What is it that makes the no-frills hotel brand unique?
By Yeoh Siew Hoon - thetransitcafe.com
Tuesday, 12th June 2007
Our writer finds out from co-founder of Tune Hotels; what is it that makes the no-frills hotel brand unique and it's more than the price.

From the start, it was clear Dennis Melka was singing a different tune from the rest of the people in the room.He was after all at the Jones Lang LaSalle Hotels' Investment Conference in Singapore where the focus is usually about premium real estate and luxury hotels and residences.

But there he was, the director and co-founder of Tune Hotels.Com, talking about rooms from US$3 to US$30 a night and where you had to buy everything, including towels. And yes, you get to keep them "because we don't want it after you've used it".

As the audience laughed at the notion, Melka was adamant that this was the "next big thing" in hospitality – the no-frills segment where customers just pay for what they use, and not the extras that the hotel industry has been used to piling on.

Ask him what makes the AirAsia hotel subsidiary unique and the former investment banker who spent over a decade with Credit Suisse First Boston, rattles off the following.

"One, we challenge the conventional logic. We put a five star King Coil bed with duvet in an economy hotel for example and we require prepayment for rooms (we don't hold rooms for anyone).

"Two, we put all our inventory on-line and give the consumer the best price, not travel agents. We don't play games with our inventory, we put it for anyone to book at anytime.

"Three, we don't pretend that we can run restaurants or a convenience store, we bring in professional operators. Four, we sell 70-80% of our inventory on line and in advance direct to the consumer; and five, we built our entire business around the basics: bed, shower and security.

"We cut out the other "non-sense" that hotels think customers want. Truth is 50% of people just need a good clean place to sleep and don't spend much time in the hotel at all."

The first Tune Hotels, with 172 rooms, opened in Kuala Lumpur recently and Melka, who is also director and co-founder of Tune Money.Com, a web-based financial portal, says it is running at 95% average occupancy.

"We are sold out most nights. Average rate is RM50++ so far which we are very happy with. Customers love the bed and shower and security.

"Surprisingly, we sell very few towels, maybe less than 5% of our customers buy a towel. They understand our model."

The company is eyeing about 20 Tune Hotels in Malaysia and other ASEAN countries including Thailand, Indonesia and the Philippines. "We see a market for several hundred properties over time.

The average room size of a Tune Hotel is 10sqm and cost per room is about US$25,000 per room including cost of land, according to Melka.

Billed as "The Web's Favourite Hotel", everything is sold on-line, and even walk-up guests at the hotel are checked in on-line.

"Travel agents are welcome and we get many groups actually but… they must pay upfront and there are no changes allowed," said Melka.

Like AirAsia's model – the earlier you book, the cheaper the rates – advance booking rates for Tune Hotels start at RM 9.99++.

Said Melka, "Incomes are still relatively low in Asia for the vast majority of the population; most people work very hard for their money. So I'd say that "value" matters for the majority.

"Value is a combination of price and quality. If the consumer can afford to stay in a 4 star or 5 star, that's great. If they can't, they deserve better than the current market offers which is why we started Tune Hotels.Com.

"We offer five star beds and power showers in a facility with excellent security, branded F&B and a 24 hr convenience store. Yes the rooms are small, but that's part of the trade-off to get a five star bed at a rate which is below RM50 per night."

Yeoh Siew Hoon, one of Asia's most respected travel editors and commentators, writes a regular column on news, trends and issues in the hospitality industry for 4Hoteliers.com.

Siew Hoon, who has covered the tourism industry in Asia/Pacific for the past 20 years, runs SHY Ventures Pte Ltd. Her other writings can be found at www.thetransitcafe.com . Get your weekly cuppa of news, gossip, humour and opinion at the cafe for travel insiders.
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