-focused net lease properties. Year-to-date in 2025, the company acquired 14 net lease properties for $44 million. Furthermore, they were under agreement to acquire an additional six properties in fiscal Q3 2025 for $10.3 million. This shift is significant; upon completion of the expected hotel sales, management projects net lease assets will account for over 70% of pro forma fiscal Q2 2025 adjusted EBITDAre (non-GAAP). Anyway, this activity directly supports the goal of concentrating the portfolio on more predictable returns.

Managing the existing, right-sized portfolio is a constant key activity. As of September 30, 2025, Service Properties Trust (SVC) owned 160 hotels and 752 service-focused retail net lease properties. The retained hotel portfolio, consisting of 84 hotels, generated a RevPAR of $121 in the quarter ending September 30, 2025. The company is also overseeing hotel renovations to drive performance in this retained segment, though renovation disruption was noted as a factor impacting adjusted hotel EBITDA in Q2 2025. For context on capital allocation, full-year capital expenditures are projected at $250 million for 2025, with plans to reduce spending to $150 million in 2026.

Strategic debt management is intertwined with the disposition proceeds. The sales are earmarked to address debt maturities and improve credit metrics, which was urgent given the debt service coverage covenant was reported at 1.49 times, below the minimum requirement of 1.5 times at one point. The company has already taken concrete steps to manage this:

• Early redemption of all $350 million of its 5.25% senior unsecured notes due February 2026, completed in September 2025.
• Expected early redemption of all $450 million of its 4.75% senior unsecured notes due October 2026, planned for October 16, 2025.
• The company had $5.8 billion of debt outstanding at quarter-end with a weighted average interest rate of 6.4%.

To give you a snapshot of the asset base that these activities are managing, here's the portfolio breakdown as of September 30, 2025:

Also, the planned sales of 114 hotels were expected to result in savings of approximately $725 million in capital expenditures over a six-year period that would have otherwise been spent on those properties. Finance: draft 13-week cash view by Friday.

Service Properties Trust (SVC) - Canvas Business Model: Key Resources

You're looking at the core assets Service Properties Trust (SVC) relies on to generate revenue and execute its strategy as of late 2025. These aren't abstract concepts; they are hard assets and established relationships.

The foundation of Service Properties Trust (SVC) is its substantial real estate holdings, split between two distinct categories. As of September 30, 2025, Service Properties Trust (SVC) is a real estate investment trust with over $10 billion invested in these assets.

Here's a breakdown of the physical assets underpinning the business:

The net lease segment shows high stability. As of September 30, 2025, these retail properties were 97.3% occupied, leased to 178 tenants, and required annual minimum rents of $388,745 thousand. The weighted average lease term for this segment stood at 7.5 years.

The management and financial structure are also critical resources. Service Properties Trust (SVC) benefits from the long-term management expertise of The RMR Group. As of September 30, 2025, The RMR Group managed approximately $39 billion in assets under management. They bring over 35 years of institutional experience in real estate operations.

Access to capital markets is clearly demonstrated by recent balance sheet actions taken throughout 2025 to manage debt maturities. For example, in September 2025, Service Properties Trust (SVC):

• Redeemed all $350 million of its 5.25% senior unsecured notes due February 2026.
• Issued $580 million of zero-coupon senior secured notes due September 2027.
• Raised net proceeds of approximately $490 million from the issuance, which was used to repay all amounts outstanding on its revolving credit facility.

Also, Service Properties Trust (SVC) expected to complete the early redemption of all $450 million of its 4.75% senior unsecured notes due October 2026 on October 16, 2025. That's a lot of moving parts in the capital structure.

Service Properties Trust (SVC) - Canvas Business Model: Value Propositions

You're looking at the core reasons why investors and partners choose Service Properties Trust (SVC). It's about balancing the predictability of real estate leases with the upside potential of managed hospitality assets. This dual approach is key to their strategy right now.

The first pillar is the stability derived from the net lease segment. This provides the contractual backbone for cash flow. Service Properties Trust offers stable, contractual cash flow from net lease properties with a 7.5 year weighted average lease term. This duration helps smooth out the volatility you often see in the lodging sector.

