LONDON Raag Hotels Ltd., a newly formed investment group with committed initial equity capital of £38 million, has acquired exclusive franchising rights for the no-frills Tune Hotels brand in London.
Raag plans to acquire or develop 15 Tune Hotels, providing 1,500 guestrooms and investing over £100 million into the business over the next seven years. The company has engaged Queensway Hotels Ltd. to manage its assets.
Raag concurrently announces the acquisition of Tune Hotel Westminster, the brand’s only existing property in London and which has been operating at near 100% occupancy since opening in August.
A second site has been secured close to the Broadgate area of London. Raag plans to build its portfolio by buying land or secondary commercial properties and developing these into modern budget hotels. Raag is in active discussions regarding a number of additional sites in central London.
“We see London as a key market internationally and are delighted with the performance of our first hotel in Westminster,” says Tune Hotels CEO Mark Lankester. “This new venture brings together people with complementary skills, networks and capital, which should enable us to accelerate our rollout in London. They combine real estate deal-making capability and track record with substantial detailed operational hotel management expertise and financial know-how.”
The lead investor firm in Raag is Mountgrange Investment Management. “The Tune Hotels concept is exciting because it meets a growing need in the market and provides great value for money to the customer,” says Mountgrange partner Rob Mills. “One of the most important elements of the new enterprise will be access to well-located development sites. We expect there to be a significant supply of secondary commercial buildings which can be made much more productive when converted to the Tune format. We are very happy to be working with Queensway on this opportunity as they are experts in the field of opening and operating franchised hotels.”
The Tune Hotels concept is based on providing a quality bed and shower at a very affordable price; like low-cost airlines, it uses an internet-driven marketing model with pricing driven by demand and early booking that enables it to offer very low rates. Guests can choose from an optional list of ancillary services, including the in-room TV, safe and Internet access, each at an additional cost.
There are 11 Tunes Hotels operating in Asia Pacific, including locations such as Kuala Lumpur, Penang and Bali, with plan for more than 100 new sites in China, India, Thailand, Indonesia and the Middle East.