Hospitality industry shows signs of recovery, says homestay operator

Mic Tham, director of VH Premier Sdn Bhd, owner of the Victoria Home brand

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The hospitality industry was one of the hardest-hit sectors during the Covid-19 pandemic, mainly due to the restrictions placed on international and domestic travel throughout the movement control order (MCO) period.

However, local homestay operator Victoria Home has seen a surge in occupancy rates after hotels and homestay were allowed to reopen, hinting at a possible recovery of the hospitality industry and the domestic travel industry in general.

"Before the crisis, we had quite a steady and healthy occupancy rate of about 80 to 90% most of the time for most of our properties in the Klang Valley, as well as some properties in Ipoh and Malacca," Mic Tham, director of VH Premier Sdn Bhd, owner of the Victoria Home brand.

"When the crisis hit in March and April, our occupancy rate dropped between 30 to 40%. We still have some existing tenants that cushioned the numbers, so it did not drop to zero. We were actually quite worried that occupancy rates would take a long time to recover to at least 60%. But within two weeks, some of our properties have already returned to an occupancy rate of 70-80%."

Tham also foresees the domestic tourism industry growing stronger in the near future, especially for boutique hotels and forest retreats in rural areas. She explains that families tend to avoid crowded places, and these options are popular destinations for staycations during this period of time.

However, Wong Chea Hao, director of VH Premier Sdn Bhd, highlights that different locations are recovering at varying rates due to the different customer demographics. He explains destinations such as Malacca are mainly supported by domestic and Singaporean tourists. Thus occupancy rates have rebounded back to pre-Covid levels of about 50-70%.

Wong Chea Hao, director of VH Premier Sdn Bhd.

"Meanwhile, homestays in Klang Valley are mainly supported by foreigners, especially the Kuala Lumpur City Centre (KLCC) area where we also have quite a few properties. Properties that heavily rely on foreign tourists will take more time to rebound because foreigners are not allowed to enter the country," says Wong.

Wong also points out that boutique hotels are hit worse than homestays during the MCO period, citing Muk, a boutique hotel run by Victoria Home in Malacca, as an example.

"When the MCO first started in March, guests were uncertain and worried whether they would be able to continue staying at the hotels, or even travel at all. The hotel industry was pretty much stagnant throughout the MCO period, and even during the conditional MCO period," says Wong.

"But once the travel ban was released in early June, we saw a quick rebound in the hotel industry. I would say that right now we are consistently within the 50 to 70% occupancy rate range. I would say that our hotel business has rebounded pretty quickly, immediately after we were allowed to reopen."

For the homestay occupants that made up the 30% occupancy rate throughout the MCO period, a significant portion were returning Malaysians completing their mandatory quarantine period. There were also frontline and essential workers, as well as professionals looking for an alternative space to work on a mid-term basis, says Tham.

"When MCO first started, there were Malaysians who had just returned to Malaysia and needed a space to quarantine themselves for 14 days. This is before the Malaysian government enforced compulsory quarantine at its chosen centres. For these people, a homestay was a good alternative," Tham explains.

While consumer demand for homestays is slowly warming up to its pre-Covid levels, there have been major shifts within the supply side of the industry, according to Wong.

"Many homestay operators did not foresee Covid-19, and some of them expect the crisis to be a huge, long-lasting event. Many of them are actually trying to, or have already exited the business before or during the MCO period," says Wong.

"So until today, we are looking at taking in some of the leftover properties from these operators. We are still actively accepting new property owners, and we still have our online channels open. So there have been quite a few inquiries, and we have been trying to secure deals with them."

Tham adds that some of these operators have approached Victoria Home themselves, to see if they are able to take over some of the existing property portfolios to help the property owners transition to a new operator seamlessly, as the last display of responsibility towards the property owners.

"But we have also heard from some property owners that the operators that were handling their properties previously have exited the business without informing them. Some did not even return the building access card. But this sort of issue is happening everywhere, not just in property management," says Tham.

Wong explains that the property owners were anxious about the future of the homestay industry during the height of the Covid-19 crisis, and many of them have considered opting out of the Victoria Home platform. He highlights that good communication between stakeholders is essential to get through this difficult period.

"More than half of our time [was] spent addressing these concerns by the property owners. Are we going to continue operating? Are their properties still rentable?" says Wong.

"Our partners want to know how we are going to handle the situation. So we are offering the property owners who choose to stay on with us more flexible terms while exploring the additional leasing options they might have."

"For properties that are slow to recover, even though we may be able to acquire long-term tenants that are looking to stay for a couple of months, property owners are still unable to make what they used to earn when they first joined us. So these properties will still have to wait for the crisis to recover and international borders to open."

Tham adds that one of the key business challenges during the MCO period is the effective delegation of human resources. She explains that the hospitality industry is heavily reliant on on-the-ground workers and frontline support and they had excessive resources when the MCO was in place.

To address this, many of the staff members were deployed to start a non-profit initiative called VTapau, a platform that connects food and beverage (F&B) outlets to online users at zero listing fees for all merchants.

To date, VTapau has secured more than 10,000 food varieties on the platform, hosting more than 1,000 merchants all across Malaysia. Wong highlights that VTapau is not a food delivery platform, and delivery services are dependent on each individual merchant.

"We got this idea when an auntie from a hawker stall that we patronise regularly, told us how difficult it was to operate during the MCO because no one was on the streets at the time," says Wong.

"Our initial focus was to help small hawkers and eateries that have less exposure to digitalisation, because we are more familiar with the digitisation process, and we think that these platforms are the future of the hospitality and F&B business."

"If you look at our back-end operations, the digital infrastructure needed to set up an F&B outlet is similar to the one we have for homestays and hotels. So we just needed to make some tweaks to make it more F&B-friendly."

Despite the setbacks faced during the MCO period, Tham is extremely positive on the long-term outlook of the homestay and travel industry here in Malaysia. This is mainly due to how the Malaysian government dealt with the public health crisis, and foreigners' sentiment towards Malaysia as being a relatively safe place to travel.

"When our international borders are reopened, we would just need to capture about 2-5% of the people who want to travel out of the country for a breather. The first question that comes to their mind is, which country is the safest to travel?" says Tham.

"So if Malaysia is able to continue keeping the rate of infections low, and sticks to a positive recovery route compared to other Asean countries, it is most likely to rebound faster in terms of foreign travel."