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Enter the ‘funky, frugal’ hotel

Undeterred by the global economic downturn, Tengku Sadhana Tengku Mohd Tahir has put her money and ambitions in the budget hotel business. She is developing a funky and modern budget hotel chain, aptly called Hip-Inn.COM and sporting the tagline “Funky, frugal hotel”.

Sadhana, daughter of the late Tengku Mohd Tahir Tengku Badar Shah (an uncle to the current Sultan of Selangor), owns a linen trading business and is a partner of a local restaurant business. When her brother-in-law Mohd Fizli Mansor approached her with the proposal for a budget hotel business, she was convinced of its viability and decided to set up Microconcept Hotel Sdn Bhd.

“Our goal is to have a chain of 18 budget hotels throughout Malaysia via franchise or organic growth,” says the Microconcept owner and director.

The first of these Hip-Inn hotels will be a joint venture with Bestotel Sdn Bhd on a 60:40 basis. The latter owns the existing budget hotel, called Bestotel, which has been operating for 20 years off Jalan Ipoh in Kuala Lumpur and is within walking distance to the Kuala Lumpur Performing Arts Centre (KLPac) in Sentul West.

Bestotel, occupying four shoplots in a six-storey building, will be refurbished and rebranded as Hip-Inn.COM Urban, at a cost of RM4.5 million.

“We are going to increase the existing 80 rooms to 120 rooms, while staff will be reduced from 32 to only six,” says Mohd Fizli, who is also CEO of Microconcept. The renovations will commence soon and the new hotel is scheduled to be ready in September.


Mini-budget hotels
Besides joint ventures, Microconcept may also acquire and convert older buildings, preferably old shophouses, transforming them into modern mini-budget hotels with about 50 to 70 rooms each.
“We are particularly interested in lethargic assets where we can refurbish into contemporary-looking yet affordable budget inns,” Mohd Fizli tells City & Country.

Several potential properties have been identified, including some shophouses in SS15 in Subang Jaya, and along Jalan Tuanku Abdul Rahman, KL and a small commercial building in Jalan Dang Wangi also in KL.
Mohd Fizli says the company has budgeted RM5 million to RM8 million as the initial capital expenditure for each hotel, mainly for the cost of acquisition (if any), renovations and professional fees.


Minimising costs
Microconcept’s approach may sound similar to AirAsia Bhd’s Tune Hotels .com but the former strives to offer cheaper rates than other hotels in its vicinity. Rooms come with standard features and room rates per night will range from RM35 to RM100.

“We are not as big as the AirAsia group, but we aim to provide the lowest rate possible in our own capacity,” says Mohd Fizli.

“As part of our marketing strategy, 10% of the hotel rooms will be priced at RM35 per night, 30% at RM55 per night, and 60% at RM100 per night.”

Mohd Fizli says the lowest room rates are for the early birds who book their rooms months in advance.
He adds that 60% of their customers are expected via online bookings, with the rest making reservations through travel agents, corporate packages and walk-ins.

To generate more revenue, the walls of the rooms will be “sold” as advertising space. “Our marketing team will be actively looking for advertisers, such as telecommunication companies. Revenue generated will provide funds for our future budget hotels,” he notes.

And to reduce operational costs, Mohd Fizli says each hotel will be run by a minimal number of staff of not more than six personnel who will work on shifts.

In addition, cleaning, security and maintenance services will be outsourced. Hotel guests will need to pay for any extra housekeeping or cleaning services. Guests will also have to pay more if they wish to turn on the self-controlled air conditioning in each room.

In line with the pay-as-you-use system, food and drink-vending machines will be provided.

“We have spent a lot of time and effort to find different ways to save costs and all the cost savings will be passed on to our customers as we strive to provide them value-added services at an affordable price,” says Mohd Fizli, citing the company’s goal to provide facilities and services at minimal costs.


Free broadband
As the hotel name implies, Hip-Inn.COM hotels will have a funky and chic design, coupled with eye-catching bright colours.

Sadhana believes in simple designs, with comfort and practicality in mind. The standard built-up of each room is 129 sq ft, containing a queen-size bed with an attached en suite bathroom.

Targeted at business travellers, each room will have an ergonomic-inspired workspace with free in-room broadband roaming and a 32-inch LCD set.

To ensure security, rooms will have electronic lock doors, CCTV surveillance at hotel walkways and lobby, in addition to a 24-hour security guard.

Is this the best time to kick-start a business? Sadhana says the economic slowdown presents a good opportunity for the company to take advantage of travellers who want to reduce travel and accommodation costs.

“Costs of building materials have gone down by about 30% from its peak a year ago, so we are glad to make our move now, rather than one and a half years ago when building material prices were skyrocketing,” she adds.

“The current slowdown also means we now have more options for properties which we can acquire and turn into Hip-Inns.”

 

This article appeared in City & Country, the property pullout of The Edge Malaysia, Issue 756, May 25 – 31, 2009.

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