DALLAS—Consistency is key for brands, particularly economy products, since consumers want to know exactly what they’re going to get. But Motel 6, and its extended-stay sister brand Studio 6, is aiming for a higher-quality product as well—and one that penetrates higher barrier-to-entry markets.
Last October, when The Blackstone Group completed the $1.9-billion acquisition of the Motel 6 and Studio 6 brands from Accor, the company announced plans to invest $500 million into corporate-owned properties. According to Jim Amorosia, CEO, Motel 6/Studio 6, the brands are well on their way to completing this relaunched renovation project, with 100 corporate-owned properties and 200 franchised properties to be refreshed in 2013. In all, the portfolio consists of approximately 1,100 hotels in North America. The company plans to complete the renovation project in 2015.
Amorosia credits Blackstone for the transformation. According to the executive, it’s not just the monetary support that has made the difference. “It’s been really very interesting and rewarding for us to be able to get a perspective from them,” he explained, noting that the company is very keyed in to the hospitality industry with its ownership of lodging entities like Hilton Worldwide and La Quinta Inns & Suites.
Amorosia also noted that Blackstone’s monetary support has made an impression on franchisees. “It’s been great for them to see this kind of backing from a player like Blackstone because they realize they’re not standing alone,” he said, adding that it alleviates the fear that the franchisee will renovate, but other hotels in the brand will not. “There’s a clearer market perspective.”
With the economy recovering from the recession and hotels deeply in need of renovation, Amorosia explained that the company is sensitive to spending money responsibly. “We have two types of renovations both with Motel 6 and Studio 6,” he said. The first is a full investment, in which the hotel changes out everything in the guestroom—casegoods, soft goods, colors, ff&e and TVs, for example. The company also has a phased process, which includes renovation of all of those elements except the casegoods. He noted that hotels that were built within the past few years or that recently went through a franchise conversion utilize this type of renovation. “It doesn’t make sense to force the franchisee to change out the casegoods because it’s still a perfectly good desk or nightstand,” he remarked. “Two or three years down the road, we’ll deal with the casegoods.”
For an owned property, a full-investment renovation costs approximately $7,500 a room while a phased renovation ranges roughly $4,000-$4,500 per room. “On top of that, depending on the particular location, there could be repairs or something of that nature to do with the box, but that’s always a much more case by case basis,” he said.
“We want a consistent product,” he continued. “The key, of course, is the execution of that. One of the things that we’re doing now, which is a bit of a departure from the past, is driving the message to the guest.” Amorosia explained that this includes signage on billboards, insignia on the exterior and brand-new lobbies. “It’s a very clear path-by-path transition, and then they get to the room and they say, ‘Look at this room. It’s a really cool looking, boutique property.’ There’s no more carpet on the floor—it’s wood-affect flooring, nice granite lavatories and flatscreen, high-def TVs.”
However, just because the economy brand is upping the ante on look, doesn’t mean it’s planning to join the amenity-creep trend that many midscale, limited-service hotels are facing. “We firmly believe that a guest shouldn’t have to pay for anything that they don’t necessarily want,” Amorosia said. “We have [amenities]available if somebody wants it, other than breakfast, which is something we really aren’t interested in. But we want to make sure that the guest is making the decision rather than the decision is being made for the guest.”
Amorosia explained that while many economy hotels are suffering from close margins, keeping these additional costs down allows the brand to achieve margins in the 30s and 40s, “which is basically where the industry is,” he said.
With an improved look and a positive economic outlook, the brands are poised for growth, according to Amorosia. “The opportunities are all around us,” he said. “It really is a question of partnering up with the right franchise owners.” He said that the company is interested in multi-unit deals. “Initially, we were doing more single-unit deals, and we’re still doing a lot of those, but we want to do more and more multi-unit deals,” Amorosia noted.
Motel 6 is also planning to move into the big urban markets. Amorosia pointed out that it opened its first hotel in Brooklyn, NY, a little over 18 months ago, and there are plans to open in another NYC borough before the end of the year. “We’ve got our eyes set on Manhattan,” Amorosia remarked. “That one won’t happen this year, but we expect that we’ll be able to get there in the future.”
Amorosia sees a lot of room for growth in urban markets. “When you’ve got 8.5-9 million people in population, there could be 30, 40, 50 locations easily across that big of a population base,” he explained. “You can say the same whether it’s Manhattan or it’s San Francisco, Chicago or Miami. All of those places, we can get a tremendous amount of urban penetration.” Amorosia also noted that there are still a lot of markets in highway locations, the economy sector’s traditional bread and butter, where there are opportunities.
While Motel 6 is an iconic American brand, Amorosia says there are major plans for the entire Western hemisphere. Currently, the company has 22 locations in Canada. “We believe there’s two more that will open there this year,” he said. “We’re looking to be in Mexico and Puerto Rico in the not-too-distant future. From there, our anticipation is to go right into Central America and South America. We’re going to really make a play in the Western Hemisphere.”
“Our pipeline is strong,” he said, adding that they’re on track to open 100 locations this year. “We see no reason why we can’t be able to get into those several thousand locations that we think Motel 6 and Studio 6 are capable of.”