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Indonesia's Pusako Tarinka eyes $56 mln rights issue in budget hotel push
May 20, 2014 / 9:42 AM / 4 years ago

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

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