This article first appeared in The Edge Malaysia Weekly on January 20, 2020 - January 26, 2020

MALAYSIA’s second biggest tourism contributor is accommodation, after shopping. Last year, tourists spent RM21.62 billion on accommodation, representing 25.7% of the RM84.14 billion in total receipts. In the first nine months of 2019, RM14.29 billion, or 21.6% of the total RM66.14 billion in foreign exchange receipts, went towards their stay.

But even though tourist arrivals are increasing, they are not translating into higher occupancy at hotels. Average hotel occupancy, which has been somewhat the same since 2013, is projected to be 65% at best this year as more hotels open and the alternative accommodation business booms. At the same time, hotel operators are not expecting the average daily rate (ADR) to improve this year (see chart).

These figures were revealed by Malaysian Association of Hotels CEO Yap Lip Seng to The Edge based on a survey of member hotels.

“There are about 5,000 registered hotels in Malaysia with 290,000 rooms, and another 10,000 rooms will be added in the next one to two years. It may seem to indicate healthy growth in tandem with the increase in tourist arrivals, but in reality, hotels are not enjoying the increase,” says Yap.

He points out that while tourist arrivals have risen over a few quarters, “the same periods recorded a drop in hotel occupancy, according to our internal surveys and international benchmarking platforms”.

He cites the example of arrivals from Singapore, which stood at 7.8 million for a country with a population of 5.8 million. “Year after year, Singapore remains the top tourist arrival nation for Malaysia. The question is, are they genuinely tourists and do they contribute to the tourism industry, especially to the hotel industry?”

Malaysian Association of Hotel Owners executive director Shaharuddin M Saaid concurs with Yap, saying that the data is not very accurate and is not reflective of the true situation. “The increase in arrivals as reported is not reflected in higher hotel occupancy.”

Contributing to the situation is the addition of new hotels and unregistered accommodation or homes that are unregulated such as Airbnb, he says.

In 2012, in anticipation of a tourist arrival boom of 36 million this year, the then government had projected that we would need an additional 91,000 rooms, of which 37,000 would have to be in the four and five-star categories. But Malaysia has yet to hit its 30 million tourists target and hotels are running at 40% vacancy.

Quoting Tourism Malaysia, Shaharuddin says that this year, 11 new hotels are slated to open while in 2022, there will be two new hotels. This adds to the 10 new hotels that opened nationwide at end-2019.

“The number of hotels registered with the Ministry of Tourism, Arts and Culture does not tally with the number of hotels in Malaysia. This is easily seen on online portals such as Agoda, Booking.com and Expedia. The number of hotels registered with the ministry is about 5,000 while on these platforms, there are over 8,000,” he says, adding that this is before including the listing of Airbnb, the world’s biggest accommodation sharing website.

Data provided by market analytics firm AirDNA (www.airdna.co) to The Edge shows that between January and September 2019, the total number of active listings in Malaysia was 59,769, which chalked up a revenue of US$164.96 million (RM676.13 million), while ADR was at US$54.88. In the previous corresponding period, the total number of active listings was 46,518 while total revenue and ADR were at US$108.06 million and US$59.70 respectively.

Active listings, also called available listings, are those advertised for rent during a given month or had a booked day in the month. AirDNA specialises in the compilation of Airbnb data from all over the world, which it obtains from the hospitality company’s website.

Yap says tourists choose Airbnb mainly because of its attractive pricing. This is because the platform and hosts (owners or agents) operate entirely outside the ambit of any regulator, without the burden of compliance as well as manpower, operating and other costs.

“The argument of Airbnb being the technological disruption is not true. The digital distribution system had long existed for the hotel industry; Airbnb just took advantage of the lack of regulation and enforcement in converting homes for commercial activities,” he says.

“Our best hope is that the situation will be sustained, given the increase in inventory. And if there is no change with regard to unregistered tourist accommodation, the industry will continue to be plagued by it.”

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