Hotel sector takes a hit

MAH Yap lip Seng

PETALING JAYA: While Malaysia’s hotel average occupancy rate is poised to grow to 32% in 2020, more than three times its present level, the sector could see up to 15% of its businesses shutting down permanently due to the impact of the Covid-19 pandemic.

Malaysian Association of Hotels (MAH) chief executive officer Yap Lip Seng(pic below) said the overall hotel average occupancy rate is expected to be around 25.41% for this year.

“In general, hotels are not expected to record any profits with occupancy below 40%. This means having to bear with losses from March for the rest of the year; and may even extend into year 2021, ” he said in a note.

Meanwhile, in a survey of 324 hotels, Yap said half of the participants responded that they expect to close down operations.

Citing the survey, Yap said 15% of the respondents or 48 hotels would be closing down permanently, while 35% (114 hotels) intended to shut down temporarily.

Of the hotels that will be closing temporarily, the bulk of them (27%) plan to shut down until the movement control order (MCO) is lifted, 15% are still undecided while 2% are planning to either sell or renovate their establishment.

For now, MAH is projecting revenue losses of up to RM6.36bil for the local hotel sector.

The MCO, which was implemented on March 18 to tackle the Covid-19 crisis, has been extended to May 12.

Malaysia Budget Hotel Association national deputy president Sri Ganesh Michiel said it would take a long while for the local hotel industry to recover once the MCO has been lifted.

Yap: “We believe the hotel sector will be the last sector to bounce back once the MCO has been lifted, because public confidence has dropped.Yap: “We believe the hotel sector will be the last sector to bounce back once the MCO has been lifted, because public confidence has dropped."

“We believe the hotel sector will be the last sector to bounce back once the MCO has been lifted, because public confidence has dropped.

“Because of the pandemic, many people will be afraid to go shopping, traveling or staying at hotels or resorts for quite a while.”

Ganesh noted that the hotel sector is heavily dependent on the tourism sector.

“Much will also depend on whether tourism will improve. Tourists can be both local and foreign. For now, as countries around the globe are on lockdown, we will not be able to rely on foreign tourists.

“Even if the lockdown periods are lifted, it would still take some time for these people to get their finances back in order again and start traveling once more.”

With businesses suffering, Ganesh said many budget hotel operators, a lot of whom are tenants, could default on their rental payments.

“About 60% of our members are tenants. To build a 30-room hotel would require an investment of around RM1.5mil. The government has said that landlords should give rental discounts of up to 50% and tax exemptions, but some landlords are just not willing to do so.

“We found that the owners are taking advantages by rejecting or being reluctant in allowing a waiver or discounted rate of the rental payable for their tenant who had invested in converting the property into a hotel.”

Ganesh said the landlords are currently enjoying the moratorium periods in their property loan facility, adding that this was unfair to its members who are making a loss.

“The owners would also have an intention to own the hotel unethically by reason of no payment of rental.”

When that happens, the buildings ended up reverting to the landlords, many of whom do not know how to operate a hotel, he said.

“It’s not like an office building where you can refurbish it and rent it out again to anyone looking to occupy an office. You can’t simply change a hotel building, ” he said.

Last week, StarBiz reported that hotel operators could suffer millions of ringgit in lost revenue from the cancellation of Ramadan buffets, as the government continues to impose strict social restriction rules to combat the Covid-19 pandemic.

Yap said the buka puasa market was a significant period for many hotels, with some being able to earn more than RM1mil during the fasting month alone.

Some hotels, however, have been taking advantage of the MCO period by doubling up as quarantine centres for Malaysians returning from abroad.

However, Yap said revenue from this is not expected to contribute much to hotel operators’ earnings.

He said MAH had been approached by the Tourism, Arts and Culture Ministry to source for hotels at all of the country’s entry points. Initially, the hotel list provided by MAH topped 10,000 rooms, with the government committing RM150 per room per night, complete with three meals.

As of April 12,2020, the list had grown to over 23,000 rooms, with approximately 12,000 returning Malaysians being quarantined.

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