OYO, the Indian travel tech company preparing for an IPO, announced on Saturday its acquisition of the popular American budget hotel chains Motel 6 and Studio 6. The deal, valued at $525 million in an all-cash transaction, will see OYO take ownership from Blackstone Real Estate, the current parent company. This strategic move is aimed at bolstering OYO's already expanding presence in the United States.

Purchase of G6 Hospitality  

The acquisition encompasses G6 Hospitality, the parent company of Motel 6 and Studio 6, which has been a major player in the economy lodging sector. Motel 6, known for its strong market positioning and wide-reaching network, is one of the most recognizable budget brands in North America. The transaction is anticipated to close by the fourth quarter of 2024, following the usual regulatory approvals.

Motel 6's Financial Strength and Network
 
Motel 6's franchise network generates impressive gross room revenues of $1.7 billion, ensuring a solid cash flow base for G6 Hospitality. This significant revenue stream is expected to benefit OYO's long-term growth strategy in the US, allowing the Indian tech company to further penetrate the lucrative economy lodging sector.

OYO's Growth Plans for the Motel 6 and Studio 6 Brands 

OYO plans to leverage its technology platform and global distribution network to strengthen the Motel 6 and Studio 6 brands. The company will use its marketing expertise to drive further growth in the US market, ensuring that the brands continue to perform well financially. According to OYO, Motel 6 and Studio 6 will remain separate entities, continuing to operate independently.

OYO's Expanding Footprint in the US Market  

Since entering the US in 2019, OYO has seen consistent growth and currently operates over 320 hotels across 35 states. In 2023 alone, the company added nearly 100 hotels to its portfolio, and it aims to expand even further by acquiring an additional 250 properties in 2024. This acquisition marks a pivotal moment for OYO in establishing itself as a formidable player in the US hospitality industry.

Synergies Between OYO and Motel 6  

Gautam Swaroop, CEO of OYO International, emphasized that this acquisition is a major milestone for the company. He highlighted the synergy between OYO's entrepreneurial spirit and Motel 6's well-established brand, network, and financial stability in the US. This combination is expected to pave the way for sustainable growth, with both brands continuing to operate independently while benefiting from shared strengths.

Blackstone's Role in Transforming Motel 6  

Under Blackstone’s ownership, Motel 6 has undergone significant transformation. Blackstone invested heavily in enhancing the Motel 6 brand, focusing on building an asset-light franchise model. Today, Motel 6 operates nearly 1,500 hotels across the US and Canada, a feat achieved during Blackstone’s tenure. This transaction represents a profitable exit for Blackstone, generating over $1 billion in profits for its investors.

G6 Hospitality Welcomes OYO's Innovative Approach
 
Julie Arrowsmith, CEO of G6 Hospitality, expressed enthusiasm for the acquisition, noting that OYO's innovative business model would enable the Motel 6 and Studio 6 brands to further elevate their offerings. While the iconic Motel 6 brand remains rooted in its legacy of providing affordable lodging for travelers, the partnership with OYO is expected to open up new avenues for growth and customer experience enhancement.

Financial Advisors and Legal Support for the Deal  

This high-profile deal was facilitated by leading financial and legal advisors. Goldman Sachs acted as Blackstone’s lead advisor, with additional support from Jones Lang LaSalle Securities and PJT Partners. Simpson Thacher & Bartlett LLP served as legal counsel for Blackstone, ensuring the transaction followed all necessary protocols and maximized value for the private equity firm.

  
OYO's acquisition of Motel 6 and Studio 6 represents a significant step in its journey toward expanding its footprint in the global hospitality market, particularly in North America. This move will allow OYO to tap into the vast potential of the budget hotel segment in the US while enhancing the Motel 6 brand's legacy through technology-driven innovation.