The light is still on. There’s just a new owner at the switch.
Blackstone has agreed to sell the economy hotel chain Motel 6 and sister brand Studio 6 to India’s Oyo in an all-cash transaction valued at $525 million. The private equity giant acquired Motel 6 in 2012 from Accor for $1.9 billion.
Motel 6—well-known by millions of travelers for its “We’ll leave the light on for you” tagline—was founded in California in 1962 and gets its name from what a room cost back then per night, $6. G6 Hospitality is the franchisor of the brands, which have nearly 1,500 in the United States and Canada.
The deal is expected to close in the fourth quarter.
Oyo, under its parent company, Oravel Stays, was founded in India in in 2012 by Ritesh Agarwal and matches similarly with Motel 6 in the type of budget offerings in secondary and tertiary markets. There a recurrently more than 43,000 Oyo properties worldwide, but there is a concerted effort now to grow in the U.S., as Agarwal said earlier this year at the Skift India Summit, with plans to increase its U.S. footprint by more than 250 hotels in 2024.
This deal accelerates those plans. There is no word if there will be an effort to convert current Motel 6 properties under the Oyo brand. Oyo first launched in the U.S. in 2019. Google shows results for 282 Oyo properties across 35 states in the U.S., where room rates range from $30 to $60-plus per night.
In 2019, Oyo signed a partnership with Airbnb to put its inventory on the short-term rental platform. It could potentially do the same with Motel 6.
Blackstone exits its 12-year hold of Motel 6 having more than tripled its investors’ capital and generating over $1 billion in profit, Rob Harper, head of Blackstone Real Estate Asset Management Americas told The Wall Street Journal.
Motel 6’s franchise network produces gross room revenues of $1.7 billion, a press release said.
“This acquisition is a significant milestone for a startup company like us to strengthen our international presence. Motel 6’s strong brand recognition, financial profile and network in the US, combined with OYO’s entrepreneurial spirit will be instrumental in charting a sustainable path forward for the company which will continue to operate as a separate entity,” said Gautam Swaroop, CEO, OYO International.
Over the decade Blackstone owned Motel 6, it went on an asset-light campaign, selling off owned assets and focusing on franchising.
Dan Lesser, co-founder, president and CEO of LW Hospitality Advisors, was a bit taken aback that an Indian company was the ultimate buyer over U.S. companies looking to be accretive especially in the lower-tier segments, but believes it to be a shot in the arm for Oyo, which instantly grows its footprint by some 1,500 hotels in North America. “Distribution is the name of the game and that’s pretty good distribution,” he said. ” The biggest fear of a hotel company is having loyal customers go someplace and they don’t have an offering for them.”
“We are grateful for our successful partnership with Blackstone and the transformation that has positioned us well for this new chapter. OYO’s innovative approach to hospitality will allow us to enhance our offerings and great value to our guests while maintaining the iconic Motel 6 brand that travelers have trusted for over six decades,” said Julie Arrowsmith, president and CEO of G6 Hospitality. There was no mention in the release if she would remain on as chief of the company, which will continue to operate as a separate entity of Oyo, Swaroop told The Journal.
The deal comes amid a time when economy hotel sector performance is struggling. In June, STR projected RevPAR growth of 2% for 2024 and 2.6% for 2025 across all chain scales, but in the midscale and economy segments, it forecasted negative RevPAR growth of -1.2% and -3%, respectively. “We have seen a bifurcation in hotel performance over the first four months of the year, which we don’t believe will abate soon. The increased cost of living is affecting lower-to-middle income households and their ability to travel, thus lessening demand for hotels in the lower price tier,” said STR President Amanda Hite.
Demand in the economy class, according to CoStar, declined 4.8% year-to-date June due in part to peaking inflation. As of September 2024, the inflation rate in the United States is 2.5%, which is the lowest it’s been since February 2021.