Tune Hotels making big waves

BUDGET hotelier Tune Hotels Regional Services Sdn Bhd, which operates under the Tune Hotels.com brand, has been making waves in the local hospitality scene even though it had only commenced operations since May.
Chief executive officer Mark Lankester said that like the no-frills airline AirAsia Bhd, low-budget Tune Hotels is poised to make waves and capture a huge market.

Mark Lankester“We have started rolling out expansion plans in Malaysia as part of our strategy to eventually have hotels in all AirAsia destinations.
“However, we are not limiting our openings to destinations that budget carrier AirAsia flies to,” he said, adding that the next hotel would be opened in Kota Kinabalu and Kuching.
The company now runs a flagship hotel at Jalan Tuanku Abdul Rahman in Kuala Lumpur, while about 20 hotels are under refurbishment or development.
Since the opening of its flagship hotel in Kuala Lumpur, Tune Hotel had received positive feedback.
The budget hotel follows closely AirAsia's model by offering rooms for accommodation at attractive prices, starting as low as RM9.99 per night.
“The potential in our business model is apparent from the hotel's high occupancy rate since our launch in May this year, with an average occupancy rate of 95% on weekdays and 100% on weekends,” Lankester told StarBiz in an interview recently.

Tune Hotels.com’s flagship hotel in Jalan Tuanku Abdul Rahman“We will spend about RM7mil to construct an annexe building of 50-rooms at our flagship hotel. It is scheduled for completion within ten months,” he said.
The group is also working on a greenfield project on about an acre at KL International Airport's low-cost carrier terminal.
The budget hotel at the airport is expected to be ready by first quarter 2008.
Tune Hotels is 72.19%-owned by Tune Ventures Sdn Bhd. Datuk Seri Kalimullah Hassan and Lim Kian Onn each hold a 12.03% stake and the balance 3.75% is held by Tune Hotels Employee Holding Sdn Bhd.
The shareholders behind Tune Ventures are Datuk Tony Fernandes (40%), Datuk Kamarudin Meranun (30%), Dennis Melka (25%) and Tune Strategic Investments Ltd (5%).
Beyond Malaysia, Tune Hotels is already looking at Bali and Bangkok but Lankester said the group wanted to strengthen its position locally before venturing overseas.
He said that by end-2008, there would be about 40 Tune Hotels in operation and under various development stages.
“We have received numerous offers from global property investors to assist with the roll-out of Tune Hotel across Asia.
“Hopefully by next year, we will have between 10 and 20 hotels, and add on about 15 hotels yearly,” he added.
Tune Hotels has a US$50mil joint venture with the Dubai government and a Singapore business tycoon to open 30 budget hotels in South-East Asia over the next 24 months.
Tune Hotels will have a 20% stake in the venture, while Istithmar PSJC, the investment arm of state-owned Dubai World, will hold 40%.
The remaining 40% will be held by City e-Solutions, a hospitality business which is majority-owned by City Developments, of which Singapore tycoon Kwek Leng Beng has a share.
Lankester said Tune Hotels was currently scouting for centrally-located properties in major tourists areas such as Bali, Jakarta, Bangkok and Phuket.
“Our first overseas hotel is expected to be opened in Bali by the end of next year. The location of the hotel is probably along Kuta Beach,” he noted.
Tune Hospitality Investment Dubai, a private equity real estate fund controlled and managed by Tune Hotels group, announced that it would open two hotels next year in Bali.
The group said it had secured two parcels of land to build a 146-room no-frills hotel at an estimated investment of US$3.65mil and a 196-room hotel for US$4.9mil.
Both hotels are expected to be operational by end 2008.
Lankester said: “We intend to open two or three hotels in the same vicinity.”
Besides Bali, Tune Hotels is likely to open its doors in other Indonesian cities such as Jakarta and Yogjakarta or in the capital and island resorts of Thailand.
Lankester said there was a fair amount of activity in Indonesia, given the popularity of AirAsia in Indonesia.
“There are about 68 incoming flights to Bali on a daily basis and we are looking at possibly three or four hotels in Jakarta, also in Yogjakarta and Bandung,” he said.
Moreover, Lankester said the company was currently looking at several sites in Bangkok, Phuket and Koh Samui.
“Tune Hotels is expected to either purchase or lease existing hotels and remodel them, or build new ones,” he said.
Lankester said that sometimes it was better to build new hotels from scratch, as this would be more economical.
He said each hotel was expected to cost RM15mil, while the average size of its hotels would be between one and 1.5 acres.
“We plan to develop some of the hotels and then franchise the brand and expertise to property owners,” Lankester said.
He said the company was in the process of raising capital for its expansion. “We have been talking to the banks and strategic investors,” he said.
On the capital needed, Lankester said it would depend on the investors and the number of hotels to be built.