Tune Hotels plans to raise RM238m this year

By BUSINESS TIMES

TUNE Hotels Sdn Bhd is raising over RM238 million this year from institutional property funds to finance its hotels that will be operated under the Tune Hotels.com brand.

Its director Dennis Melka said that it was finalising talks with several potential investors.

“What we are doing is we are talking to some investors in the Gulf and in the region,” he said.

“We have five to six of our own hotels under development now. We will still continue to do those. But to roll out a large hotel chain is capital intensive business, as such we are raising capital to back this,” he said.

The investors would directly fund the construction of a hotel or the purchase of a property.

Under this model, which is typical of the industry, Tune Hotels would collect management fees from the property’s owner. However, Tune Hotels would also own some hotels.

These investors may fund hotels in places like Sandakan, Tawau, Penang and Terengganu.

“We will run it for them or license it out for them,” he said.

Some of the confirmed openings include a 340-room hotel at Burmah Road, Georgetown, Penang scheduled to open in March 2008, a 168-room hotel in 1 Borneo, Kota Kinabalu, Sabah (scheduled for January 2008) and a 150-room hotel in Kuching, Sarawak (scheduled for late December 2007/January 2008).

The flagship hotel in Kuala Lumpur, which is now operating at about half its total room inventory of 173, is enjoying a 100 per cent occupancy and an average room rate (ARR) of around RM40.

“We are very happy with the results just after two weeks … but we need to improve on this. Our guests have requested for a desk in the room and bath mats. We are looking at placing LCD television in the rooms,” he said.

According to him, the hotel is already profitable. “Our operating cost is lean and our net cash is positive,” he said.

About half of the guests are from East Malaysia and 15 per cent from Singapore. A smaller percentage comes from other parts of Peninsular and other countries.

Once all the rooms are opened, the hotel hopes to run at an ARR of RM55 and fill up 75 per cent of its rooms, within the first year of operations.

Melka does not doubt that the hotel will perform well given that 4,000 rooms have been booked up until October 2007.

“We receive at least 100 to 200 bookings each day,” he said.

Tune Hotels is also in the process of buying a piece of land measuring 4,000 sq ft next to where the hotel is now located for future development.

“We have planned for an extra 150-rooms. We will see how the current hotel performs and whether the market need more rooms before we open the rest,” he said.

Tune Hotels Sdn Bhd is 72.19 per cent owned by Tune Ventures Sdn Bhd while Datuk Kalimullah Hassan and Lim Kian Onn holds 12.03 per cent each. Another 3.75 per cent is held by Tune Hotels Employee Holding Sdn Bhd.

The shareholders behind Tune Ventures are Datuk Tony Fernandes (40 per cent), Datuk Kamarudin Meranun (30 per cent), Dennis Melka (25 per cent) and Tune Strategic Investments Ltd (five per cent).