CARROLLTON, Tex. — Rob Palleschi, CEO of G6 Hospitality, credits Canadian initiatives for changing Motel 6 and Studio 6 hotels from conversion brands to ones that are now half conversion and half new builds. Canadian Lodging News had a zoom talk with Palleschi and Irwin Prince, president and COO of Realstar Hospitality, master franchisors of Motel 6 and Studio 6 in Canada.
With more than 30 years of hospitality and business experience, Palleschi is a seasoned leader in the food-and-beverage and hospitality industries. Before he came to G6, he served as the CEO of TGI Fridays, where he demonstrated passion for long-term growth and cultivating customer engagement. Additionally, Palleschi spent 12 years at Hilton Worldwide and served as global head of full-service brands. During his tenure with Hilton, he was responsible for international operations and developing global growth strategies focused on guest experience, product quality and an energized brand identity.
G6 may not be a household name to Canadian readers, but they have 1,500 properties, including operating properties and pipeline numbers. “Together with Irwin’s team, we have 146 deals in the pipeline, 77 of which are new construction and the rest conversion,” Palleschi said.
“Conversion has always been our bread and butter,” added Prince, adding that there are 35 Motel 6 and Studio 6 properties open and operating in Canada, and that they are split 50-50 between new builds and conversions.
“We also have the new hybrid prototype [combining the two brands] — and there’s nothing like it in the segment,” Prince added. “The hybrid caters to both extended stay and transient traffic, and is really great for today’s market. We are excited to find the sweet spot for extended stay. It’s very profitable, requires lower staffing and has efficient rooms that are uncluttered and wide open.”
One owner is looking at three new properties in Northern Ontario. While these projects are temporarily on hold due to the coronavirus, Prince hopes to have one, if not two, of these hotels open by the end of the year.
G6 is doing well in the U.S. too, said Palleschi. “During the month of May, we opened three properties, a new construction in Katy, Texas, another new construction in Iowa and a conversion in Sacramento, Calif. We plan to open three over the next 10 days!” he added. “It’s not easy, but our teams are moving teams are moving forward.”
New construction properties like the one in Katy, Texas, cost less than $60,00 U.S. a key to build, not including the land, where others in the same chainscale segment cost $95,000 U.S. or more. “If you’re looking at $60,000 per key, you’re making money pretty quickly,” Palleschi said.
Palleschi added that its franchise community is strong in both Canada and the U.S. “In an owner survey conducted at the end of 2019, 82 per cent ticked off the top two boxes, in terms of satisfaction,” he said.
Palleschi credits Canada for the shift from conversions to new construction. “When I joined G6 three and a half years ago, I saw pictures of new construction in Canada. At that point, no way was anyone [in the U.S.] building a new construction Motel 6. I peppered [Realstar’s David] Blades with questions. After seeing what was happening in Canada, we launched here in the U.S., and now half of the pipeline is new construction. That’s a winning relationship, and a huge win for us.”
Prince noted that the design of the prototype for the segment paid tribute to the design sensibilities of a wide age range of customers. They wanted a design that wold not turn away boomers and would also appeal to millennials. “We wanted to put that into a package that people would want to stay at. In secondary or tertiary markets, where developers have their pick of brands, you don’t need to put a Mercedes where something more practical will do.”
He added that it’s an aspirational brand — once a developer sees it, they want to do it in multiple markets.
“Customers today are informed and smart and they know the level of experience they are looking for at any one time. They understand what’s right for a certain market,” said Palleschi.
How G6 reacted to COVID-19
At the height of the pandemic, G6 had 128 of its hotels closed or suspending operations, but they are slowly opening as local governments have relaxed the restrictions. At press time, just 70 of their hotels were closed. “Seventy is still a significant number when you’re there day in and day out — for our partners who own and operate the properties.”
Here in Canada, three of 35 Motel 6 properties are closed, but Prince noted that all of them will be open in four to six weeks. “One hotel had 100 per cent occupancy because of crew business, and one hotel had 75 per cent occupancy due to crew business. We attract first responders, medical workers and truckers plying the 401 from the U.S. delivering fruit and groceries — who are also essential providers.”
Palleschi’s concern is for the families that own the hotels, who are far from being huge, institutional players. “I worry about them — whether they can weather the storm, open sooner and regroup.” He added that both he and Prince are involved in management and ownership, and are not just in the franchise fee business.
“Owners appreciate and are relieved by constant contact and engagement,” said Prince. “They say thanks for checking in, thanks for the heavy lifting, thanks for recognizing that folks’ lives are on the line.”
Motel 6 was founded in 1962, back when the six in the name referred to the $6 price of a room. Palleschi noted that in the 58-year legacy of Motel 6 and Studio 6, the company has stayed loyal to their customers, providing properties that are clean, comfortable and affordable, not adding different brands or product types. Customers appreciate and respect that — the budget conscious, the farmers, the truckers and the oil field workers. “They’re the salt of the earth — they’re what drives our countries,” said Palleschi.
“No one cares more about their properties than our owners — they have loyalty and have built relationships in their communities. There’s no secret sauce — they just go out and appreciate their customers and get additional customers. They stick to their knitting, and stick to the plan.”