IPO-bound travel tech platform OYO has announced its decision to acquire the renowned American budget hotel brands Motel 6 and Studio 6 from Blackstone Real Estate for $525 million in an all-cash deal. Oravel Stays, the parent company of OYO, confirmed that it has reached an agreement to purchase G6 Hospitality, which is the leading franchisor for both Motel 6 and its offshoot, Studio 6.
This strategic acquisition is anticipated to close in the fourth quarter of 2024, subject to customary closing conditions. The move is a significant step for OYO as it seeks to expand its footprint in the U.S. market, further solidifying its presence in the competitive hospitality sector.
The Financial Landscape of OYO’s Acquisition
Motel 6’s franchise network boasts impressive gross room revenues of $1.7 billion, providing a substantial fee base and cash flow for G6. On Your Own Room plans to leverage its comprehensive technology suite, global distribution network, and marketing expertise to enhance the Motel 6 and Studio 6 brands, driving sustained financial growth. The integration of these brands into OYO‘s operations is expected to unlock new opportunities for both revenue generation and market expansion.
Since entering the U.S. market in 2019, OYO has steadily grown its presence, now operating over 320 hotels across 35 states. This growth trajectory positions OYO well to take advantage of the established brand recognition of Motel 6, which has long been a staple in the budget hotel segment.
Gautam Swaroop, CEO of OYO International, expressed enthusiasm about the acquisition, stating, “This acquisition marks a significant milestone for a startup like us, reinforcing our international presence. The strong brand recognition and financial profile of Motel 6, combined with OYO‘s entrepreneurial spirit, will be crucial in charting a sustainable path forward for the company, which will continue to operate as a separate entity.”
Under Blackstone’s ownership, significant investments were made to enhance the Motel 6 brand’s value. This included implementing a strategy to transform the business into a leading asset-light lodging company, resulting in a franchise network of nearly 1,500 hotels across the U.S. and Canada. Such a transformation has established a strong foundation for OYO to build upon.
Julie Arrowsmith, CEO of G6 Hospitality, commented on the transition, saying, “OYO’s innovative approach to hospitality will allow us to enhance our offerings and deliver great value to our guests while maintaining the iconic Motel 6 brand that travelers have trusted for over six decades.” This statement reflects On Your Own Room commitment to preserving the heritage of the Motel 6 brand while infusing it with fresh, modern strategies.
Rob Harper, Head of Blackstone Real Estate Asset Management Americas, noted that the transaction represents an excellent outcome for investors. He highlighted the culmination of an ambitious business plan that has more than tripled investors’ capital and generated over $1 billion in profit during Blackstone’s holding period. This success story further underscores the potential that OYO is poised to tap into with its latest acquisition.
Future Prospects for OYO
As OYO embarks on this acquisition, the company is set to redefine its strategy in the U.S. hotel market. With its extensive resources and technology capabilities, On Your Own Room aims to enhance the operational efficiencies of Motel 6 and Studio 6, while also expanding their market reach. The brand’s established presence and loyal customer base will serve as a strong platform for future growth.
Goldman Sachs & Co. LLC acted as the lead advisor for Blackstone, while Jones Lang LaSalle Securities, LLC and PJT Partners served as financial advisors. Simpson Thacher & Bartlett LLP provided legal counsel to Blackstone. The expertise of these advisory firms underscores the significance of this deal in the broader hospitality landscape.
In summary, OYO‘s acquisition of Motel 6 and Studio 6 is not just a financial transaction; it’s a strategic move that aligns with the company’s vision for growth and innovation in the travel tech sector. With a robust plan in place, On Your Own Room is poised to enhance the value of these iconic brands while continuing to expand its international presence. As the deal approaches its anticipated closing date, the hospitality industry will be watching closely to see how OYO leverages this acquisition for future success.
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