G6 delivers enhancements, focused brand purpose

DALLAS—For the past two years, G6 Hospitality LLC, the parent company of the Motel 6 and Studio 6 brands, has been undergoing a renaissance of sorts. With CEO Rob Palleschi firmly at the helm and the rollout of the new prototype that’s seen interest from hotel owners and franchisees, the company is firmly focused on its future.

“The real story for us is that we’re a 58-year-old brand that everyone knows, which has had a renaissance over the last two years,” said Greg Juceam, president/COO.

As part of the strategy the past two years, the structure of the company was changed to separate the franchising and owned/managed sections to improve products and services. “It’s been two years since we decided on that, but where we are today, there’s a momentum in every category of the business that’s incredibly different,” Juceam said. “The Motel 6 that we know in 2020 and beyond is so different than what we’ve known in the past. It’s a storied brand, but it’s a very different future as we mature and evolve.”

He noted that alongside enhancements to the company, G6 has been clear-eyed about its value proposition, remaining focused on its existing brands. “The rest of the industry is consolidating; big brand families are buying the little guys, and it’s all being thrown into the melting pot of that brand family. G6 is taking the complete opposite approach,” Juceam noted. “We’re not buying any brands, building any brands: We have Motel 6 and Studio 6, and we’ve really spent our time trying to make those brands better for the guests and our franchise partners.”

The consolidation in the industry has also afforded opportunity to G6, both on the development side as well as when it comes to labor. “There are great employees who like something about being in a singular-focused brand, whether it’s in the field or in the corporate office, who have come to us and said, ‘Look, I didn’t really want to be part of this company that has 80,000 employees and 20 or 30 brands,’” Juceam said. “That’s been helpful for us.”

When it comes to development, Mike McGeehan, chief development officer, added, “One of the things our franchisees like most about us is we’re focused on just the Motel 6 and Studio 6 brands. They’re committed to the economy segment; they see the opportunity to make the money they can in this segment. We stay true to who we are, and they feel like we’re the leaders in the economy segment; everyone knows who Motel 6 is. I think that’s one of the reasons why we’ve led the way in the numbers in terms of signing new agreements and bringing on new properties. We continue to lead the pack on the economy side for that.”

G6 was thoughtful about the prototype design.

According to McGeehan, the current pipeline includes 178 projects, 68 of which are new-construction. “We’re the leaders in new-construction in the economy segment; we’re about 25% of the overall pipeline for economy brands of new-construction,” he said.

Additionally, G6 has seen traction with its dual-brand offering, with 40 signed agreements.

“The construction in the new-builds is such that the rooms are the same size,” Juceam said. “You can build a 100-key hotel, with 50 Motel 6 and 50 Studio 6 rooms on the same land, the same room size in the prototype. Let’s say there’s a downturn and you want 60% extended-stay. We have it built in a way that you can just pull out the transient amenities and plug in the extended-stay amenities, and you’ve changed your product. It’s just intelligent design based on the needs of the market.”

According to McGeehan, areas of focus for G6 currently include the Mountain states, Texas and Florida. “We’re also trying to put a stronger strategy together to develop in the Northeast. There are more barriers to entry there,” he said.

“Along with [new development], we put together a pretty aggressive renovation strategy; the new prototype we introduced called Gemini is a new room design as well, so it’s our renovation package too; as franchisees come in with an existing product, whether it’s another brand or an independent, we’re going to ask them to renovate,” McGeehan said. “In many cases, they renovate before they open with our brand, and in some cases, depending on the quality of the product, we may give them a year. Our goal is to get our inventory of properties fully renovated to Gemini over the next two years.”

As part of this dedication to consistency of quality, G6—which has close to 1,100 franchisees—has been discerning about its partnerships. “Over the last couple of years, our focus has been to make sure we’re being selective as to who we bring into the network,” he said. “In the vein of transparency, we’ve moved properties out in the last couple of years. We’ve gone through a period where franchisees have not committed to the quality of the brand, renovating, maintaining the standards; we’ve moved out more than we have in the past, but that’s OK. That was about 8-10% of our network, and we’re kind of at the point now where we’ve done what we need to do, and it’ll just be maintaining where we’re at.”

Juceam added that the prototype has also expanded G6’s reach. “Most of our owners today are self-proprietors, entrepreneurs. We’ve seen a lot of interest from institutional buyers, institutional owners and asset managers, and institutional management companies,” he said. “These are owners and bankers who today do upscale and upper-upscale hotels, and maybe have been reticent in the past to dip their toe into economy, but the margins are great and the product is great—the hotels are very successful. We’re going into that part of the cycle where more uncertainty typically has been good for the economy, and so they see that, and see it’s a less labor-intensive model, less capital-intensive model, and all of a sudden, it’s validating to us that people see the differentiation that is what we’ve been aiming to put together.”

Unlike most hotel brands, which have asset-light models, the company owns and operates about 300 of its properties, and has spent some $90 million on owned assets in the past couple of years. “That’s a pretty healthy clip for the economy segment. I think the punch line to all of this is that the guest is going to see a better product, and then you support it with better services,” Juceam said, adding that this also has value for franchisees. “We’re putting our money where our mouth is. When we tell them that they have a new standard they have to live up to, we also have to live up to it.”

In the end, Juceam said, “There’s a simplicity to our model that we really tried to hang on to—our parent company and our leadership—to just be grounded in who we are.” HB

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