Indian budget hospitality giant Oyo, which entered
the United States market in 2019, announced on Friday it would acquire from
Blackstone Real Estate the economy hotel franchiser G6 Hospitality for $525
million in an all-cash transaction. G6 is the parent company of Motel 6 and extended-stay brand Studio 6.
The purchase would cement Oyo’s interests in the North American
market, where it put down roots just prior to the pandemic and persevered via
private funding through the downturn to manage 320 properties in 35 states. The
acquisition, expected to close this year, would add approximately 1,500 properties
in the U.S. and Canada to Oyo’s North America portfolio. Oyo plans to maintain
the brand names Motel 6 and Studio 6.
Aside from the G6 acquisition, Oyo planned to add 250 hotels
in North America this year.
Oyo executives continue to call the company, which boasts more
than 43,000 global locations, a startup. CEO Ritesh Agarwal founded Oyo in 2012
and turned its first profit in fiscal year 2023-24 to the tune of $12 million,
according to a post by Agarwal on social media channel X.
The company has raised a total of $3.4 billion in funding
over 17 rounds and filed for an initial public offering twice with the Securities
and Exchange Board of India—it has withdrawn its papers as many times. The latest
was in May when, according to Reuters, the company gained private funding that
changed its financial picture enough that it was required to modify IPO
documentation. Oyo has not yet refiled.
In the meantime, it announced Series G funding of $175
million this summer, but the round also cratered the company’s valuation to
$2.5 billion, down from a highpoint of approximately $10 billion in 2019.
G6 Hospitality president and CEO Julie Arrowsmith said in a
statement, “OYO’s innovative approach to hospitality will allow us to enhance
our offerings and [create] value to our guests while maintaining the iconic
Motel 6 brand that travelers have trusted for over six decades.”
Head of Blackstone Real Estate Asset Management Americas Rob
Harper called the transaction “a terrific outcome for investors” and “the
culmination of an ambitious business plan that more than tripled our investors’
capital and generated over $1 billion in profit over our hold period.” He added
that Blackstone believed G6 was “extremely well-positioned” for the future.
The short-term future for economy hotels, however, isn’t
looking as bright, according to a number of lodging analytics firms in the U.S..
STR’s June revised forecast for 2024, noted the growing headwinds facing budget
hotels, in particular.
"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 in a
statement. Business travel, however, could be a bright spot; how much of that
will reach down into the economy hotel segment is yet to be seen.
Oyo maintains a business travel booking portal, with
different versions depending on the geography. The U.S. business travel portal,
called Oyo B offers more than 4,000 locations globally. It was not immediately
clear what attributes qualified properties to be available in Oyo B, nor whether
the Motel 6 or Studio 6 properties would be included in that portal upon a
satisfactory close of the transaction.