Motel 6, with about 1,500 locations in the U.S. and Canada, takes its name from its original nightly rate of six dollars. Photo: Brian Snyder/Reuters
Motel 6, one of America’s most recognizable lodging brands, has a new owner after an India-based hotel giant has agreed to buy it for $525 million.
Oyo, the new owner, said on Friday it is making the acquisition as part of its plans for ramping up its U.S. expansion.
Motel 6 has provided beds to budget-conscious travelers of America’s highways for the past 62 years. The brand, with about 1,500 locations across the U.S. and Canada, takes its name from its original nightly rate of six dollars.
New York investment firm Blackstone BX -0.96%decrease; red down pointing triangle, which acquired Motel 6 in 2012, is the seller. The sale is expected to close in the fourth quarter.
Oyo was founded about a dozen years ago. The budget-hotel operator expanded rapidly to become one of the world’s largest hotel chains. Venture capitalists helped fuel that growth, in particular SoftBank Group 9984 1.88%increase; green up pointing triangle. In 2019, the Japanese venture firm led an investment round of more than $1 billion that valued Oyo at $10 billion.
But Covid-19’s disruption to the travel industry and quality-control problems at some hotels during Oyo’s brisk global expansion forced the company to slow down and regroup. It has been growing its presence in the U.S. over the past couple of years, and currently operates 320 hotels across 35 states.
That footprint is poised to get a lot bigger now that Oyo’s parent company, Oravel Stays, is acquiring Motel 6’s parent company, G6 Hospitality, which also includes the Studio 6 hotel brand.
“Motel 6’s strong brand recognition, financial profile and network in the U.S., combined with Oyo’s entrepreneurial spirit will be instrumental in charting a sustainable path forward for the company,” Gautam Swaroop, CEO of Oyo’s international division, said in a statement provided by Blackstone.
Motel 6 will continue to operate as a separate entity, he added.
The first Motel 6 opened 62 years ago in Santa Barbara, Calif., and was a hit with traveling salesmen. The brand became famous for its roadside locations, no-frills lodging and folksy 1986 advertising campaign that told customers, “We’ll leave the light on for you.”
The Santa Barbara property is now known for the opposite of cost savings. It is one of the chain’s priciest, due to its location in an affluent vacation community, with rooms often selling for hundreds of dollars a night.
After decades of expanding near major highways and in smaller towns, Motel 6 began focusing more on major American cities.
The all-cash transaction with Blackstone ends an unusually long period of ownership by the private-equity firm, which acquired Motel 6 in 2012 in a deal valued at $1.9 billion. The pandemic delayed Blackstone’s exit from the investment, according to a person familiar with the matter.
Accor, the giant French hotel operator, sold the chain to Blackstone after it had slowed investment in Motel 6 and turned its focus elsewhere.
Blackstone poured $900 million into improving the chain’s real estate and has spent the past dozen years selling off hundreds of individual Motel 6 properties, as it converted the chain to a franchise company, according to the person familiar with the matter. The investment firm has sold almost all of the more than 550 Motel 6 hotels it acquired 12 years ago.
“This transaction is a terrific outcome for investors,” said Rob Harper, head of Blackstone Real Estate Asset Management Americas. In all, Blackstone more than tripled its investors’ capital and generated over $1 billion in profit, he said.
Motel 6’s franchise network produces annual gross room revenues of $1.7 billion, according to Blackstone.
The deal comes as the U.S. hotel industry’s economy sector is struggling. After benefiting briefly from the surge in travel coming out of the pandemic’s lockdown period, budget hotels are now struggling with declining occupancy and stagnant room rates.
Economy-class hotel customers paid $79 a night on average this year as of August, about 14% higher than five years ago but down slightly from last year, according to analytics for data firm CoStar.
