OYO, led by Ritesh Agarwal, is acquiring the well-known American hotel chain Motel 6 and its sister brand Studio 6 for $525 million (approximately Rs 4,400 crore). The purchase involves G6 Hospitality LLC, the parent company of both brands. This deal is part of OYO’s strategy to grow its presence in the US market. The agreement was finalized on September 20, 2024, and the transaction is expected to be completed by the end of 2024.
Current US Hotel Market
This acquisition comes at a time when the US hotel industry is facing challenges like low occupancy rates and stagnant room prices. According to a Wall Street Journal report, customers at economy hotels typically pay around $79 per night, which is a 14% increase from five years ago but lower than last year. This situation highlights the current struggles of many hotel chains in the economy segment.
Know About OYO
Founded in 2012 and based in Gurugram, OYO is a global hotel chain that allows users to easily book hotel rooms through its app. OYO’s portfolio includes both leased and franchised hotels, as well as homes and living spaces. Currently, OYO offers more than 174,000 hotels across 35 countries. In the US, OYO operates over 320 hotels and plans to expand by adding 250 more in 2024.
Importance of Motel 6
Motel 6, founded 62 years ago in Santa Barbara, California, is one of the most recognized lodging brands in the US. The brand is named after its original room price of $6 per night, which appealed to many traveling salespeople. G6 Hospitality LLC operates nearly 1,500 economy lodging locations in the US and Canada, making it a significant player in the budget hotel market.
In 2012, Blackstone purchased Motel 6 and invested $900 million to improve the brand, which now generates $1.7 billion in gross room revenues. Despite inflation and rising costs, experts believe the economy hotel segment is set to grow in 2025, particularly due to the $53 billion Chips Act aimed at boosting semiconductor production, which will likely increase demand for budget accommodations.
OYO’s acquisition of Motel 6 marks a significant step in its growth strategy in the US market. This move not only strengthens OYO’s portfolio but also positions it well in the expanding economy hotel sector.
