Rooms for a song

Tune Hotels' low-cost, limited-service approach is set to shake up the Australian market, writes Winsor Dobbin.

Tune Hotels, best known for offering internet rates for as low as $3 a room a night, has signalled it has expansion plans in Australia's capitals.

In a move certain to create a stir among established hotel groups, the chief executive of Tune Hotels, Mark Lankester, has confirmed the company is opening hotels in Melbourne and Sydney, with other business centres to follow.

Owned by Malaysian entrepreneur and AirAsia airline founder Tony Fernandes, Tune opened in Kuala Lumpur in 2007 with one hotel. It now has 18 properties in Malaysia, Indonesia, the Philippines and Thailand. Tune's third London hotel, at Kings Cross, opened this week, with internet rates from £9 ($13) a room.

Tune's first Australian venture, 235 rooms in Melbourne's Swanston Street, is due to open in August next year.

"When you go into a new country, you have to treat that country like a Monopoly board and say, 'Right, which is the prime territory that is going to make the brand stand out?"' Lankester says.

The Melbourne hotel will be followed by a 250-room property at Sydney Airport and is linked to AirAsiaX's new daily flights from Sydney to Kuala Lumpur. "That gave us the impetus," Lankester says. "When we looked at feasibility, we thought it was ludicrous that you could get a room in the city of Sydney cheaper than you could get a room at the airport - and we aim to change that. For us, location is a key differentiator. All our hotels will be central because they are designed as urban, short-duration stay properties. You need to be relevant to your markets - and stay relevant."

On future developments, he says: "A Sydney CBD site has been identified and we like Brisbane and love Perth, but boy is it difficult to get into that market. Land prices there are through the roof. We like Adelaide, too. People have told us to go to Karratha and places like that but that is not our market. We might take a look at Hobart, though."

Tune Hotels introduced a "limited service" hotel concept, which it says offers "five-star beds at a one-star price" and guarantees lower prices for customers booking well in advance. Guests pay extra for towels and toiletries, airconditioning, television and in-room wi-fi in a similar business model to that employed by AirAsia and AirAsiaX.

Tune rooms have a single or double bed, lighting, hangers, desk, fan, mirror and bathroom with power shower, but no cupboard, clock radio or phone. Tune provides a 24-hour reception desk and security, including closed-circuit cameras, which Lankester says is popular with female travellers.

He says the Tune brand has recognition among Australian consumers, many of whom have stayed in its hotels in south-east Asia and London.

"Because we already have so many Australian customers, expansion into [this] market makes an awful lot of sense," he says. "Within four years I expect there will be at least six Tune Hotels up and running in Australia - it would be earlier, but unfortunately getting planning permission takes a long time."

The company has said it is aiming for 100 hotels in its global portfolio by 2015.