LOS ANGELES—The extended-stay Studio 6 brand is primed to step out from the shadow of fellow G6 Hospitality brand mate Motel 6.
G6 Hospitality, which oversees the Studio 6 and Motel 6 brands, is looking to significantly boost its number of Studio 6 properties, said Jim Amorosia, CEO of G6 Hospitality. The brand has 90 properties in North America.
“At 90, it’s a decent number, but not a critical mass number,” Amorosia said in an interview with Hotel News Now during last month’s Americas Lodging Investment Summit. “Critical mass is probably in the 150 to 200 range.”
To help get to that critical mass number, Amorosia said the company is on the lookout to acquire a regional chain that could instantly double Studio 6’s portfolio. Such a deal could take place during the next 12 to 24 months.
“That’s where we’re keeping our fingers crossed,” Amorosia said of locating a potential acquisition target. “The right one is going to come along for the right value. So we’ll be able to make an acquisition to, for example, fill in a piece of the Midwest or significantly acquire a company that takes us into the Midwest or North Central (United States) where we can create some economy of scale, but more importantly, can create (a portfolio) that isn’t all concentrated in a handful of markets as it is today.”
He added, “Whether it’s one of the small regional groups where it doesn’t make sense for them to grow, we’ve got that opportunity because we have the built-in franchise base that wants to move it forward.”
Possible U.S. growth markets for Studio 6 include the Southwest and California, Southeast and Northeast regions. “We’re missing diversity across the system so we have an easy path for the extended-stay traveler.”
Amorosia said he views the Studio 6 brand as “a diamond in the rough” and that the brand has a tremendous future in front of it. That outlook is buoyed by Amorosia’s views on the extended-stay segment as a whole.
“It’s going gangbusters,” he said.
Blackstone acquisition
G6 was acquired by Blackstone Group for $1.9 billion in October 2012. Blackstone is investing about a half billion dollars in the Motel 6 and Studio 6 brands. The money from that investment is to be put to work during the course of the next 36 to 39 months.
The company, which has a total portfolio size of 1,200 properties, renovated 100 owned properties and 200 franchised properties during 2013 and anticipates renovating 125 owned hotels and 300 franchised hotels during 2014, Amorosia said.
The company’s goal is to reach 2,500 properties within five years or so. “We think that at 2,500 in the Americas, you’re still in that level where you’re not only benefitting each other and not negatively impacting each other, but you’re able to control the segment.”
In making its investment in G6, Blackstone saw the G6’s brands as category killers, Amorosia said.
“We want to be the McDonald’s of the hotel industry,” he said. “We’re not going to be a Kobe burger, but we’re going to be a consistent hamburger.”
G6 will likely expand its reach beyond the U.S. and Canada and into Mexico by the end of the year, Amorosia said. He said the company views growth in Mexico the same way it does Canada. G6 has 20 properties in Canada today, but Amorosia said he believes that number can be pushed to 70.
“We consider that there’s an opportunity of going into Central America; we believe there will be a play for South America,” he said. “And as we move our brand into South America, whether it’s three, five, 10 years, who knows, we believe there will be a play to go into Europe or Asia.”
The investment from Blackstone has been a boon thus far for G6 in more ways than one, Amorosia said.
“The investment is a given, but the second one that was really very interesting was, from a spirit standpoint, it raised the entire energy level of my group,” he said.
Also, developers who had worked with other of Blackstone’s hotel companies, such as Hilton Worldwide Holdings and La Quinta Inns & Suites, began contacting G6 about potential development opportunities, he said. Of the 200 hotel openings planned for this year, roughly 10% could be new builds between Motel 6 and Studio 6. The company had 90 openings a year ago.
Exit strategy
Blackstone in recent months has started unwinding some of its hotel investments, including initial public offerings for Hilton and Extended Stay America. Blackstone’s La Quinta brand also has announced it submitted a confidential draft registration with the U.S. Securities Exchange Commission. www.hiltonworldwide.com
Amorosia said it’s still too early following the acquisition by Blackstone to say what the end game will be for the Motel 6 and Studio 6 brands.
“I think it’s fair to say that Blackstone, they’re a player that takes something, fixes it, or in our case, invests in it and gives us the opportunity to fix it, and at some point in time they’re going to sell it and that’s something that makes sense for them as a real estate play,” he said. “But we’re still young in terms of the game. We’re only 15 months in versus La Quinta, which is seven-plus (years in) and Hilton, which was seven-plus.”