A new Tune for Aussie accommodation market?

Low-cost expert Tony Fernandes (the man behind Air Asia) is launching his Tune discount hotel marque in Australia.

This is no-frills, low-cost at a pretty spectacular level. All you get is a clean room with a comfy bed (according to the firm) and shower. Every single extra (i.e. breakfast, a towel, hairdryer, toiletries, air-con, wi-fi) have a price, none of which seem exorbitant.

The company saves big expenses by not wasting space on gyms, lounges, restaurants, pool, or varied fitouts (i.e. suites etc), and on excessive and unwarranted laundry and other services, and the consumers shares in some of those cost savings.

As the article argues, other firms (such as Accor) are in this domain (e.g. Formule 1) but it strikes me that this slight tweaking of the model might work better. If the price point is a little lower (say $40-50 a night) and the locations satisfactory (i.e. very central), this offering may well bridge the gap between:

(i) the hostel market (which is highly idiosyncratic and uncertain for the customer),

(ii) the motel market (ditto, plus with very car-dependent locations), and

(ii) the low-end hotel chains (which often seem poor quality for the price)

You’d also think that South East Asian brand awareness might also assist in attracting customers in Australia (both from Malaysian, Indonesia and around plus other international travellers continuing on in their journeys).

In a business strategy sense, you could argue that the challenge for Tune is to capture as much of the tightar$e traveller niche (i.e. Focused Low Cost dominance), or alternatively shift the Willingness to Pay algorithm for a big chunk of the broad market (i.e. a Broad Low Cost play).

Blue Ocean proponents will no doubt view this as a creating new market space, on the ground of the bridging above, although the existence of the three current competitor groups should call that into doubt.

As an aside, I’m curious as to whether Aussie councils will allow such a garish paint job… and what Coke thinks of the logo…

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One Response to “A new Tune for Aussie accommodation market?”

  1. Steve Sammartino Says:

    Seems to be a very clear uber premium and crazy low cost structure developing in most markets these days with very few innovations hitting the middle of the market. I’m really curious if this is a result of the loss of the supposed middle class incomes, or whether it is creating it?

    I also am not a huge fan of the no frills evolution, because it tends to have such an impact on the quality of the offer in the middle ground, which invariably downgrades rather than innovates to respond; Qantas domestic for example. Which leaves most people with a crappy experience or options they can barely afford.

    Steve.

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