AirAsia Chief Plans Ambitious Expansion of Hotels

KUALA LUMPUR ~ Malaysia’s Tune Hotels.com 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 Hotels.com, 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 Hotels.com 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 Hotels.com was to manage, license and operate the budget hotel.

Tune Hotels.com 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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