Partners in aviation but competitors in hospitality.
While much has been written about AirAsia chairman Tony Fernandes and Ratan Tata being the perfect business partners for budget travel, the two are ardent competitors when it comes to budget hotels in India.
Fernandes' hospitality company Tune Hotels not only plans to take on Indian-branded budget hotel chains including Tata’s Ginger and Lemon Tree Hotels Pvt Ltd’s Red Fox by opening 30 properties in the next three years, but is also competing for Ircon International, a company under Railways to set up hotels at 14 semi-developed sites near key railway stations across India.
According to a report in DNA, Tune Hotels, India Services , a joint venture between Tune Hotels and Mumbai-based Apodis Hotels and Resorts Ltd, Tata Group’s Ginger, Accor’s Formule 1 and Lemon Tree’s Red Fox are the major players in the race for the 14 sites located in Jammu, Allahabad, Haridwar, Udaipur, Jodhpur, Gwalior, Indore, Jabalpur, Raipur, Digha, Siliguri, Hubli, Madurai and Kannur.
These land parcels are a huge opportunity for budget hotel chains due to the prominent locations, ready markets and clear title developments. ( Read the full DNA report here).
Tune Hotels currently has just one property in India, which was opened in Ahmedabad earlier this year but Fernandes has big plans for his hospitality arm.
Tune Hotels is looking at $30 million investment for its first 30 hotels in the first phase and is likely to make the budget segment more competitive even though demand is relatively high in this sector as it plans on offering "five-star beds at 1-star prices".
Tune Hotel in Ahmedabad offers rooms at Rs 1,000-2,500 a night, while Ginger’s tariffs are Rs 1,400-3,000.
However, Fernandes plans on leveraging Air Asia’s strength to gain market share in India, targeting cities to which it flies.
Striking such synergies with AirAsia's operations and promotional schemes while developing its footprint may just give Fernandes the necessary edge over Tata's Ginger Hotels.