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Motel 6 lodging properties in Bay Area land on the sales block amid economic uncertainty

SAN JOSE — A private equity firm’s quest to unload big chunks of its lodging portfolio has triggered the sales of multiple Motel 6 hotels in the South Bay, a review of public documents and industry reports show.

Buyers have paid a combined $32.5 million for the three hotels, according to deeds filed with the Santa Clara County Recorder’s Office and information posted by MSCI Real Capital Analytics.

The recently bought hotels include Motel 6 properties in San Jose, Santa Clara and Gilroy.

The seller in all three instances is a hotel affiliate controlled by private equity firm Blackstone. New York City-based Blackstone is attempting to unload a large portion of its Motel 6 lodging portfolio.

“Blackstone is attempting to sell off a lot of their Motel 6 properties,” said Alan Reay, president of Irvine-based Atlas Hospitality Group, which tracks the California lodging market.

Budget hotel brands have tended to perform better than full-service hotels that are geared toward business travelers and convention events in the wake of the economic woes that the coronavirus spawned.

But it’s also possible that budget hotels that still require some levels of staffing aren’t viewed as being as profitable as other hotels that generate much more revenue with modest levels of employees to operate them.

“With budget hotels, labor costs will be a higher percentage of their revenue,” Reay said.

Among the recent deals involving Motel 6 properties in the Bay Area that were sold by the Blackstone affiliate:

— Motel 6 at 3208 El Camino Real in Santa Clara, 100 rooms, bought for $13.5 million on July 7.

— Motel 6 at 6110 Monterey Road in Gilroy, 127 rooms, bought for $10.5 million in June.

— Motel 6 at 2081 N. First St. in north San Jose, 76 rooms, bought for $8.5 million on June 15. The hotel is about a block away from a huge tech campus that Google leased a few years ago.

In 2012, Blackstone bought G6 Hospitality, which launched the Motel 6 chain in 1962 with a hotel in Santa Barbara that offered stays for $6 a night. The Blackstone purchase of G6 Hospitality included more than 1,000 Motel 6 and Studio 6 hotels. The Studio 6 hotels are an extended-stay brand.

“Typically, Motel 6 hotels serve a mix of leisure and business travelers,” Reay said. “They definitely cater to the traveler who wants an economical choice for a hotel to stay.”

The transactions involving the Motel 6 properties are happening at a time when the lodging market is attempting to recuperate from an array of coronavirus-inflicted economic maladies.

“Leisure and resort markets in the Bay Area have recovered strongly and many are seeing record revenue,” Reay said.

The post-COVID recovery is far weaker, however, for hotels in business-oriented markets such as Silicon Valley and San Francisco.

“The downtown convention centers like San Francisco and San Jose still have a lot of catching up to do,” Reay said. “You can’t just flip a switch and get full occupancy right away. They are still lagging behind the leisure and resort markets.”

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