As Malaysia expects tourist arrivals to surpass pre-pandemic levels next year, hotels in the country are devising strategies to make the most of this recovery. Many are intensifying their efforts to meet environmental, social, and governance (ESG) requirements to enhance their attractiveness.
However, they are also seeking government support to overcome challenges that could impede their revival efforts. For example, they are seeking official endorsement for their ESG initiatives and simplification of the tourism tax collection.
Malaysia has already recorded 19 million tourist arrivals as of November, nearing the 19.1 million recorded in 2019, the year preceding the pandemic. Hotels, particularly budget and mid-range ones, have faced challenges in recent years, with the popularity of short-term rental accommodation (STRA) and the competitive pricing strategies of online travel agencies (OTAs) causing occupancy rates to decline.
Hotels have lost 70%-80% of their customers to STRA providers, according to Sri Ganesh Michiel, president of the Malaysia Budget and Business Hotel Association (MyBHA). The decline started approximately seven years ago. Ganesh pointed out that many hoteliers have had to abandon plans to improve their amenities and that the forthcoming increase in the sales and service tax (SST) from 6% to 8% in 2024 would further raise operational costs.
Ganesh urged the government to introduce stricter legislation governing STRAs and OTAs to level the playing field. Meanwhile, the Malaysian Association of Hotels (MAH) wants the Ministry of Tourism, Arts and Culture to endorse hoteliers’ efforts to meet ESG requirements by issuing sustainability certificates or labels. They also suggest collecting tourism tax at the point of entry to prevent exemptions for STRA users.
Isaac Raj, CEO of MAH, called for stricter regulations for STRAs and their practices, emphasizing that STRA providers can offer lower rates in a price-sensitive environment, leading to pricing competition among budget hotels.
Both MyBHA and MAH have previously made proposals to the government, such as raising the service tax threshold for budget and business hotels from RM500,000 to RM1.5 million.
Ganesh emphasized the importance of government support for the hotel industry’s future sustainability, calling for a more proactive approach.