Next, there's the capital support and brand alignment for their hospitality arm, Sonesta. Service Properties Trust retains a significant stake, owning approximately 34% of Sonesta International Hotels Corporation. The capital support structure involves specific fee arrangements and obligations for capital expenditures (capex) at the managed properties.

Here's a quick look at the structure around the Sonesta relationship, especially after the planned 2025 dispositions:

• Base management fee of 3.0% for full-service hotels.
• Base management fee of 5.0% for extended stay and select-service hotels.
• Incentive fee equal to 20% of EBITDA above a threshold, starting in 2026.
• Construction management fee of 3% on managed capital expenditures.

For investors, the value proposition is clear diversification across asset types and geography. Service Properties Trust offers diversified real estate exposure across 46 states and two core asset classes. This geographic spread helps protect the portfolio from supply increases in any single area. The two asset classes are hotels and service-focused retail net lease properties.

The retail side is specifically positioned for resilience. Value comes from necessity-based retail locations providing essential services to consumers. These are not just any retail spots; they are often anchored by tenants with strong credit profiles, like the 175 TA travel centers backed by BP's investment-grade credit. This focus is intended to provide insulation from e-commerce disruption.

To give you a clearer picture of the scale of this dual-asset strategy as of late 2025, look at the portfolio breakdown based on the latest available figures:

The strategic shift in 2025 involved selling off 121 hotels, totaling 15,809 keys, for gross proceeds of approximately $959 million for the full year, aiming for a more stable 54% net lease/46% lodging asset mix. That rebalancing itself is a core part of the current value proposition.

Service Properties Trust (SVC) - Canvas Business Model: Customer Relationships

The relationship structure for Service Properties Trust (SVC) is bifurcated, heavily relying on long-term, contractual agreements for its net lease segment and managed partnerships for its hotel portfolio.

Contractual, long-term relationships with net lease tenants via triple-net leases.

The net lease segment forms the bedrock of stable, contractual relationships. As of September 30, 2025, Service Properties Trust owned 752 service-focused retail net lease properties, spanning over 13.1 million square feet throughout the United States. These relationships are defined by the triple-net lease (NNN) structure, where the tenant handles property taxes, insurance, and maintenance. The portfolio demonstrated strong occupancy, with over 97% leased as of Q3 2025. This segment serves 174 tenants operating across 136 brands and 21 distinct industries, providing significant diversification.

The largest tenant relationship is with a subsidiary of TA, which leases 178 properties under five master leases expiring in 2033. The aggregate guaranty from BP Corporation North America Inc. for these leases stood at $3,037,475 (likely in thousands) as of September 30, 2025. Rent coverage for these specific TA leases as of that date ranged from 1.08x to 1.40x. Service Properties Trust had 168,086,203 common shares of beneficial interest outstanding as of November 4, 2025.

Here's a look at the scale of the net lease segment as of September 30, 2025:

Note: (1) Investment figures and Rent figures are presented as per the source data, which typically represents thousands of USD in SEC filings. (2) Rent coverage is as of September 30, 2025.

Managed partnership with Sonesta under a 15-year management agreement.

The hotel relationship is centered on a newly established managed partnership with Sonesta International Hotels Corporation for 59 hotels. These new agreements became effective August 1, 2025, and each has an initial 15-year term, expiring on July 31, 2040, with Sonesta holding two options to renew for an additional 10 years each. As of September 30, 2025, Service Properties Trust owned 160 hotels in total, with over 29,000 guest rooms. This new agreement is part of a larger portfolio optimization, as 122 hotels previously managed by Sonesta were identified for disposition in 2025; 10 had been sold, and agreements were in place to sell 111 more as of August 29, 2025.

The fee structure for these 59 retained hotels is detailed:

• Base management fee: 3.0% of gross revenues for full-service hotels; 5.0% for extended stay and select service hotels.
• Incentive fee: 20% of EBITDA.
• Brand promotion fee: 3.5% of gross room revenues.
• Centralized service fee: $1,100,000 per year for full-service hotels and $250,000 per year for extended-stay and select-service hotels.
• Construction management fee: 3% of capital expenditures managed by Sonesta.

