AirAsia Chief Plans Ambitious Expansion of Hotels

KUALA LUMPUR ~ Malaysia’s Tune is setting up a US$25-million joint-venture fund with a foreign investment bank to develop more budget hotels in Southeast Asia.

Dennis Melka, director of Tune, said the no-frills hotel operator, which was founded by a group of investors including AirAsia chief Tony Fernandes, will take a 20-percent stake in the joint venture.

“We are looking at another joint-venture … with a global investment bank. I hope to announce the tie-up within the next six to eight weeks,” he said. Melka declined to identify the other party.

Last month, the company announced a $50-million tie-up with the Dubai government and Singapore tycoon Kwek Leng Beng’s Hong Leong Group to open 30 Tune Hotels in Southeast Asia.

Tune will hold a 20-percent stake in that venture while Istithmar PSJC, the investment arm of state-owned Dubai World, and City e-Solutions, a unit of City Developments, will each take 40 percent.

“There is an overwhelming amount of interest to help us set up the hotels. Southeast Asia is a huge market. The opportunities are so big it’s prudent to work with a lot of different people,” Melka said.

Melka said a 20-percent stake was adequate in joint ventures as the strategy of Tune was to manage, license and operate the budget hotel.

Tune and AirAsia share the same business model, offering a bare-bones service and an internet-based reservations system that prices flight tickets or rooms cheaply if bookings are made in advance.

Fernandes built AirAsia into South East Asia’s leading low-cost carrier after he first launched the airline in December 2001 with just two aircraft.

The aviation tycoon is expected to launch long-haul budget flights from Malaysia to China and Australia later this year.

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