Red Planet enters budget-hotel orbit - Bangkok

The inside of a room at Bangkok’s Tune Hotel Asoke, opening in September

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Investment firm brings Tune chain to Bangkok

Traveller demographics are changing, and so are their demands.

Low-cost, value-based accommodations with a comfortable bed, great location and WiFi have taken precedence over the frills long associated with traditional hospitality, spawning a boom in hotels that value function over form.

Seeking a greater slice of the budget-hotel pie, Red Planet Hotels, an investment company, has purchased a significant stake in Tune Hotels, a subsidiary of the low-cost carrier AirAsia.

Tim Hansing, the CEO of Red Planet, attributes the Asean budget-hotel boom to the rise of cheap flights and the development of the Asian middle class.

"The budget airline system allows us to capture that market and tag on to the demand it's generating," said Mr Hansing, who worked eight years alongside Saudi Prince Alwaleed, the owner of the Four Seasons, before starting Red Planet.

The Tune buy is the biggest transaction in Red Planet's two-year history and propels the company onto Tune's board of directors. The deal moves a 16% stake of Tune into Red Planet hands, making it one of the biggest franchisees of the brand across Asean.

  Hansing: Tapping a poorly served market

"It wasn't in the original plan to buy Tune, but for Red Planet it is a total game-changer," Mr Hansing said. "This is the fastest-growing market for tourist arrivals in the world, and the budget-hotel market is served very badly in Asia."

Tune's streamlined hotels market themselves on a pay-as-you-go platform: The customer books a room, then pays for amenities as needed.

Red Planet will open a 130-room Tune Hotel on Sukhumvit Soi 14 in September, and by year-end the company will have 10 operating projects across Thailand, the Philippines and Indonesia.

Rooms will start at US$15 in Bangkok, and customers tend to add $5 worth of amenities. Air conditioning and WiFi are the most popular.

"Funny enough, towels are not that popular. People tend to bring their own," said Mr Hansing, who began in the industry 25 years ago as a carrot peeler in a hotel kitchen.

Budget hotels are often more profitable than their luxurious counterparts because they are less costly and quicker to build, offer faster return on investment, have a bigger demand base and offer more diversification.

There are 24 Tune hotels with nearly 4,000 rooms globally, with additional projects in the pipeline from Scotland to Saudi Arabia.

Red Planet, which opened shop at a new location in the Philippines today, has more than $180 million in projects operating or under construction in Asia.