Oyo to Acquire Parent Co. of Motel 6

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over 17 rounds and filed for an initial public offering twice with the Securities and Exchange Board of India—it has withdrawn its papers as many times.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.