Hot properties: Amid the growing tourism market, new unlicensed hotels are mushrooming in Penang. — CHAN BOON KAI/The Star
Tourist demand sees unique stays flourishing in Penang
GEORGE TOWN: Unlicensed hotels in Penang are spiralling out of control due to tourist demand for “quaint accommodations”.
Rather than caring about how many stars such hotels are rated with, tourists yearning for the ambience of yesteryear seek out accommodations brimming with heritage vibes.
But because no by-law or regulation exists for “guest houses” or “heritage homestays”, such operators, despite being legal businesses, are operating without licences from local authorities.
Malaysia Budget and Business Hotel Association chairman Andy Lau Eng Leong estimates that these lodgings might make up 30% to 50% of hospitality providers in Penang.
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“Most are within the heritage enclave, with about 80% of them in pre-war houses,” he said.
“Big capital investments and the difficulty of obtaining approvals have caused many to operate illegally,” he said.
Many such operators declined to speak to The Star, but an operator in his 70s who refused to be named was willing to tell his story.
“My father bought this pre-war house before I was born.
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“We started this guest house 11 years ago and we live here, too, so we can immediately solve any problems our guests might have.
“Even our wooden window louvres must be at least a century old. I try hard to preserve the property’s heritage value.”
He sought an operating licence years ago, and among the many requirements was that every room must have a bathroom.
“I can’t do that without tearing apart the wooden floorboards and rafters, which is part of the heritage element of the house,” he stressed.
He was required to provide two car parking lots and two motorcycle parking spaces, failing which he must pay Penang Island City Council (MBPP) RM55,000 as a contribution in lieu of parking space provision.
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“Ours is a guest house, and there are thousands like ours in old cities all over the world.
“But our local authorities keep insisting we are hotels and want us to comply with by-laws for hotels,” lamented the operator.
A check with MBPP revealed that it tallied 31 unlicensed hotels on the island as of last month.
Some of the applications for licences are still pending.
MBPP records show that hotel licences were issued regularly, from 218 licences issued in 2020, followed by 225 (2021), 233 (2022), 237 (2023), 202 (2024) and 203 (2025).
“The council’s Hotels By-Law 2017 allows for the imposition of RM250 compounds on hotels without licences.
“More action can be taken against anyone displaying signboards without a licence,” it said in a statement.
On mainland Penang, Seberang Perai City Council (MBSP) recorded 20 operations without licences.
“Besides compounds, we can take them to court,” said the MBSP in a statement.
It was reported in 2015 that there were over 200 unlicensed hotels in George Town at the time, many of which were award-winning establishments.
Fuelled by booming tourist arrivals, such entrepreneurs created chic accommodations in pre-war houses but could not comply with regulations such as fire safety and heritage conservation.
In November 2017, with the grace period for legitimisation ending, MBPP raided several and tore apart the partitions of cramped rooms with sledgehammers.
On the legal hotel scene here, Malaysian Association of Hotels (MAH) Penang chapter chairman Tony Goh said the addition of new hotels last year alone boosted Penang’s 16,000-room inventory to 17,000.
He said a survey last year of 47 hotels with three to five stars in the area revealed that they were operating at less than 70% occupancy rates.
“Over 75% would be ideal.
“Five-star hotels recorded an annual growth rate of 9.1%, higher than the national average of 6.4%, with an annual average occupancy of 66% compared to the nation’s 60% average.
“The average daily room rate is just slightly above RM536 in Penang compared to the nation’s RM523.
“The annual price increase of 0.5% in Penang is much lower than the nation’s 5.7% growth due to a lack of pricing power,” he said.
