Motel 6 lodging properties in the Bay Area land on the sell block

SAN JOSE — A private equity firm’s quest to offload large chunks of its lodging portfolio sparked the sale of at least four Motel 6 hotels in the South Bay, according to a review of public documents.

The buyers paid a total of $40.3 million for the three hotels, according to deeds filed with the Santa Clara County Recorder’s Office.

Recently purchased hotels include Motel 6 properties in San Jose, Santa Clara, Gilroy and Campbell.

The seller in all four cases was a hotel subsidiary controlled by private equity firm Blackstone. New York-based Blackstone is trying to shed much of its Motel 6 accommodation portfolio.

“Blackstone is trying to sell a large portion of its 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 cater to business travelers and conventions following the economic challenges caused by the coronavirus.

But it’s also possible that budget hotels that still require certain levels of staff may not be considered 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 recent transactions involving Motel 6 properties in the Bay Area that were sold by the Blackstone subsidiary:

– Motel 6 at 3208 El Camino Real in Santa Clara, 100 rooms, purchased for $13.5 million on July 7. The buyer was a Texas-based group led by Jagmohan Dhillon, senior director of DMC Hotels and Dhillon Management.

— Motel 6 at 6110 Monterey Road in Gilroy, 127 rooms, bought for $10.5 million on June 23. The buyers were Jayesh Patel and Hemaben Patel, based in the Canoga Park neighborhood of Los Angeles.

– 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 from a huge tech campus that Google leased a few years ago. The buyer was Temple Santa Nella, a group led by Ravi Patel and based in the Merced County town of Gustine.

– Motel 6 at 1240 Camden Ave. in Campbell, 19 rooms, bought for $7.8 million on May 20. The buyer was San Francisco-based Ambika Enterprises, led by Devendra Patel.

In 2012, Blackstone acquired G6 Hospitality, which started the Motel 6 chain in 1962 with a hotel in Santa Barbara that offered $6-a-night stays. Blackstone’s purchase of G6 Hospitality included over 1,000 Motel 6 and Studio 6 hotels. Studio 6 hotels are an extended stay brand.

“Generally, 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.”

The transactions involving the Motel 6 properties come at a time when the lodging market is trying to recover from a series of economic illnesses inflicted by the coronaviruses.

“Leisure and resort markets in the Bay Area have rebounded strongly and many are posting record revenues,” Reay said.

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

“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 still lag behind the leisure and resort markets.

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