Budget group Tune Hotels set to open 25 UK hotels by 2019

16 October 2014 by
Budget group Tune Hotels set to open 25 UK hotels by 2019

Budget hotel group Tune Hotels has announced it is to open at least 25 hotels in the UK in the run-up to 2019, bringing its total in the country to 32. The roll-out represents an investment of upwards of £200m and spearheads its launch into the rest of Europe.

The Malaysian-based company has just opened its sixth UK property, a 104-bedroom hotel in Newcastle city centre, and will unveil its seventh at London's Canary Wharf in January. The next tranche of hotels will be in central urban locations such as London's Shoreditch, Leeds and Liverpool.

"It's a fairly robust pipeline, but in terms of timing we are well placed. The UK is turning and there is more optimism," said group chief executive Mark Lankester.

Lankester was unfazed about competition from the burgeoning budget sector: "Compared with Premier Inn and Travelodge, we are a small player," he said. "But the market is under-served, because Premier Inn is going up in terms of price and Travelodge is trying to follow that."

He pointed out that Tune offers affordability in city centre locations. Its demand-based dynamic pricing structure means guests only pay for what they want and use. If they don't want towels, a TV or Wi-Fi, for example, they don't pay for it. Room size is "space-efficient" on the basis that business and leisure guests spend little time in their rooms. The focus is on providing a clean room with "five-star" bed, power shower and security.

This mirrors the no-frills budget airline model of AirAsia, which is also part of parent company Tune Group, the private investment group of founder Tony Fernandes.

As with the budget airlines, "the earlier you book, the better the price", said Lankester. For instance, guests who book nine or 10 months ahead online can secure a room for £25 or as little as £10 with a promotion. Conversely, the last room of the day in central London could be £80.

Typically, Tune finances its hotels through bank debt. Most are conversions of commercial buildings, particularly 1960s-70s properties that are not regarded as prime real estate, but are in prime locations.

From the UK, Tune plans to target the rest of Europe. The brand's arrival in the UK in 2010 marked its first foray outside Asia. It was chosen for several reasons. The shareholders had natural synergies here and there was an AirAsia flight from Kuala Lumpur to London. More significantly, it was part of a long-term strategy to trial the concept and get a foothold in Europe.

"Lots of Europeans come to London or Edinburgh and they get to know our brand and allow us to springboard in. We now have the thumbs up to launch the brand in their home countries," said Lankester.

With the biggest percentage of its European guests coming from Austria and Italy, Tune will make its Continental debut in Vienna by the end of 2015 and in Florence by spring 2016. The team in the UK will drive the European expansion.

"We will rapidly grow from there," said Lankester.

Tune, which has 44 hotels across Malaysia, Indonesia, Thailand, Philippines, India, Australia, Japan and the UK, also has ambitious expansion plans worldwide. In addition to Europe, it is looking to grow its portfolio in Asia, as well as launch into the Middle East and Africa.

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