Blackstone bought Motel 6 in 2012, paying $1.9 billion to French lodging company Accor for the chain, whose name references its $6 nightly rate when it was founded in 1962.

Accor had itself purchased the brand in 1990 from KKR to expand its North American presence, but headwinds in the budget hospitality segment eventually turned Motel 6 into a drag on the rest of the company’s portfolio of brands.

Relatively cheap-to-build locations meant an influx of competitors, while mid-market brands like Holiday Inn began siphoning off core customer segments like frequent business travelers. "This is a business that hasn't performed particularly well over the last 20 years," noted one Deutsche Bank analyst.

Patrick Sayer, former chief executive of Eurazeo, which at the time held a stake in Accor, shared an even less favorable view of the asset: "The Motel 6 issue polluted the perception of Accor since its acquisition," he said.

An Accor initiative to transition from direct property ownership to an asset-light franchise model wasn't enough to move the needle, and Accor's CEO put out a public invitation for bids: "If anyone is interested in Motel 6, the door is open."

While not a full-blown fire sale, Blackstone did take advantage of the less-than-favorable market perception to negotiate a purchase price of around $25,000 per room, which analysts said was below replacement cost.

The sale to Oyo caps off a nearly 12-year hold period for the business, which Blackstone says "more than tripled" its initial investment. “This transaction is a terrific outcome for investors,” said Rob Harper, head of Blackstone Real Estate Asset Management Americas.

A three times return on capital over more than a decade is nothing to write home about, but early and consistent distributions mean Blackstone's final IRR on the deal is likely more attractive than it might seem.

At close, the firm contributed equity of $626 million, or around one-third of the total purchase price.

Three years later, it launched a $1.8 billion Motel 6 securitization that refinanced existing debt and let Blackstone pull out its full equity contribution, per Thomson Reuters. A subsequent 2017 refinancing returned an additional $287 million.

Around $900 million was spent on various renovation projects through the hold. Additional equity may have been required, but some or all of the spend was funded through capex reserves set aside during the refinancings and a separate fund-level debt contribution.Illustrative Motel 6 returns scenario assuming October 2012 entry and December 2024 exit

Under Blackstone ownership, Motel 6 continued its shift to the asset-light franchise model. From entry in 2012 to the most recently available data in 2021, the firm sold off at least 354 of its owned properties. Assuming a conservative value per key of around $25 thousand (the purchase price & 2012 CMBS appraised value) and a portfolio-average room count of 124, that works out to north of $1.1 billion in proceeds through 2021.

More locations have been sold since, though no definitive data is available.

Assuming outstanding debt, cumulative cash flow from operations, exit proceeds, and post-2021 location sales all net out to zero, Blackstone may have handed investors the bulk of their distributions from the deal some time ago. While the illustrative outcome is potentially rich relative to Blackstone's ‘more than tripled’ returns guidance, rough back-of-the-envelope math shows a gross IRR that is meaningfully better than what would have been achieved had distributions come only upon exit (around 10.1 percent, in that scenario).

Goldman Sachs & Co. acted as Blackstone’s lead advisor and Jones Lang LaSalle Securities and PJT Partners acted as financial advisors. Simpson Thacher & Bartlett served as Blackstone’s legal advisor.