Overview of the hotel Industry in Malaysia

Malaysian tourism industry is a major contributor in the services sector of Malaysian economy.
Hotel industry plays major role in supporting the Malaysian tourism. Malaysias hospitality
industry is experiencing healthy growth in the hotel openings and hospitality-related services
through the steady flow of business traveler, tourists and popularity and as a MICE (Meeting,
Incentives, Conventions, and Exhibitions) venue. Malaysias advantage in this sector lies in good
value in terms of costs compared to the rest of the region, its diversity of natural attractions such
as beaches and mountains as well as solid infrastructure and amenities.
Malaysias tourism sector is one of the 12 National Key Economic Areas (NKEAs), which has
been identified as one of the contributing prime sector in Malaysia economy achievement.
Among strategies of the Tourism NKEA to attract high-yield tourists is encouraging the
development of an optimal mix and quality hotel, with a high level of service delivery.4039 new
4- and 5-star hotels were completed in 2014 with a good distribution throughout the country in
the key cities of Alor Setar, Ulu Kinta, Kuching, Johor Bahru, Penang, Pulau Carey, Melaka and
Miri. Notable project completions include the 335-room 5-star Double Tree by Hilton Hotels in
Johor Bahru, the 497-room 5-star Best Western Premier in Ulu Kinta, Perak, and the 324-room
4-star Boulevard Imperial Hotel in Kuching.
11277 4- and 5-star rooms were completed between the year 2011 to 2013, and the current
incremental total is 15316 4- and 5-star rooms for 2014. Spurred by the Governments effort to
extend the existing Investment Tax Allowance to the end of 2016, the growth trajectory remains
on track to achieve the target of 37000 new 4- and 5-star hotel rooms by 2020. The
Governments aspiration via Malaysia Tourism Transformation Plan which is to attract 36
million tourists to Malaysia and generate RM168 billion for the country by the year 2020.
The Malaysian Investment Development Authority (MIDA) will continue to focus on high-yield
tourism, driving economic and employment growth for the nation. The development of hotel and
tourism projects is encouraged in line with the promotion of Malaysia as an attractive tourist
destination and as a regional centre for trade and commerce. The activities that being promoted
and are eligible for incentives under the Promotion of Investments Act (PIA), 1986 including the
establishment of budget hotels (1-3 star), establishment of 4-5 stars hotels, expansion or
modernization of existing hotels (1-5 star) and other tourism related projects.
http://etp.pemandu.gov.my/annualreport2014/upload/08_NKEA06_ENG_Tou.pdf
http://www.mida.gov.my/home/hospitality/posts/
Hotel Demand
The hospitality market in Malaysia witnessed approximately 71,666,295 hotel guests staying at
properties across the country in 2014, of which nearly 63% comprised of domestic travelers.
Commercial accommodations (hotels, bed &breakfast, etc.) are the top choice for international
travelers to Malaysia with almost 96% of the arrivals utilizing commercial accommodation in
2014.

Although hotel demand in 2015 slowed down together with the drop in arrivals, the long-term
demand for hotels remains resilient given that the country is still an attractive destination with
several gateway cities such as Kuala Lumpur, Georgetown, and Johor Bahru. Previously, the
Commercial and MICE travel segment was fuelled by large primary and secondary industries
that specialized in oil and petroleum products. However, shifts may occur due to the weak
performance in the oil market and the new drivers are expected to be from the financial and
consumer products sectors.
The national tourism campaign in 201, the Year of Festivals, focuses on festivals and exhibitions,
promoting the attractiveness of Malaysia as a MICE destination in the South East Asian region.
This is expected to induce demand for MICE and Leisure travel. Kuala Lumpur, in particular, is a
vibrant MICE location in the region by virtue of good infrastructure, international connectivity,
cost competitiveness and a wide array of facilities (convention centre, retail, F&B etc.) and
accommodation. \
Hotel Supply
In the hotels and rooms supply report by the Malaysian Tourism Office for the year 2014, a total
of 4,072 classified hotels, which account for 262,021 rooms were recorded. During 2010-2014,
Malaysias hotel supply grew by a CAGR of 14.5% in terms of hotels and 11.7% in terms of
rooms. The states of Sabah (533 hotels), Johor (509 hotels), and Pahang (424 hotels) have the
highest number of hotels in the country, with an average inventory of 60 keys.
Of the existing hotel supply (by number of hotels) in Malaysia, 22.7% is branded and affiliated
with an international company while the rest comprises of independently run operations. The
branded hotels are mostly located in Kuala Lumpur, along famous tourist attractions in coastal
areas such as Langkawi, Penang and the key cities of East Malaysia such as Kota Kinabalu and
Kuching.

Figure 1: Malaysia Hotel Supply (2010-2014)

Based on the hotels tracked across key markets, approximately 10,000 rooms is expected to enter
the markets in the next three years. Key brand openings in the upscale and luxury segment will
include the countrys first Harrods hotel and the first Fairmont hotel along with brands such as
the St. Regis, Banyan Tree, Westin, and the Alila.
This is expected to lead to an increasingly competitive upscale and luxury hotel landscape,
putting pressure on occupancy and average daily rate (ADR). However, these marquee
developments are also expected to induce fresh demand into the market as they reach out to their
core consumers across the globe in the luxury end of the consumer segment and market Malaysia
as a destination to them.

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