Business Travel Show Europe Kick Off, 23 February,
Global Travel Risk Summit Europe, May 2023,
3rd Annual Sustainable Business Travel Summit
Mark Lankester is CEO of Tune Hotels, which has 10 properties in Malaysia and Indonesia, has recently opened its first London property and announced a second in the Broadgate complex with funding for 15 hotels in London by 2015. Tune Hotels is part of the Tune Group, the private investment group of Tony Fernandes, founder and Group CEO of low-cost airline AirAsia.
How are things going?
We are delighted. We took a long hard look at the UK market and more importantly the London market. It was a natural fit – we all have had a long history with the UK. When our sister company Air Asia launched, the UK was its first full international play, and for the longest time we were trying to find sites. The Westminster site was perfect. It’s done exceptionally well, 100% occupancy. Now it’s making sure we match our aim: 1500 rooms in London by 2012. We are also looking to the regional cities.
You own this property. Would you franchise the model?
We would, but not so much in the UK, where we’d like to own more. We are looking at Europe and Brazil as well, in Sao Paolo and Rio de Janeiro. We have 50 hotels in construction across south east Asia. We have 20 across India. We are looking at China but it is a difficult market. We’re in planning for a second hotel in London in zone one.
London must welcome more hotels at this price point
If you speak to Boris Johnson’s bunch, they say yes. But when you talk to local councils they look at it very differently. So you have to comply and stick to the same story. We are doing conversions in most cases, but we are not taking anything away. There are a lot of office buildings that are only sparsely occupied, 30 per cent occupied, and when we do a conversation we bring people into the area.
So it doesn’t need to be in destinations where Air Asia flies to?
The places we acquire probably would be those destinations, yes. And we have to understand the market to acquire property there.
How do you control pricing?
There’s always going to be seasonality in the pricing, but across the board the intention is to operate very efficiently. Our website shows very low prices, but those prices are not fully all in, or not if someone wants the extras such as breakfast. It’s all been stripped out and the pricing is a la carte. All we’ve decided to do is give people the choice and they can have the things they want.
How do you control costs?
Everything is outsourced. So we have a Costa Coffee next door to the hotel in London, which is a franchise. Traditionally we always have a 24-hour convenience store, a coffee shop (a Costa or a Starbucks), and in larger locations where we have 200 or 300 rooms, we will have a full blown family restaurant, which might be a KFC, but again, it is run on a franchise. We outsource all of this because it’s not our core business. We should be about building operational efficiencies, building the brand, marketing, handling revenue management and getting that network up.
What’s a typical size for a Tune Hotel?
The largest one, back in Malaysia, is going to be a 500-room airport hotel. We only really do four types of hotel: capital city centre, capital city fringe, airports and tier two cities. Resorts don’t work, because the expectations for a resort location are very different. The dwell time is far longer within the room. In a resort you spend more time in the room and within the resort itself, which requires an awful lot of capital to build. It’s not something we’re good at.
Is it important to build the first few before you franchise?
I think so. You have to take baby steps, prove the concept. The second we will build or convert as well, and the third, fourth and fifth we hope to transact this month.
How do you recognise the loyalty of customers?
We say our pricing is, we hope, something people will come back for. And the product. But as we go forward we have to reach outside what is normally done and look at things like a loyalty programme. And that means you have to upgrade your systems. We have names and passport numbers on the system. The odd things is that the email address is used as a unique identifier but people have a lot of different ones, so it can be difficult to have that as a key flag. We are investing heavily in technology and our property management system, but it’s challenging.
Do you email people with promotions?
Everybody who books a room through the website signs up to our database and is given the choice of signing up to the newsletter. For those that do, every time we do a promotion – which we do once every three months, with some ad hoc ones in-between – the database always gets the promotion 24 hours ahead of the general public. So they get the goodies first. And Facebook, if you are a friend and “like” us it is the same, so our customer engagement programme is beyond just the database.
But why offer promotions like that to customers who like you and are coming back anyway? Why not promote to those who haven’t stayed with you?
There are two schools of thought. Some would say they may be converts already so we should be looking at the wider market, but in terms of loyalty, the people who know you and have committed capital to you in terms of having stayed with you, they are the ones who have made us what we are today, so I think it’s important to go back and say thank you very much and here’s something for you. What we’re finding is we can tell how many people forward on some of these promotions. And the forward on becomes quite interesting, because if it’s being sent by a friend or retweeted out or put on a Facebook that can become very powerful. Rather than one to all we’re going one to one and then onto all, so we have brand advocates telling their friends.
Are people staying with you on business or leisure?
In our London property a good slug of our people are staying on business, we think about 30%. They may be SMEs or paying for themselves, and they see the tube station is right outside, and they aren’t spending a huge amount of time in the room.
You have only recently become involved in hotels...
Yes, I’ve been in charge of it for three years. Before that I was in the music business. I ran Asia for Warner Music. Tony Fernandez gave me a call, and told me he was going to take what they had done with the low cost airline and offer it to the hotel space. He explained the whole thing and I bought into it in a big way.
What’s important to the success of a hotel brand?
Service is key, and actually making sure you’ve got happy customers. Some would say that happiness is a factor of service, but we train the staff to also say “no”. We’re not a full service hotel where it’s “Yes sir!” to every request. Our moniker is five-star beds at one-star prices. But you can’t come here and expect five star services that we are not set up to handle, so they have to be able to say “no” or point out the things that we have to charge extra for.
How many staff do you need to employ to deliver this limited service?
We have seven employees for 80 rooms, and we’re building another 33 rooms across the yard which should be open in September 2011. People are very understanding of choice now, and some people prefer it. We have to comply with certain guidelines in the UK, such as the Inn Keepers Act. So whereas traditionally we charge for energy consumption, everywhere bar the UK we charge for air conditioning, primarily because hotels are the worst energy hogs. When you check into a four or five star hotel and you’re paying £250 a night you get all these messages about don’t drop your towel on the floor. But after the three night stay they don’t give you a discount for helping them reduce their operating costs. We say we’ll give you that in advance, and then we’ll charge if you want these things. Now in the UK we can’t do that. We are not allowed to charge for it. There’s an ambient temperature law so we abide by that.
Do you see further opportunities for ancillary revenues?
Yes. In Asia we don’t supply TVs, but we’re beginning to think here in London we will. Guests are saying they love the concept but want a TV and are prepared to pay for it. So we’re looking at it. The issue of TVs is the maintenance and so on, but so many people have said they do want it that we will put it in the UK and make it standard. We’ll put it there and charge for it. It’s not about clobbering people for everything you can charge for, it’s about giving people what they want.