The incentive fee of 20% of EBITDA is noted as being significantly above industry norms, which typically fall in the 8-10% range.

Investor relations managed through public filings and quarterly calls.

Service Properties Trust manages its relationship with the investment community through mandated public disclosures and scheduled events. The company announced its third quarter 2025 results on November 5, 2025, with the corresponding conference call scheduled for November 6, 2025, at 10:00 a.m. Eastern Time. The contact for Investor Relations is Kevin Barry, Senior Director. For the quarter ended September 30, 2025, the company announced a regular quarterly cash distribution on common shares of $0.01 per share, equating to $0.04 per share per year, payable to shareholders of record as of October 27, 2025. Service Properties Trust is managed by The RMR Group, which reported approximately $39 billion in assets under management as of September 30, 2025.

Automated rent collection and lease enforcement processes.

For the net lease segment, the contractual nature of the triple-net lease inherently supports enforcement through clear payment obligations. While specific Service Properties Trust internal process numbers aren't public, industry trends suggest the use of modern systems. Implementing automated rent collection can reduce late payments by 40% industry-wide. Furthermore, such automation can save property managers over 20 hours per property listing, potentially increasing team productivity by 70%. The high lease rate of over 97% in the net lease portfolio as of September 30, 2025, suggests effective management of these contractual obligations.

For the hotel segment, the new Sonesta agreements include provisions allowing Service Properties Trust to terminate management if minimum performance thresholds are not met for two consecutive years, beginning with the measurement period starting in 2028.

Finance: draft 13-week cash view by Friday.

Service Properties Trust (SVC) - Canvas Business Model: Channels

Direct ownership of real estate assets forms the foundation of Service Properties Trust's operations, spanning two distinct categories as of the third quarter of 2025.

The hotel portfolio, as of September 30, 2025, consisted of 160 hotels containing over 29,000 guest rooms across the United States, Puerto Rico, and Canada, representing an investment value exceeding $10 billion. Service Properties Trust is actively channeling assets out of this segment; the company is on track to sell 121 hotels, totaling 15,809 keys, for estimated gross proceeds of approximately $959 million in 2025. For the remaining comparable hotels, the gross operating profit margin percentage for the third quarter of 2025 was 24.4%.

The net lease segment provides the counter-balance, focusing on service-focused retail properties. As of September 30, 2025, Service Properties Trust owned 752 service-focused retail net lease properties, covering over 13.1 million square feet throughout the United States. This portfolio segment is highly leased, standing at more than 97% leased, with a weighted average lease term of 7.5 years.

Service Properties Trust channels its hotel operations through management agreements, most notably with Sonesta International Hotels for brand distribution and operational oversight. A significant channel is the new 15-year management agreement signed for 59 hotels, which is set to expire on July 31, 2040, with two 10-year renewal options available to Sonesta. Service Properties Trust will continue to hold an ownership stake in the operator, owning 34% of Sonesta.

The financial structure of this channel involves several fee streams paid to Sonesta:

• Base management fee of 3.0% for full-service hotels.
• Base management fee of 5.0% for extended stay and select service hotels.
• Incentive fee equal to 20% of EBITDA above a specified threshold, beginning in the 2026 calendar year.
• Brand promotion fee of 3.5% of gross room revenues.

The leasing and asset management teams serve as the direct channel for sourcing and retaining net lease tenants. This team activity resulted in the acquisition of 13 net lease properties for a total of $24.8 million during the third quarter of 2025. Year-to-date investments for 2025 totaled $70.6 million, with these new deals carrying an average going-in cash cap rate of 7.4%. The net lease portfolio is diversified across 178 tenants operating under 139 brands across 21 distinct industries.

Service Properties Trust accesses capital and investors through public equity markets via the Nasdaq exchange. The stock trades under the ticker SVC on the NASDAQ-GS exchange. The market capitalization as of a recent trading day was approximately 304,236,027. The company channels investor returns through distributions, with the annualized dividend set at $0.04, yielding approximately 2.15%.

Here is a snapshot of the key asset base that Service Properties Trust channels for revenue generation as of late 2025:

Investor access via the public markets shows recent trading activity. The 52-week high for Service Properties Trust Common Stock was $3.08, with a 52-week low of $1.55. The closing price on December 4, 2025, was $1.81, following a previous close of $1.86 on December 3, 2025. The trading volume on December 4, 2025, was 767 thousand shares.

