MANILA, Philippines–Asian low-cost hospitality firm Red Planet Hotels Ltd. said it had acquired a minority stake in the Tune Hotels group and that the hotel chain would set up five more branches in the Philippines.
In a telephone interview, Red Planet Hotels CEO Tim Hansing said the group would double the number of Tune Hotels in the country this year to take advantage of the ongoing budget travel boom.
“We’re going to open another three or four hotels in the Philippines,” he said. “We will have branches in Quezon City, Cagayan de Oro City, Davao City and Ortigas (Pasig City).”
He said the group was also hoping to announce a new hotel within the SM Mall of Asia complex in the coming months.
“So we will have nine to 10 hotels in the Philippines by the end of next year,” Hansing said, noting that, on the average, each Tune Hotel would have about 160 rooms.
“There is huge growth in the hotel sector in the Philippines,” he added.
The Red Planet CEO explained that hotels in the Philippines had sat “half empty” for many years, but that demand had “suddenly caught up with supply” recently, resulting in a shortage of hotel rooms, especially for budget travelers.
“We recognized this was happening as early as two years ago,” he said.
Together with its other hotel investments around Asia, Red Planet will spend about $180 million to put up 3,191 hotel rooms over the next year.
There are four Tune Hotels currently in operation in the Philippines, with its newest—the Makati branch—having opened last week.
He said Tune Hotels had been very well received by the local market, as evidenced by its Ermita branch having been fully booked on its first day of operations.
He added that, unlike the troubled airline industry, budget hotels were very profitable, earning an average operating margin of 50 percent Ebitda (earnings before interest, taxes, depreciation and amortization).
He said up to 40 percent of Tune Hotels’ clients were walk-in customers.
Hotel rooms cost anywhere from $5 to $35 a night, depending on how early a client books his room, or what amenities he wants to enjoy.
In the Philippines, Tune Hotels is in direct competition with the Gokongweis’ Go Hotels which, like Tune Hotels’ tie up with AirAsia, is also co-branded with budget carrier Cebu Pacific.
“They have two hotels and they’ve been around longer,” Hansing said when asked about his competitor.
Last week, Red Planet acquired a 16.05- percent stake in Tune Hotels, equivalent to 9,975,038 shares, as both companies sought to grow the booming low cost hotel brand.
Tony Fernandes, founder of the Tune Hotel and AirAsia brands, remained the biggest shareholder of the hotel chain.
Established in 2007, there are now 24 Tune Hotels operating 3,859 rooms globally.
There is a confirmed additional pipeline of 38 more hotels with 10,106 rooms, including those in India, Scotland, Australia and Saudi Arabia along with additional properties in Thailand, Indonesia, the Philippines, Malaysia and England.
By the end of 2012, Red Planet Hotels will have 10 operating hotels with 1,623 rooms in Thailand, the Philippines and Indonesia.