|Last October, Jonathan Gray took the stage at the annual Motel 6 brand conference in Las Vegas to explain why the Blackstone Group’s real estate division, which he heads, was investing so much money into the brand. It was the day after the private equity firm finalized its $1.9 billion acquisition of Motel 6 and the 42-year-old Gray was there to sell the move to the hundreds of hotel owners and operators attending the show. He really didn’t need to.
Every person in that crowd had long been leaving the light on for a new ownership group and the influx of capital it would bring. They knew that a company like Blackstone could supercharge the growth of Motel 6 and its sister extended-stay brand, Studio 6, just as it had done when it acquired La Quinta in 2005. And the first step in this growth plan, Gray said in his speech, was to invest in property improvements across the current Motel 6 hotel line to the tune of $500 million. That was by far the biggest applause line of the day.
Sitting on a reported $50 billion in assets that also include Hilton Worldwide and Extended Stay America, Gray’s real estate division has rapidly established itself as Blackstone’s most profitable branch through a series of bold moves like this one. It’s a bet that makes a lot of sense when you consider how much the lodging industry is benefiting from rising room rates and little new supply. So stay tuned for a big payoff.