Penang’s short-term rental limits will backfire

Penang’s short-term rental limits will backfire
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Of the three million international tourists who visited Malaysia in 2022, it is no surprise that many flocked back to Penang, breathing new life into the F&B and tourism-related businesses decimated by the pandemic. Many of those would have also taken to online travel platforms like Agoda, Airbnb, Booking.com, or Expedia to plan and book their vacation stays.

As one of Southeast Asia’s top attractions before COVID, Penang has a special role to play in leading the charge for tourism recovery in Malaysia this year. At this critical juncture, Penang must take bold and decisive action to adapt to new travel trends and expectations, such as digital nomads and short-term rentals, or risk losing its status as a premier cultural destination to places like Hoi An, Chiang Mai, or Bandung.

Now, the biggest ‘red flag’ for Penang’s recovery is the state’s plan to severely restrict short-term rentals in strata properties. The Penang Housing, Local Government, Town and Country Planning Committee Chairman Jagdeep Singh has said that he plans to finalise these guidelines by the end of January 2023.

Since early 2021, the Penang government has been developing guidelines which could limit short-term strata rentals to just three-days a week, and 180-days a year. This is a severe blow to travel platforms and tourism entrepreneurs who have consistently expressed their concerns over such unprecedented restrictions.

The Penang government's proposal is a disaster waiting to happen. By requiring hosts to secure 75% approval from Joint Management Bodies (JMBs) or Management Committees (MCs), they are creating a bureaucratic nightmare for everyone involved. This will not only be a pain point for hosts, but also for JMBs. The Commissioner of Buildings (COB) would also have to deal with registering all potential hosts, as well as related administrative issues.

But the real tragedy is that this ban will severely impact accommodation supply for tourists, leaving them with fewer options for authentic stays and experiences in Penang.

Penang's hardline approach is driven by fear of noise and nuisance issues at short-term rental properties, but global best practices from other jurisdictions offer far more proportionate solutions. Rather than implementing guidelines that aim to restrict STRA, the Penang government can introduce a mandatory Code of Conduct to tackle noise issues (like New South Wales in Australia), or entrust strata properties to make their own decisions on whether to allow short-term rentals.

It is worrying that Jagdeep’s office is now pushing through these restrictive guidelines without consulting tourism entrepreneurs and online travel platforms on the final form of the guidelines. Not only is this unduly rushed, but it also undermines the industry's viability and the livelihoods of thousands of homeowners in Penang.

Consider digital nomads, who the federal government is trying to attract under the DE Rantau programme which launched in Penang last year. The restrictions would severely limit the number of days that digital nomads can stay in short-term rentals, making it difficult for them to find a suitable place to live and work. This would force many digital nomads to look to other Malaysian cities or even countries for a more accommodating environment, leaving Penang behind in the race for long-term tourists.

The guidelines should also worry businesses embedded in areas like the historic UNESCO zone and Tanjung Bungah. The decrease in different types of accommodation options for travellers may lead to a fall in tourists, which will have a domino effect on highly-visible businesses patronised by travellers, such as restaurants, cafes, and heritage attractions. These businesses, which were just starting to recover from the pandemic, will once again be hit hard by the lack of tourism.

Taking all this into consideration, the restrictive guidelines would do little but slow Malaysia’s travel recovery. Thailand, Singapore and Vietnam welcomed 10 million, 4.6 million, and 3.6 million international tourists respectively in 2022. To regain 26 million tourists annually like in its pre-pandemic days, Malaysia must pull out all the stops to welcome all types of travellers.

This is a call to action for the Penang government to realise the gravity of the situation, and to engage with online travel platforms and other stakeholders before finalising these guidelines. They would then truly understand the impact of their decision on the industry and the people who depend on it.

In the end, everyone will be left worse off from the Penang government's proposed guidelines if they are implemented. It is time for them to reconsider this short-sighted and damaging policy.


Chris Kerin is the Managing Director of the Asia Travel Technology Industry Association (ATTIA). ATTIA represents companies operating in the travel and tourism sector in the Asia-Pacific region, with technology and innovation at their core. Its Members include Agoda, Airbnb, Booking.com, Expedia Group, Amadeus, Travelport and Skyscanner.