Insight - Retail, hotels and travel struggle for survival

“Many hotels are not able to sustain any longer; in the current environment, closing down is inevitable, ’’ said Malaysian Association of Hotel Owners executive director Shaharudin M Saaid.(pic)

HIT again with lockdowns from this new Covid-19 variant, the retail, hotel and travel sectors are struggling to sustain.

Hotels and travel companies are hit big time; some related to the retail sector are getting creative, and seeing gradual take-up of their services, while others still struggle with the lack of consumer spending.

Hotels are estimated to have lost RM150mil a week during this movement control order (MCO) 3.0, even as they were hoping to get some business during the Ramadan berbuka puasa buffets and Hari Raya holiday break.

“Many hotels are operating at less than 50% capacity while many more are still closed; with continuous MCOs, a lot of them will never re-open.

“Many hotels are not able to sustain any longer; in the current environment, closing down is inevitable, ’’ said Malaysian Association of Hotel Owners executive director Shaharudin M Saaid.

As at 2017, the value of hotel assets stood at RM35bil; about 100 hotels had closed for good since 2020 and early 2021.

Hotels acting as quarantine stations still have some business in the new norm.

On average, a hotel has guests for five to 15 rooms per day; the food and beverage (F&B) business is significantly reduced as dine-in is not allowed; revenue from online F&B for takeaways and delivery, is not much.

Hotels have reduced manpower cost by 50%; cutting salaries by 50% and putting staff on no-pay leave for four to 15 days.

As the hotel and tourism sector is expected to suffer for at least another year, hotels are requesting for an extension of the wage subsidy till March 2022; a 10% discount on electricity bills until December 2021; moratoriums respectively on bank loan payments until December 2021, and assessments for the second half of 2021 and 2022.

In some states with enhanced MCO, hotels are requesting the government to subsidise or pay for the costs of Covid-19 swab tests.

Heavy losses are also incurred through payments for licences and permits.

With the current situation that cuts off revenue streams, the hotel industry is willing to impose stricter standard operating procedures such as lower capacity limit, served-buffet service, increased screening and even mandatory testing for hotel guests checking in.

“We have seen similar situations in other countries where governments provide subsidies to businesses for losses incurred due to the inability to operate, according to either business hours affected or volume, whichever is applicable, ’’ said Malaysian Association of Hotels CEO Yap Lip Seng.

The sudden halt in business due to MCO 3.0, has caused Iconic Hotel Penang to incur significant losses in a short period of time.

It is now expecting a minimal number of business travellers, while price margins for takeaways remain low and competitive.

Hotel operation costs mainly consist of labour and utilities.

“We will need to relook at our current manpower and new, energy saving measures, while designing creative ways to attract locals to stay here, ’’ said Iconic Hotel Penang general manager Kevin Cheah.

State borders are still closed but during this season of MCOs, online platform for hotel bookings, JustTonite, experienced a surge in bookings as guests are looking to get out of their homes and have a short stay at the hotel.

“People are craving for staycations, daycations and workcations outside the confines of their homes, ’’ said JustTonite founder Hanley Chew, who was CEO of Sunway International Hotels and Resorts, Berjaya Hotels and Resorts, as well as Khazanah’s Destination Resorts and Hotels Sdn Bhd.

Currently, the tightened SOPs, due to the high number of reported cases, will have an impact as people will be less willing to leave their homes.

But the 100 hotels listed on JustTonite are in full compliance while rooms are available for short getaways for residents within the vicinity of the hotels, added Chew.In their preparations for the relaunch of travel, Parlo Group is facing uncertainties related to the lack of clear guidelines from most countries on how they will handle tourists who have been vaccinated versus those who have not.

There is also lack of proper guidelines on vaccine passports and acceptance of the types of vaccines by some countries.

Parlo is looking into other potential revenue streams as the current handling of travel for Myanmar foreign workers is facing some roadblocks, said Parlo CEO Dani Yap.

With the ability to develop front and back-end digitalisation for retailers, Radiant Globaltech Bhd sees that the drive among retailers in this direction, is higher than ever.

Its management software portal AX B2B Retail has grown from a base of 2,000 trade suppliers in 2018 to 4,750 at end-2020, and is targeting over 5,500 by end-2021.

Among its clients are 7-Eleven Malaysia, Sogo, Manjaku baby mall, Parkson and Jaya Grocer.

Radiant Globaltech is also implementing more automation solutions such as a digital ordering stand which allows restaurant patrons to place their orders electronically.

“We hope the government will provide more subsidies to spur innovation in retail technologies, ’’ said Radiant Globaltech managing director Paul Yap.

Aeroline, once known for its luxury bus services, is now a certified ultra-violet C (UVC) solutions company, providing air disinfection systems for split unit air conditioners.

Operating under Giro Generasi Sdn Bhd, the company had designed and registered a patent for its product under the brand name “the uvc.co”.

Since last year, Aeroline had been sanitising its buses with UVC rays; it had tried to sustain the company until November last year when it held a voluntary separation scheme for 85% or 110 of its staff.

“We diverted the business, reskilled the coach captains and crew to do sales and installation of our new product which comes under a Philips distributorship, and is aimed at improving indoor air quality, ’’ said Giro Generasi CEO Law Cheok Gheen.

The retail sector saw a mixed performance, as reduced spending had affected groceries and pharmacies even though they had been allowed to open.

The work-from-home culture as well as the start of food services and home schooling, had boosted demand for office-type furniture, electronic gadgets, kitchen appliances, kitchen equipment, home furnishings and home plants.

“Retail companies that have easy-to-use and well-stocked online platforms which are responsive and innovative, benefitted during this MCO period, ’’ said Retail Group Malaysia managing director Tan Hai Hsin.(pic below)

Worst hit are entertainment and recreational-related outlets, bars and nightclubs, shops located in airports and bus terminals as well as those that had been highly dependent on tourists.

Popular types of retail trades include food and beverage outlets located in shop offices, convenience stores, mini markets, specialty food stores as well as clinics, dental clinics and chiropractors.

Sunshine Kingdom, with 65 durian-related products targeted at Chinese tourists, had moved to the local market with a new brand SunshineBoyz, which carries lower priced items.

“Response has been lukewarm due to lower spending power, ’’ said Sunshine Kingdom founder Aesos Lai. “We do not have any more money to continue to survive.’’

A lot of Hari Raya promotions were carried out but this year, there is no “balik kampung” or open house and less money to spend on “baju Raya”.

Such is the predicament of many sectors left in the limbo by the pandemic.

While our hope is to get vaccinated quickly, we must practise discipline and responsibility, all round, in keeping with the SOPs; we should also not save on sanitisation.

Yap Leng Kuen is a former StarBiz editor. The views expressed here are the writer’s own.