Indonesia"s Pusako Tarinka eyes $56 mln rights issue in budget hotel push

* Company aims to almost triple hotel rooms to 3,000

* Profit margins for budget hotels can hit 50 pct-Pusako CEO

By Fathiyah Dahrul and Eveline Danubrata

JAKARTA/SINGAPORE, May 20 (Reuters) – Indonesian hotel

operator PT Pusako Tarinka Tbk is planning a 635.5

billion rupiah ($55.7 million) deal with the company that

operates Tune Hotels, a budget hotel chain founded by Malaysian

tycoon Tony Fernandes.

The Indonesian company also aims to nearly triple its hotel

rooms to 3,000, with most of the expansion in Jakarta and other

major cities in Southeast Asia’s largest economy, Pusako Tarinka

President Director Suwito told reporters on Tuesday.

“The budget, or value-for-money, hotel sector in Indonesia

is the fastest growing, the most resilient, and the most

profitable sector of the hospitality market,” said Suwito, who

like many Indonesians uses one name.

Profit margins for budget hotels in Indonesia can go as high

as 50 percent as they only offer rooms without food and

beverage, he added.

Under the deal, Pusako Tarinka will sell 1.27 billion shares

at 500 rupiah each in a rights issue in June. PT Red Planet

Indonesia and its affiliates will subscribe to the shares and

the listed company will be renamed PT Red Planet Indonesia.

Red Planet currently owns and operates seven hotels in

Indonesia under a franchise agreement with Tune Hotels.

From 2009 to 2013, the total sales value of Indonesian

budget hotels has jumped 79.5 percent to around 3 trillion

rupiah, according to Euromonitor International data.

This outpaces the 8.7 percent rise to 14.9 trillion rupiah

for luxury hotels over the same period, the market research

consultancy added.

Budget hotels mainly target middle and lower-middle income

consumers who mostly travel by low-cost carriers and have

limited budgets, said Yulia Fransisca, a senior research analyst

at Euromonitor.

“Many companies have taken advantage of this high demand in

budget hotels and in turn, spurred the whole industry growth,”

Fransisca said.

While the budget hotel sector in Indonesia is highly

fragmented and mainly dominated by local players, foreign

companies such as Accor Group and Aston Group are increasingly

showing interest in the “lucrative” market, she added.

The Indonesian government, however, has included

“non-starred hotels” in its revised negative investment list

earlier this month, meaning that foreign investors can only own

up to 51 percent of such hotels.

($1 = 11,417.50 rupiah)

(Reporting by Fathiyah Dahrul and Eveline Danubrata; Editing by

Matt Driskill)

Indonesia"s Pusako Tarinka eyes $56 mln rights issue in budget hotel push