Pusako Eyes $56m Deal With Malaysia Hotel Chain

Jakarta/Singapore. Indonesian hotel operator Pusako Tarinka is planning a Rp 635.5 billion ($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… hotel sector in Indonesia is the fastest growing, the most resilient, and the most profitable sector of the hospitality market,” said Suwito, adding that profit margins for budget hotels in Indonesia can go as high as 50 percent as they only offer rooms without food and beverage.

Under the deal, Pusako Tarinka will sell 1.27 billion shares at Rp 500 each in a rights issue in June. Red Planet Indonesia and its affiliates will subscribe to the shares and the listed company will be renamed 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 Rp 3 trillion, according to Euromonitor International data. 

This outpaces the 8.7 percent rise to Rp 14.9 trillion for luxury hotels over the same period, the company 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. 

Reuters

Pusako Eyes $56m Deal With Malaysia Hotel Chain