Oyo acquiring US hospitality chain with 1,500 motels for $525 million

New York, Sep 21: Boosting its international presence, Indian hospitality major Oyo’s parent company Oravel Stays is acquiring Motel 6 and Studio 6 chain with about 1,500 facilities across the US and Canada from the investment company Blackstone in a $525 million cash deal, the US firm said on Friday. With the acquisition of G6 Hospitality, parent company of the two budget lodging chains, Oyo will become a major player in the US and Canadian hospitality industry, which is already dominated by Indian Americans.

Blackstone said that Motel 6’s franchise network produces gross room revenues of $1.7 billion. Motel 6 is ubiquitous across the US and Canada known for its relatively cheap rooms that, however, conform to the corporate standards in maintenance and hospitality. Stay 6 is an extended stay network for guests who want to rent rooms with more facilities for longer periods.

Oyo International CEO Gautam Swaroop said that the group will continue to operate as a separate entity. “This acquisition is a significant milestone for a startup company like us to strengthen our international presence”, he said. “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”, he said.

Blackstone said, “Oyo will leverage its comprehensive technology suite as well as its global distribution network and marketing expertise to further strengthen the Motel 6 and Studio 6 brands and drive continued financial growth”. Since its launch in the US in 2019, Oyo has steadily increased it portfolio and now operates 320 hotels about 100 acquired last year in 35 states, according to Blackstone.

There are 108,000 hotels and motels in the US, and, according to the Asian American Hotel Owners Association, Indian American entrepreneurs own about 60 per cent of them. A large number of Motel 6 facilities are already run by Indians. Blackstone bought Motel 6 from the French hotel company Accor in 2012 for $1.9 billion.

While selling the company for only $525 million may seem a bad deal, the travel industry publication Skift, said that in fact Blackstone made a sizeable profit by selling off many of the properties it acquired. Blackstone managed to more than triple its investors capital and generate over $1 billion in profit by investing $900 million in improving the properties and then selling off hundreds of them the publication said.

When it was founded in 1962, Motel 6 got its name for the $6 price of hotel rooms at that time.