Oyo 2.0: After Motel 6 Acquisition, Next Comes an IPO

23.09.2024 - 22:29 / skift.com / Pranavi Agarwal / Peden Doma Bhutia

In a move to expand its international reach, India-based hospitality company Oyo announced the acquisition of Motel 6 and Studio 6, two economy lodging brands, from Blackstone for $525 million. This all-cash deal positions Oyo to significantly boost its presence in the U.S., adding nearly 1,500 properties to its portfolio.

The acquisition also strengthens Oyo’s market position as it prepares for a long-anticipated IPO. Last month, when Oyo raised INR 14.5 billion (approximately $175 million) in a funding round, the hospitality company had said that it would use the capital to support its global expansion plans.

Oyo’s journey in the U.S. began in 2019. Today, Oyo operates 320 hotels in 35 U.S. states and plans to add an additional 250 properties in 2024. The Motel 6 deal will provide Oyo with a cash flow boost: Motel 6’s franchise network produces gross room revenues of $1.7 billion, which generates a strong fee base and cash flow for G6, Oyo said in a release.

The acquisition marks a turning point for Oyo, which had initially struggled to establish a foothold in the U.S. market. With Motel 6’s brand recognition, Oyo gains not only an iconic name but also a proven model for generating revenue in the competitive U.S. economy lodging sector.

Oyo said they would not be able to comment more on the deal other than what’s mentioned in the release.

Oyo has undergone a significant transformation since its early days as a loss-making entity. For eight consecutive quarters, the company has posted profits, including a profit of INR 1.32 billion ($16 million) in the first quarter of fiscal 2025. The IPO has been in the pipeline for some time.

A source familiar with Oyo’s plans had previously told Skift that the company is close to completing a refinancing and it expects to pursue an IPO after it’s done.

Oyo initially filed for an IPO in 2021, but the economic uncertainty brought on by the pandemic led to delays. With the global hospitality market stabilizing and Oyo’s financial health improving, the company is now better positioned for a successful public offering.

The economy chain scale in the U.S. has long presented opportunities, even as the market has tilted toward upscale and upper-midscale investments. Brands like Hilton and Marriott have begun exploring midscale and premium economy options, but much of the economy segment remains ripe for disruption.

“Oyo’s acquisition of Motel 6 positions the company to capitalize on the untapped potential in this space,” said Pranavi Agarwal, senior research analyst at Skift.

In 2007, 25% of the U.S. branded hotels were in the economy chain scale which is now at 19%-20%. The U.S. economy lodging sector remains dominated by just two major players, Wyndham and Choice