The structure of the Sonesta channel involves specific fixed fees that act as a cost floor:

• Centralized Service Fee (Full Service): $1,100,000 per year.
• Centralized Service Fee (Extended/Select Service): $250,000 per year.
• Construction Management Fee: 3% of managed capital expenditures.

Finance: draft 13-week cash view by Friday.

Service Properties Trust (SVC) - Canvas Business Model: Customer Segments

You're looking at Service Properties Trust (SVC) as it actively reshapes its portfolio, moving toward a more net-lease-centric structure as of late 2025. The customer base is clearly split between real estate tenants and hotel guests, plus the capital providers.

Net Lease Tenants: Retailers, restaurants (QSR/casual dining), and automotive service providers

The net lease segment is a core focus for Service Properties Trust (SVC), providing stable, long-term income streams. As of September 30, 2025, Service Properties Trust (SVC) owned 752 service-focused retail net lease properties, covering over 13.1 million square feet, leased to 178 tenants. These properties generate $389 million in annual minimum rents. The portfolio remains highly occupied, standing at more than 97% leased, with a weighted average lease term of 7.5 years as of the end of the third quarter.

The types of businesses occupying these spaces are quite specific, focusing on essential services and daily needs. Here are the key categories of tenants Service Properties Trust (SVC) serves:

• Automotive service providers, including a significant anchor presence with 175 TA travel centers.
• Quick service and casual dining restaurants.
• Value retailers and fitness/childcare properties.

Here's a quick look at the scale of the net lease segment as of September 30, 2025:

Hotel Operator: Primarily Sonesta International Hotels Corporation

Service Properties Trust (SVC) does not operate its properties; instead, it relies on hotel management companies. As of September 30, 2025, the 160 hotels owned by Service Properties Trust (SVC) were managed by four operators. The relationship with Sonesta International Hotels Corporation is central to the hotel segment, though Service Properties Trust (SVC) is actively selling many of these assets.

The operator breakdown for the 160 hotels owned as of September 30, 2025, shows a heavy concentration with Sonesta:

You should note that Service Properties Trust (SVC) is executing a plan to sell 113 Sonesta branded hotels, targeting gross proceeds of approximately $913 million for the full year 2025.

Hotel Guests: Business and leisure travelers utilizing full-service and extended-stay hotels

Hotel guests form the end-user segment for the lodging assets. These travelers utilize the portfolio, which, as of September 30, 2025, comprised 160 hotels with over 29,000 guest rooms across the United States, Puerto Rico, and Canada. The properties cater to both business and leisure segments, often falling into full-service or extended-stay categories.

The performance metrics reflect this segment's activity:

• For the 84 hotels in the retained portfolio (after sales), Revenue Per Available Room (RevPAR) increased by 60 basis points year-over-year for the third quarter of 2025.
• The 76 hotels not yet sold as of quarter end generated a RevPAR of $72.

The overall hotel portfolio generated Adjusted Hotel EBITDA of $44.3 million in the third quarter of 2025.

Public Investors: Equity and debt holders seeking REIT exposure

This segment consists of the capital providers funding Service Properties Trust (SVC)'s operations and acquisitions. The equity holders are the public shareholders of the REIT.

Key figures for the public investor base as of late 2025 include:

• Number of common shares of beneficial interest outstanding as of November 4, 2025: 168,086,203.
• Institutional Ownership as of October 8, 2025: 76.9%.
• The regular quarterly cash distribution announced in October 2025 was $0.01 per share, equating to $0.04 per share per year.

Debt holders are also critical, as Service Properties Trust (SVC) recently issued $580.2 million of zero coupon senior secured notes due September 2027, following redemptions of other notes to manage maturities. Finance: draft 13-week cash view by Friday.

Service Properties Trust (SVC) - Canvas Business Model: Cost Structure

You're looking at the core expenses Service Properties Trust incurs to run its dual-asset portfolio of hotels and net lease properties as of late 2025. The cost structure is heavily influenced by debt servicing, hotel operations, and management arrangements.

