Red Planet

Red Planet Hotels buys stake in budget operator Tune Hotels

Low-cost, no-frills hotel brand Tune Hotels attracts investment from Red Planet, one of its major franchisees.
Tim Hansing, chief executive of Red Planet
Tim Hansing, chief executive of Red Planet

Budget hotel operator Red Planet Hotels has bought a 16.05% holding in Tony Fernandes’s Tune Hotels, the Bangkok-based company announced earlier this week. The investment comes after Red Planet recently raised $90 million in a two-stage round of fundraising, and gives it a seat on the Tune board.

The total cost of the transaction is undisclosed, and the purchase of the existing 9,975,038 shares will be through 20% cash and 80% shares. It is the biggest single corporate investment by the firm in its two-year history. Red Planet is already a significant franchisee of the Tune brand across Southeast Asia.

“The investment represents Red Planets Hotel’s pledge to the brand and the founding members’ vision for the Tune Hotels concept,” said Tim Hansing, chief executive of Red Planet.

Malaysian businessman Fernandes is a pioneer of branded low-cost hotels, in addition to having introduced the no-frills airline model to the region with AirAsia. He formed Tune in 2007, which now operates 24 hotels with 3,859 rooms throughout the world, and another 38 are planned with 10,106 rooms in Australia, the Middle East and the UK, as well as more in Asia.

Typically, the 14 square-metre rooms offer weary travellers a high quality bed with “crisp linen sheets”, a power shower and hygienic floor-to-ceiling tiles. They can pay extra for luxuries such as TV and air-con. The basic package costs about $50 a night, the average stay is two days and occupancy rates are between 75% and 85%, according to Hansing.

By the end of 2012, Red Planet will be operating 10 hotels with 1,623 rooms in Thailand, Indonesia and the Philippines. It opened its first in Jakarta in July, and later this year plans to open three more — one in Bangkok’s Asoke district, another in Patong, Phuket, and one in Pekanbaru in Sumatra.

“This significant investment and commitment to the Tune Hotels brand is indicative of Red Planet Hotels’ well-balanced long-term development programme and provides tremendous value growth to our existing shareholders,” said Hansing.

The firm has 66 shareholders, a quarter of whom are Japanese and the rest are rich individuals. It intends to raise a further $120 million towards the end of this year, and another $100 million in 2013. Deutsche Bank was its original angel-round adviser.

If all goes according to plan, Red Planet will be operating between 80 and 100 hotels in two years’ time. The company might then consider an IPO, possibly in Hong Kong, said Hansing.

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