US$ 50 Million JV established to Develop Portfolio of Budget Hotels in Asia

Istithmar PJSC, the investment arm of Dubai World, has created a US$ 50 million joint venture company in Dubai to develop and own a portfolio of Tune Hotels in strategic business and tourism destinations in Southeast Asia.

Tune Hotels is a new “no-frills” limited-service concept created by the founders of Air Asia, Tony Fernandes and Kamarudin Meranun, to address the need for affordable, quality accommodation in Southeast Asia. The rapidly growing regional economies, coupled with the exponential growth of low cost carriers, have generated an unprecedented volume of value-based travelers.

Tune Hotels claims to offer a five-star sleeping experience at a one-star price. Each Tune room includes a luxury King Koil bed with 250 thread count duvet, en-suite bathroom with Power Shower, and an electronic key card entry system in, what the group call, a “space-efficient” room of approximately 10 square meters. Each hotel has an outsourced 24-hour convenience store, a branded food and beverage outlet, on-site 24 hour guarded security and extensive CCTV cameras throughout the public areas of the property. Tune relies on a direct-to-consumer internet-based reservation system that allows for superior inventory control and flexible, demand based pricing.

Tune’s no-frills model means that certain items such as air conditioning, towels and bathroom amenities are available for small additional charges. Average room rates are approximately US$15++ but customers who make advance bookings online at tunehotels.com can enjoy rates as low as US$3++.

Joe Sita, Chief Executive of Istithmar Hotels FZE, a division of Istithmar PJSC, said, “We have been building our hotel portfolio across many different markets and I am excited that we are able to reach into the Asian budget accommodation market with this innovative, fast growing brand. It gives us an opportunity to invest in a segment that is poised for tremendous growth in the years ahead and touches on several key themes such as the increased demand for travel by the rising middle class in Asia and rapid growth of low cost carriers in the region.”

Richard Johnson, Managing Director of Istithmar Real Estate, a division of Istithmar PJSC, said, “The hotels sector is crying out for clean, safe branded budget accommodation in major cities.

“Customers can be sure of a quality ‘sleep and shower’ experience, in a clean and safe environment, and can then choose which other items they want on top. It’s a really exciting model and we’re looking forward to rolling it out across the region.”

Dennis Melka, Director and Co-Founder of Tune Hotels, said, “We focus on delivering certain key essentials to the customer, like five-star beds and Power Showers in safe, clean hotels, but eliminating certain “frills” like meeting rooms, swimming pools and mini-bars. Our joint venture company will take the Tune experience to key cities across the region.”

The first Tune Hotel opened on 27 April 2007 in the heart of Kuala Lumpur and has enjoyed 91% occupancy since opening. Additional properties are on track to be opened in Penang, Johor Bahru, Kuching and Kota Kinabalu, amongst many other locations.

The new joint venture plans to open about 30 properties over the next three years, in Malaysia, Indonesia, Thailand, the Philippines and Singapore.

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