KUALA LUMPUR—Tune Hotels & Resorts has aggressive plans to nearly triple its global footprint by 2016.
Part of British-Malaysian businessman Tony Fernandes’ AirAsia conglomerate, Tune now is focusing expansion efforts in Africa and Europe. The company has 36 hotels in Asia, with the majority in Malaysia (13 hotels). Tune also has four hotels in London and one in Edinburgh, Scotland.
Executives have their eyes set on major cities with major airports—all the better to influence the door-to-door travel booking journey.
“(Fernandes’) air passengers said, ‘Thanks for the planes, but when we get to the destination, the hotels are too expensive. Why not use your airline’s business model in hotels?’ So he did,” said Mark Lankester, group CEO of Tune Hotels, during a telephone interview.
“What do you really need in and of a hotel? Be in the very heart of the action and have fantastic beds and hot, powerful showers,” he said, adding that great security and cleanliness, and Wi-Fi that works are also built into Tune’s model.
The airline-to-hotel path has emerged as a viable growth model for many businesses, executed by companies such as:
- Emirates Group: Emirates Airlines with Emirates Hotels & Resorts Residences;
- Virgin Group: Virgin Atlantic Airways with Virgin Hotels and Virgin Limited Edition; and
- EasyGroup: EasyJet with EasyHotel.
Expansion
Tune’s goal is to operate 100 hotels by 2016—an attainable target, Lankester said.
The company has sites in Dublin and Austria on the cards, he said, and a property in London’s Canary Wharf is planned. The brand also has broken ground in Nairobi, Kenya, and is looking at other East African sites, buoyed by the rise in that continent’s middle class.
“If you really get down and dirty, you’ll find (good hotel sites). There are times they might not come through known channels. You have to aggressively search, and you have to buy well,” Lankester said.
“Real estate is a very local business, and you can fail miserably when you own in too many markets. We work with partners who are well entrenched, and that definitely is our African model. In other destinations, we do own and operate, and increasingly will do so,” he said.
Lankester has his sights on two other destinations. He said Australia is incredibly strong, and Japan is behind its new prime minister, Shinzo Abe.
“Emerging from an airline, we look at the same kind of data that airlines do—how to illicit new travel and add capacity to it. We strive to understand market ebbs and flows and how to reach into destinations to cross market the digital platform,” he said.
Most development will come through conversions of existing properties, he added, but executives will consider new builds on sensibly priced land.
Tune operates using a franchise platform, with partners such as Raag Hotels in the United Kingdom and Red Planet Hotels in Southeast Asia.
Tune hotels average between 150 and 200 keys.
Pricing model
“These rooms are sold at very attractive prices,” Lankester said.
Rates for a room start at a budget flat rate with the option for guests to add on additional services. Rates increase with the inclusion of add-ons such as towels and toiletries as well as air conditioning and early check-in.
Additionally, third-party advertising dots hotels. Space in Tune’s hotels also is leased out to retail operators such as coffee shops.
“Our model is empowering. We provide all possible needs on our booking engine, and then it is your choice to opt out,” Lankester said.
This model is perfectly suited for a shorter-length-of-stay product in an urban setting, one attracting more business guests, the CEO said.
To drive direct bookings, Tune opens new booking periods with attractive price points, but the chain will enlist online travel agencies as it expands its portfolio from nine countries.
“What I have found is that if you do not have a huge legacy, you have no fear of failing. When we came out with the idea, many said it would not work, but we have always been of the opinion that guests want clear customer service during the booking process,” Lankester said, “but not necessarily things such as roomservice during their stay.
“Across hotels, roomservice is being slowly phased out,” he added.
Lankester is driving a process that intends to give the hotel industry a thorough shake up to “give it a soul and put something forwards,” he said.
“If you look at the order books for Airbus and Boeing, they are enormous, and most of their passengers will be low-cost, middle-class and aspirational. This is a huge phenomenon; travelers going to places their parents could not afford.
“I’m not saying that the 5-star hotel guys will not be part of that,” Lankester said. “It’s just that I believe we will be more so.”