This article first appeared in The Edge Malaysia Weekly on June 26, 2023 - July 2, 2023

FOREIGN tourists have yet to return here in full force.

Malaysia’s hotel industry has not recovered to levels achieved prior to the Covid-19 pandemic, both in terms of average occupancy rate (AOR) and average daily rate (ADR), as visitors from traditionally strong markets are still lacking in numbers. Nevertheless, Malaysian Association of Hotels (MAH) president Datin Christina Toh believes that things are looking up for the industry.

In 2022, the hotel industry achieved an AOR of 52.4% and an ADR of RM247, slightly lower than in 2019 — prior to the pandemic — which recorded 54.1% (AOR) and RM258 (ADR), data shared by MAH reveals.

“The industry is well on the road to recovery from the pandemic as seen from the trend of the performance metrics,” Toh tells The Edge (see charts). 

“The average performance in January to May 2023 was 49.7% in terms of AOR and RM283 in ADR,” she says, representing growth of 12.4% and 20.6% respectively compared to the same period in 2022.

As a result, the first five months of the year saw the industry’s room revenue rise by a healthy 38% compared to the corresponding period of 2022.

“If this trend continues, room revenue for 2023 is expected to exceed RM20 billion,” Toh says, against last year’s RM15.7 billion.

While growth in 2022 was predominantly supported by domestic travellers, Toh observes that the industry saw an uptick in international arrivals in the fourth quarter of 2022.

“In 2022, [tourists from] Singapore and Indonesia remained the top arrivals. Arrivals from our previous staple China, India and Thailand are still far from the pre-pandemic levels,” she observes.

The top five locations that experienced the quickest recovery in AOR in 2022 versus 2021 were Kedah, Perak, Penang, Kuala Lumpur and Melaka while Sarawak, Labuan and Putrajaya were lagging. In terms of ADR, the top performing states were Johor, Selangor, Perak, Melaka and Penang while Pahang, Labuan and Kedah trailed behind.

Even as Toh expects the hotel industry to improve in 2023, she anticipates that international arrivals will be affected due to global economic and political headwinds. Indeed, this year’s arrival target is 16.1 million tourists and RM49.2 billion in receipts. In comparison, Malaysia welcomed 26.1 million tourists and RM86.1 billion in receipts in 2019.

For 2025, which has been declared “Visit Malaysia Year” (VMY), the government has set a goal of 23.5 million international tourist arrivals and income of RM76.8 billion. While encouraging, it is still a far cry from 2019’s achievements. But, it is a start.

“On the local front, domestic travel is also seeing a slowdown due to economic conditions,” Toh adds. “[Overall,] based on data analytics for 2023 and our AI [artificial intelligence] projections, AOR will improve slightly [in 2023] versus 2022 and it is expected to be range bound at 50% to 55%.”

ADR for the year is expected to be between RM280 and RM298.

MAH has its own official data service provider called ADATA that tracks the performance of hotels in Malaysia. ADATA’s AI engine combines historical data and live room pricing data to predict demand and supply.

Interestingly, Toh says the opening of new hotels does not hamper the recovery in AOR and ADR.

“The opening of new hotels reflects investors’ confidence in the industry and should not impact the recovery trend in the medium- and long-term horizon. With continuous growth of international arrivals and domestic travel supported by active tourism promotion locally and abroad, the industry will continue to recover. With what Malaysia has to offer in terms of tourism attractions, the industry has lots of room for growth beyond just recovery from the pandemic,” she says.

Given more than 2,600 rooms are soon to be added just in Kuala Lumpur alone, Toh’s confidence is assuring.

Among the upcoming hotel openings in Kuala Lumpur with a sizeable number of room inventory is The Renaissance Kuala Lumpur, which will reopen after renovation as a dual brand — the Renaissance and the Four Points by Sheraton. 

The Renaissance will offer 400 rooms while the Four Points by Sheraton will feature 513 rooms. Other openings include the 544-room Conrad Kuala Lumpur, 450-room Hyatt Regency Kuala Lumpur, 471-room Kimpton Hotel@TRX and the 232-room Park Hyatt Kuala Lumpur.

Meanwhile, labour crunch, high operational costs, unregulated short-term rental accommodation (STRA) and music licensing payments continue to pose challenges.

“The industry-wide labour shortage remains unresolved despite engaging in meaningful discussion and consultation with various ministries,” Toh says, adding that the request to expedite the process for foreign labour applications has gone unnoticed, which will have an impact on the quality of service.

Should the issue not be adequately addressed, she opines it could be a major setback for the industry ahead of VMY2025, which is just 1½ years away. A shortage of staff in critical departments like housekeeping is already impacting the ability of hotels to maintain the desired quality of service standards, she says.

“As demand for accommodation is expected to increase significantly leading up to and during VMY2025, the issue is likely to worsen.

“The industry continues to face significant challenges due to high operational costs. This issue was worsened by the fourfold electricity tariff hike, which increased from three to 20 sen at the beginning of the year. The sudden surge in electricity expenses has put additional burden on hotels and other hospitality establishments,” Toh emphasises.

Another area of concern is unregulated STRA, which continues to place pressure on the hotel industry.

“Platforms such as Airbnb and similar services have introduced intense competition for hotels,” she says.

However, Toh notes that there have been positive developments in Penang and Perak, which have taken steps to regulate the STRA segment. “We are currently working to have the rest of the states follow suit on this encouraging progress.”

In March, the Penang government said it had issued separate guidelines for short-term stays in high-rise accommodation and in landed properties. Stratified projects must obtain approval from the joint management body (JMB) or management corporation (MC), and short-term stays must not be longer than three days per reservation. In addition, each unit cannot be booked for more than 180 days in a year.

On May 25, the Penang Island City Council (MBPP) provided further details and said that all forms of STRA at private residential units on the island were banned with immediate effect. Serviced apartments; small office/home office (SoHo), small office/flexible office (SoFo) and small office/versatile office (SoVo) units; office suites and duplex offices could operate if they had the approval of the JMB or MC, with 75% of owners voting in favour of the scheme.

The JMBs and MCs are also to collect RM250 to RM500 a year in fees per unit. The units must be registered with MBPP and the respective owners will have to pay a one-time security deposit, ranging from RM1,000 to RM3,000 per unit.

The issuance of music licensing and payment is also an issue because there are numerous music licensing bodies that hotel operators need to keep track of and pay.

“This has led to significant confusion among hoteliers,” she says.

Accordingly, MAH is working with the relevant ministries to advocate for a single collection body.

On MAH’s plans, ahead of VMY2025, Toh says its members are focusing on raising the service standards of member hotels. MAH, through its education arm, MAHTEC, is conducting comprehensive hotel training programmes at both the national and chapter levels (state level).

MAH, which is celebrating its 50th anniversary next year, also conducts free training programmes covering various aspects of hotel operations and service delivery, contributing to the professional development of hotel staff that will ultimately improve the overall guest experience.

Following the success of the Hospitality Leadership Conference (HLC) held in May, which saw speakers share insights into leadership strategies, sustainability and technological innovations, HLC 2.0 is being planned for next year.

“These events serve as a platform for knowledge sharing and industry networking, contributing to the growth and advancement of the hospitality sector,” Toh adds. 

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