A multi million-dollar fund based in Abu Dhabi is being launched to help Millennium and Copthorne to develop a chain of budget hotels in the region.
The hotel group wants to expand its trendy loft-style Studio M brand across the Middle East and Africa by creating a fund that would be required to raise US$150 million (Dh550.9m) to $200m in its first phase.
"We are working on creating our own hospitality fund," said Ali Hamad Lakhraim, the president and chief executive of Millennium and Copthorne, Middle East and Africa.
"We are thinking to start with 10 hotels in the first three years and expand it across the region."
Potential initial locations for the hotels include Abu Dhabi, Dubai, Saudi Arabia and Doha, said Mr Lakhraim.
The fund is to be managed independently by a financial institution, which has yet to be announced, would be likely to attract GCC investors, including institutional investors and high net-worth individuals, Mr Lakhraim said.
Money from the fund's first phase would be used to start development in the UAE and Saudi Arabia.
"Those are the two most dynamic markets that we believe will have a lot of footfall when it comes to travellers and business," said Mr Lakhraim.
"To do them individually for a company like ours, it will take forever to have critical mass," he added.
"But if you start creating such funds, then you can expand the brand quickly."
The UAE is significantly ahead of the rest of the GCC region when it comes to budget hotel development, with 2,808 branded rooms under development.
Saudi Arabia is the second-most active market, with 1,690 rooms being built, according to research by Christie + Co, a hospitality advisory company.
Accor and Rotana are among the companies focused on opening hotels in the segment in the region.
"I would say that probably Saudi Arabia has the strongest potential because it's a very large country, and it's got a very large population of mid to low-income people who are increasingly starting to travel," said Gavin Samson, the managing director of Christie + Co, Middle East and North Africa.
