Oyo to buy iconic hotel chains Motel 6 and Studio 6 for $525 million for US expansion

Oyo agreed to purchase the iconic US hotel chains Motel 6 and Studio 6 with around 1,500 locations in the US and Canada from Blackstone Real Estate

Homegrown hotel giant Oyo is purchasing Motel 6, one of America's most recognizable lodging brands for $525 million from global investment management conglomerate Blackstone's real estate division, as a part of plans to expand in the US.

The logo of OYO, India's largest and fastest-growing hotel chain, installed on a hotel building is pictured in an alley in New Delhi. (Reuters)

Oravel Stays Ltd, the parent company of Oyo agreed to purchase G6 Hospitality LLC, the parent company of the Motel 6 as well as Studio 6 brands on September 20, 2024, with the transaction expected to close in the fourth quarter of 2024, according to Blackstone's press statement.

This comes at a time when the US hotel sector is struggling with declining occupancy and stagnant room rates, according to a Wall Street Journal report, which added that economy segment hotel customers usually pay $79 a night on average as on this year's August, which is 14% higher compared to five years back, but lesser then last year, citing analytics from data firm CoStar.

What is Oyo?

Founded in 2012 by Ritesh Agarwal and headquartered in Gurugram, Oyo is a global hotel chain allowing for fast and convenient booking of hotel rooms through its app.

Oyo's hotel portfolio comprises of leased as well as franchised hotels, homes, and living spaces, currently offering more than 174,000 hotels in more than 35 countries.

At the moment, it has over 320 hotels across 35 states in the US, adding nearly 100 in 2023 alone, and aiming to add another 250 in 2024.

What is the significance of the Motel 6 brand?

Meanwhile, G6 Hospitality LLC has nearly 1,500 economy lodging locations across both the Motel 6 and Studio 6 Extended Stay brand in the United States and Canada, with Motel 6 ranking in the top 50 of all franchises in the 2024 Entrepreneur Franchise 500 report.

Motel 6 is a 62-year old brand originating from Santa Barbara, California, whose name was derived from its rooms originally costing $6 a night, making it a hit, especially with travelling salesmen.

Blackstone had purchased it in 2012 from French hotel operator Accor, injected $900 million into improving it, and claims it now generates $1.7 billion in gross room revenues.

“Inflation is everywhere, costs are up, but their top line isn’t growing, which then puts pressure on margins,” the Wall Street Journal report quoted Jan Freitag, national director of hospitality at CoStar as saying.

However, the economy hotel segment is poised to grow in 2025 in the US, especially with the passing of the $53 billion Chips Act for boosting semiconductor production, which means construction crews will be moving around the country, and their preferred places to stay would be budget accommodations, he added.