Hotel industry feeling the brunt of the virus impact

  • Corporate News
  • Monday, 06 Apr 2020

PETALING JAYA: To say that the bulk of Malaysian businesses are going through turbulent times would be an understatement.

Many have seen their sales plunge as customers stay home due to the ongoing movement control order (MCO), while others – deemed as non-essential – have been forced to completely shut down.

But even before the MCO, businesses in the tourism, retail and hospitality sectors were already feeling the impact of Covid-19 as the number of cases began rising outside of China, sparking travel fears and restrictions.

And then the Malaysian government, via the MCO which began on March 18, declared that hotels could no longer house new guests through the period, and that other services like spas would have to be closed.

Room cancellations alone, due to Covid-19 fears, the MCO, and travel restrictions, have amounted to RM68mil with 170,085 room bookings cancelled, according to the Malaysian Association Hotels (MAH).

This is aside from the loss of revenue from new bookings over the 28-day MCO period, and potentially beyond this period, given the possibility of a further extension of the MCO.

Stressing just how bad things are in the hotel scene, the MAH says 2,041 hotel employees have already been laid off due to economic pressures and the extended MCO, while 9,773 had been given unpaid leave and another 5,054 taken pay cuts as at the end of March 2020.

These numbers, it said in a recent statement, are set to continue rising over the next few months, with a recovery not expected until the third quarter.

Just halfway through the now-extended MCO, and as major cities across the globe began imposing lockdowns, two listed hospitality players have already announced temporary closures of their hotels and resorts.

On Thursday, palm oil and property player KECK SENG (M) BHD (KSM), and hospitality player LANDMARKS BHD said they are temporarily closing their hotels and resorts due to the impact of the pandemic on the global hospitality business.

KSM said it is temporarily closing its hospitality businesses in New York and Toronto in line with directives by the local authorities to enforce citywide lockdown.

Its Tanjong Puteri Golf Resort in Johor, however, continues to serve guests who had been staying at the resort prior to the MCO, although all other non-essential resort services and facilities have been suspended.

“It is currently unknown when operations are planned to resume.

“The hotels and resort division may require financial support from the holding company KSM, ” the group says in its filing with the stock exchange.

It also cautioned investors that given the evolving circumstances, it is not possible for the company to quantify or determine the extent of the impact on its business and financial position.

Separately, Landmarks told the local bourse that it will be temporarily closing its resorts and leisure operations in Malaysia and Indonesia.

“The health risks caused by this pandemic and the containment measures imposed by the government has given a huge negative impact to the business operations of the company’s resorts.”

A popular hotel in Ipoh has also said it will be closing its doors for good at the end of this month owing to financial problems which were exacerbated by the MCO.

The management of Tower Regency Hotel recently sent a notice of closure to its staff, saying the hotel, which started operations in January 2009, had suffered “millions” in losses in the last three years as it tried to keep the business running.

“The Covid-19 pandemic has severely impacted the hotel industry and also affected any chances of reviving the hotel in the immediate future.

“It is with a heavy heart that the hotel needs to take the drastic step of stopping its operations, ” it said in the memo.

Painting a dismal outlook for the sector, the MAH is projecting a revenue loss of RM560.72mil during the MCO period, with occupancy rates projected to fall to a dismal 11% from 32% the middle of last month.

A source from the hotel industry told StarBiz that they were faced with many difficult decisions, including cutting salaries and even mulling retrenchment.

The source, from a company that operates a hotel in Johor, said they had decided to temporarily close their hotel operations; without new guests, they would be incurring losses.

The cost of wages and utilities, he said, would far exceed revenue from the few guests who had checked in ahead of the MCO.

“After barely breaking even in February, we were faced with much uncertainty in the beginning of March. Singaporeans, who make up a large number of our guests, were not coming at the time.

Even before the MCO was declared, Shangri-La Hotels (M) Bhd, on its prospects for 2020, had cited a “more difficult and challenging” environment due to weaker business conditions brought about by Covid-19 in China.

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