Motel 6, a motel business in the United States, was recently acquired by OYO from Blackstone Real Estate for a price of $525 million. As a consequence of this, the Indian hotel aggregator would acquire almost 1400 properties located around the United States.
It was announced on September 20, 2024, that Oravel Stays Ltd, the parent company of OYO, had acquired G6 Hospitality LLC, the parent company of the Motel 6 and Studio 6 brands. According to Blackstone, the transaction is anticipated to be finalized by the fourth quarter of 2024.
Motel 6’s Business Model
Motel 6 operates motels all throughout the United States and Canada, offering guests hotel rooms that are both tidy and clean at reasonable prices. As a result of the chain’s initial pricing of six dollars per night when it was first established, the name “Motel 6” was given to the establishment.
Both OYO and Motel 6’s business models have been developed on the motto that is compatible with the idea of delivering clean accommodations to travelers on a minimum budget.
The acquisition, on the other hand, takes place at a time when the hotel industry in the United States is experiencing difficulties with decreased occupancy and consistent room rates, as stated in a report published by one of the biggest media houses of the US. The report revealed that customers prefer to stay in a low budget hotel that is priced around $79 per night on an average. This figure is 14% higher compared to five years ago, but it is still lower than the expectations of the US hotel industry.
How This Deal Can Provide a Win-Win Situation for Both?
The combination of OYO’s entrepreneurial drive and the strong brand awareness, financial profile, and network that Motel 6 possesses in the United States will be extremely helpful in determining a path ahead for the firm that is both sustainable and profitable. According to the statement issued by Blackstone, there was a comment made by Gautam Swaroop, CEO of OYO’s international division.
Rob Harper, who is the head of Blackstone Real Estate Asset Management Americas, has stated that this acquisition is an excellent conclusion for investors.
Motel 6 was acquired by Blackstone in 2012 from the French hotel company Accor for a price of $1.9 billion. Following the acquisition, Blackstone committed $900 million to enhance the chain’s offerings. However, it has recently sold it to OYO for a price that is less than half of what it was valued at in 2012.
The hospitality industry has evolved immensely in the last two centuries. In the early 1800s, inns were the only lodging facilities that were available for tourists. However, at the turn of the century, the definition of lodging expanded to include food and drinks that were also provided for tourists and travelers. Soon, the element of luxury blended in, giving birth to hotels.
It was in the year 1829 when American architect Isaiah Rogers designed and constructed the first luxury hotel in Boston, Massachusetts. The hotel was named ‘Tremont Hotel’. The hotel boasted of private attached bathrooms with locks on the doors. The year 1829 is considered as a landmark in the history of the American hospitality industry. The 20th century is known as the beginning of the modern hospitality era.
The 20th century saw innovations in transport systems that allowed more and more people to travel to various destinations. Enterprising entrepreneurs seized the opportunity this presented and jumped into the hotel business. The middle of the century saw the rise of giant hotel chains that have a global presence today. Famous names like Marriott, Sheraton Group, and Hyatt emerged as major players within the hotel industry. Increasing intercity travel due to the increasing use of cars and a well-connected road network also favored the growth of motels. This concept within the hospitality industry was well received and motels, too, grew in numbers. It is the 21st century that has seen maximum advancements with technological integrations in the hospitality industry. Apart from building some of the tallest hotels like Fairmont Makkah and Burj-al-Arab; Airbnb opened, signaling a new segment in the hospitality industry.
About Airbnb
AirBedandBreakfast.com, commonly known as Airbnb, Inc. was founded in the year 2008 by Brian Chesky, Nathan Blecharczyk, and Joe Gebbia. The company is headquartered in San Francisco, USA, and operates as an online marketplace for short-term and long-term homestays and experiences. The company plays the role of a broker and charges a commission for each booking.
Over the years, Airbnb has acquired many companies and has expanded internationally beginning with its first international office in Hamburg in the year 2011. The company has grown exponentially since it began operations and has gone on to become one of the most valuable and successful startups in the world. Airbnb has revolutionized the tourism and hospitality industry with a significant impact on HORECA (Hotel, Restaurant, and Catering) industry. It has disrupted the traditional HORECA model affecting revenue decline for hotels in certain markets. A notable detail of Airbnb is that it is one of the only major travel companies that does not have a loyalty program.
With its business model of providing a platform for peer-to-peer exchanges, Airbnb has been fortunate to avoid any major rental and hotel tax laws so far. However, there exists a certain similarity in the way Airbnb and the hotels, function. Hence, it allows for a comparison of certain parameters between the two business models to gain insight into which is best suited to the tourism industry.
Price
Airbnb operates as a marketplace where hosts and guests exchange housing for money with the company earning a commission. It does not have a direct effect on the prices of the lodging offered, as hosts retain the rights to set the prices for different lengths of stay, cleaning fees, weekend stays, and additional guests. Hotels, on the other hand, maintain a pricing scheme that meets consumer demand and the price includes housekeeping services. Of course, both Airbnb and hotels charge a premium during holidays and at a tourist-friendly destinations. In recent years, though, Airbnb has substantially closed the gap even in the luxury segment by widening its offerings.
Type of Accommodation
This is where, perhaps, Airbnb trumps hotels due to the variety of accommodations that it can offer like standalone homes, shared spaces, apartments, and even some hotel rooms. Moreover, Airbnb accommodations offer residential-style amenities including living rooms, kitchens, dining rooms, laundry facilities, and sometimes even private parking spaces that are all included in the cost of the homes. Hotels, on the other hand, can provide some of these amenities at a surcharge. They are more traditional with guest rooms and some suites.
Quality of Stay
Between hotels and Airbnb accommodations, hotels come out on top when it comes to quality of stay. Hotels have a staff that is available 24/7 with immediate access to daily housekeeping services available which is included in the cost. Also, hotel guests can get an immediate resolution to any service complaints while Airbnb guests have to contact the hosts resulting in a loss of time. Airbnb homes also charge extra for cleaning services and sometimes, it may not be available at all.
Can Airbnb Outperform a Potential Recession? | WSJ The Economics Of
Flexibility of Reservations
This is one area in which both hotels and Airbnb vary. Hotels offer refundable and non-refundable rates. However, extenuating or unforeseen circumstances will result in hotels relaxing on non-refundable rates and waiving any charges. These policies in hotels are all clearly stated and uniformly applicable. Airbnb hosts often set their own cancellation and refund policies which may widely differ from host to host. Although Airbnb offers cancellation policies for a limited number of extenuating circumstances, individual experience varies based on the situation.
Loyalty Programs
Most hotels have a robust loyalty program that encourages guests to repeatedly book rooms and in return get many rewards that include free stays, salon services, discounts on food and beverages, etc. Such reward programs guarantee a certain percentage of sales for hotels. Airbnb, however, has no such loyalty program and is dependent on the individual guest experience with the hosts for repeat bookings.
Conclusion
The question arises – Which is better? Airbnb or Hotels? The answer, however, is not a simple yes or no. It rather depends on the individual guest and the type of accommodation and service they are looking for as well as their budget. While it is true that hotels, in general, are a safer bet about quality and safety, Airbnb offers many more attractive deals and options than most hotel chains.
FAQs
Who are the founders of Airbnb?
AirBedandBreakfast.com, commonly known as Airbnb, Inc. was founded in the year 2008 by Brian Chesky, Nathan Blecharczyk, and Joe Gebbia.
Which is better, Airbnb or hotels?
It depends on the individual guest and the type of accommodation and service they are looking for as well as their budget. While it is true that hotels, in general, are a safer bet about quality and safety, Airbnb offers many more attractive deals and options than most hotel chains.
Simran Shahid