Financing costs remain a significant pressure point. For the third quarter of 2025, the consolidated financial results were primarily impacted by an $8.7 million increase in interest expense compared to the prior year quarter. This rise is generally attributed to higher weighted average interest rates during the 2025 period. You should note that the company proactively redeemed notes in September 2025, issuing new secured notes, which impacts the current debt profile.

Hotel operating expenses are a major variable cost. For the 160 comparable hotels in the third quarter of 2025, costs below the Gross Operating Profit (GOP) line increased by 7.6% from the prior year. This increase was specifically driven by insurance claims at certain hotels. Furthermore, the gross operating profit margin percentage for these comparable hotels declined by 330 basis points to 24.4% in Q3 2025. The portfolio generated adjusted hotel EBITDA of $44.3 million in Q3 2025, a decline of 18.9% year over year, reflecting softer demand and expense pressures, including elevated labor costs and repairs and maintenance expenses from prior periods.

Capital allocation for property upkeep is substantial. Full-year capital expenditures (CapEx) are projected at $250 million for 2025, with plans to reduce this spending to $150 million in 2026 as property investments wind down.

Management and related fees are complex due to the new agreements for the retained hotel properties. Service Properties Trust pays various fees to its managers, including The RMR Group and Sonesta. Here's a breakdown of the fee components, keeping in mind the Sonesta incentive fee kicks in starting in 2026.

The various fees paid to operators and managers are layered. You need to track these carefully as they directly impact distributable cash flow.

• The Sonesta management agreement includes a construction management fee of 3% on managed capital expenditures.
• The RMR Group management fees, based on Q1 2024 figures, included $1,484 thousand expensed to net lease operating expenses.
• The trust is required to fund hotel capital expenditures and maintain minimum working capital tied to room counts under the Sonesta agreement.
• Property taxes, insurance, and maintenance are generally paid by the hotel managers as agents for Service Properties Trust or by the tenants for net lease properties.

It's important to remember that the $8.7 million interest expense jump in Q3 2025 is a direct hit to the bottom line before operating income, while the $250 million CapEx projection for 2025 is a major use of cash flow for property improvements.

Service Properties Trust (SVC) - Canvas Business Model: Revenue Streams

You're looking at the core ways Service Properties Trust (SVC) brings in cash right now, which is heavily weighted toward its net lease segment as it actively reshapes its hotel portfolio. The stability comes from the long-term contracts on the retail side, while the hotel side is more dynamic, especially with the ongoing dispositions.

The net lease portfolio provides a very predictable income floor. As of the third quarter of 2025, the annualized minimum rent from these service-focused retail properties totaled $389 million. This segment is characterized by high occupancy, reported at 97.3% as of September 30, 2025, with a weighted average lease term of 7.5 years. Rent coverage across this portfolio was just over two times for the trailing 12 months.

For the hotel operations, Service Properties Trust retained 160 hotels as of September 30, 2025. The revenue generated from these properties in the third quarter of 2025 was $377.6 million in hotel operating revenues. The total revenue for that quarter, including both hotel and net lease income, was $478.8 million. The hotel segment also generates revenue through base and incentive management fees derived from hotel operations, net of operating expenses, which Service Properties Trust collects from its hotel management partner.

Here's a quick look at the components of the revenue streams based on the latest reported quarter and annual targets. This defintely gives you a clearer picture of where the money is coming from:

A significant, non-recurring revenue stream for 2025 is the proceeds from the strategic asset sales, primarily hotels. Service Properties Trust expected to generate approximately $959 million in total gross proceeds from hotel sales for the full year 2025. This activity is part of a larger transformation effort to shift the portfolio composition.

The management fee component is tied directly to the hotel performance. You see this reflected in the structure where base and incentive management fees are collected from hotel operations, net of the operating expenses incurred. This links a portion of the revenue directly to the operational success of the managed hotel assets.

• Net Lease Annualized Minimum Rent: $389 million.
• Hotel Asset Sales Proceeds Target: $959 million for 2025.
• Q3 2025 Hotel Operating Revenue: $377.6 million.
• Portfolio Size: 160 retained hotels.