G6 Hospitality, the company behind the Motel 6 and Studio 6 brands, is acting out an ambitious growth plan fueled by the investment of its owner, the Blackstone Group. Along with rolling out a capital improvement program across the entire system, Motel 6 is ramping up development in Mexico and South America. Last year, G6 signed an area development agreement with Latina Promohoteles, a subsidiary of Promodesa Comercial, to develop up to 55 properties by 2020 in Mexico under the brands Hotel 6 and Estudio 6. Recently, Dean Savas, G6 Hospitality’s EVP of franchise development and management, took a moment to give us an update on the deal and everything else G6.
How is the development agreement with Promohoteles coming along?
When we first started talking with Latino Promohoteles, they said, “We need a well known brand and the big red six is well known in Mexico.” So they saw the opportunity to not have to create and market their own brand and instead partner with us. Here we are a year later and we will have eight projects signed and will have four of them out of the ground by the end of the year. And we expect that place to accelerate in 2016. Now you have to remember that goes along with the change in government there, the growing middle class, all the investment they’re getting. It’s all about the timing.
Where are the new hotels being developed in Mexico?
Our first four or five projects will be in the Barielle region because that’s the center of the petroleum industry in Mexico. The oil companies there are expanding. They’re expanding by billions of dollars. A small city like Salamanca has no type of facility like this. This region is also where several car manufacturers—Nissan, Toyota, Audi, Ford—are building large plants. They’ll be bringing people in from all over the world for these plants and our Estudio 6, which is an extended stay product, is perfect for that type of consumer.
The first one in Salamanca will be part of a shopping plaza that our partner Latina Promohoteles is building. It’s a mixed-use project that’s almost a square block and it’s kind of enclosed, which is common in Mexico. When it’s finished, the plaza will be a gathering area in the city where people can spend a great deal of their time. Promodesa which is the parent company of Latina Promohoteles, is one of the largest developers of these types of mixed-use projects and has been doing it for 30 years.
How does does your marketing plan translate to the Mexican market?
It starts with us enhancing our digital footprint. We have a new brand dot com site with Motel 6 and we’re doing a lot in mobile. We’re also working with Best Day Travel in Mexico, which is like what Expedia is here, to get the Hotel 6 and Studio 6 names out in front of the Mexican consumer. By marketing through this, we believe we can do quite a bit. We also have a public relations firm that we’re working with in specific markets to go out and advertise on billboards. If you remember Motel 6 was on billboards all over the place at one time. We believe the usage of billboards and very focused marketing can help us accomplish our goal.
Will the Tom Bodett commercials be making their way to Mexico?
No, I don’t think the “We’ll leave the light on” line translates well.
I didn’t think about that.
Starting out we’re going to be in the Barielle region which is area around Salamanca, Guadalajara, and Puerta Vallarta. Then we’ll be doing four or five projects right in Monterrey. That way it will be easier for us to focus on marketing, so we don’t have to market all of Mexico. We start off by marketing in these centralized locations.
You’ve probably seen some of the Hotel 6 renderings that are interior corridor high rises with large lobbies and retail on the first and second floors. Then the third floor to the eighth floor are all hotel rooms. This is a result of us adjusting the Motel 6 concept to this market, whether it’s Mexico or somewhere else South America. The two story exterior core properties along the roadside won’t work in Mexico and we’re looking to develop these brands where the middle class will be traveling and doing their business, and where there’s international business.
How do you respond to moves other hotel companies are making in the economy space?
Here’s the brilliance of Blackstone, it saw an opportunity when no one was interested in the economy segment and bought the strongest economy brand. Then Blackstone invested in the best IT platform, the best marketing and distribution, and committed to renovate our properties. Now the company owns the economy segment, which was their plan from the very beginning. Now we are doing high double digit revPAR increases because we now have agreements with all the OTAs, a new brand dot com site, and we’re pushing e-distribution to get our top line out there. We’re also doing revenue management enhancement, not only for our own company and properties, but for our franchisees. We are building our own revenue management system.
The renovation is big because now we can push rate. There’s no such thing as a cheap Motel 6 anymore because we have to plan for what we can do now. We still have the occupancy that we’ve always had but now we have the ability to bring new customers in through new rate distribution, through the OTAs, we’re bringing new customers in to see our new product that have never stayed with us before. Now we can show them that this isn’t the same company it was before. And we’ve been very successful. As you know, the company was refinanced here not to long ago after two years. Things are going very well.
How’s your unit growth in the U.S.?
We want to be the uncontested leader. We’re going to bring everything to the economy segment that every other segment has that the economy segment has never had. That’s what we’re working on. Outside of us, there’s zero supply growth in the economy segment. We are experiencing more signings of new construction than we have in the past 8 or 9 years. We have about 45 signed contracts and 8 to 10 new constructions happening right now. People are seeing that there’s value in having economy products in their portfolios if you can find the right site and if you can build correctly. Motel 6 has always something that you can depend on. If you buy it right and you’re a good operator and a smart then it doesn’t matter if times are good or times are bad—you’ll do fine.
