Hotels ramping up efforts to meet expected rise in demand

 

Budget hotels are preparing for an uptick in tourist arrivals next year, but they also want government assistance to meet various challenges. (Facebook pic)

PETALING JAYA: Hoteliers in Malaysia are considering new strategies to make the best of an expected rise in tourist arrivals next year.

Many are ramping up efforts to meet environment, social and governance (ESG) requirements to boost their desirability.

However, they also want the government to help them overcome several challenges that, they say, could derail their recovery efforts.

For instance, they want official endorsement for their ESG efforts as well as steps to simplify the collection of tourism tax.

Malaysia expects tourist arrivals next year to exceed pre-Covid-19 pandemic levels.

As of November, the country has already recorded 19 million arrivals, just marginally short of the 19.1 million recorded in 2019, the year before the pandemic cut short leisure travel.

Hotels, especially those in the budget and mid-range category, have been struggling to stay afloat for several years now.

The rise in popularity of short-term rental accommodation (STRA) from as long as seven years ago has led to a decline in hotel occupancy rates, a situation that deteriorated further with the spread of Covid-19.

Apart from that, Malaysia Budget and Business Hotel Association (MyBHA) president Sri Ganesh Michiel said, hotels are also bearing the brunt of the practice of online travel agencies (OTAs) to engage in competitive pricing strategies.

As a result, Ganesh said, hotels have lost 70%-80% of their customers to STRA providers. “This decline began about seven years ago,” he told FMT Business.

A survey conducted by the Malaysian Association of Hotels (MAH) showed that in 2019, before the Covid-19 pandemic began, overall hotel occupancy rate had declined 4.71% compared with the previous year.

This was despite an overall increase in tourist arrivals in the same period.

CEO of MAH Isaac Raj said the lack of regulations to govern STRAs has given them an “unfair advantage (over hotels) in the affordable accommodation market”.

He told FMT Business STRA providers are able to set lower rates in a price-sensitive environment.

“This had triggered pricing competition among budget hotels, adversely affecting our overall business sustainability,” he added.

Ganesh said that in the struggle to keep their business going, hoteliers have had to abandon plans to improve their amenities.

“Without profits, some hotels could not even buy new towels or new linen to replace torn or worn out ones. How do you expect them to survive?” he asked.

He said the increase in the sales and service tax (SST) from 6% to 8% next year would raise operational costs further, compounding the challenge the industry faces.

Ganesh said many hoteliers have been forced to turn to offering STRA instead.

He urged the government to introduce stricter legislation to govern the operation of STRAs and the practices of OTAs to level the playing field.

MyBHA had previously proposed that the service tax threshold for budget and business hotels be raised from RM500,000 to RM1.5 million but the industry has yet to receive a response from the government.

MAH wants the ministry of tourism, arts and culture to endorse efforts by hoteliers to meet ESG requirements by issuing sustainability certificates or labels.

It said this would be in line with the National Tourism Policy 2020-2030 of promoting environmentally-friendly practices within the hotel industry.

MAH also reiterated its proposal that the tourism tax be collected at point of entry to ensure that those who opt for STRA are also not exempted from paying.

“That will alleviate any revenue loss for the government,” it said.

Ganesh said it is crucial for the government to take steps to help the hotel industry.

“We need a more proactive and robust approach to ensure the future sustainability of the hotel industry,” he added. - FMT