Hotel sector likely to recover only in 2023, says MAH

By TIN Media | Hospitality Published 2 months ago on 25 June 2021
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MALAYSIA:

Hoteliers' prospects remain gloomy, with some hotels operating at 0% occupancy and others opting to temporarily close their doors. Several businesses are totally reliant on Covid-19 quarantine visitors to stay afloat. According to one industry expert, the industry may not see any significant comeback until well into 2023.

“In many ways, the situation is already worse than in 2020,” says Malaysian Association of Hotels (MAH) vice-president C S Lim, “with the average occupancy rate (AOR) sitting at a low 20%, and even that is mostly given by [occupants at] quarantine hotels.”

“We've seen increased travel restrictions this month, including an inter-district ban, as well as a more significant economic impact on businesses and individuals. This indicates that most, if not all, people will not be thinking about leisure travel or hotel events or activities in the near future. This is exacerbated by the general public's, both local and foreign, rapidly dwindling confidence in Malaysia's pandemic management.”

As a result, in 2021, the overall AOR and average daily rate (ADR) are predicted to be lower than in the previous year. “In general, both AOR and ADR are likely to be lower in 2020,” Lim adds, noting that last year's figures were aided by a good January performance before the enforcement of the Movement Control Order (MCO) on March 18.

According to MAH data, the AOR and ADR for January 2020 were 59.48 percent and RM235.73, respectively. Last year, the AOR and ADR were 32.43 percent and RM196.24, respectively, for the entire year.

Due to the MCO, only April and May 2020 saw a single-digit AOR, after which things began to improve as the country entered the Recovery MCO phase. This aided in the stabilization of the full-year AOR and ADR for 2020. “The hotel business was lucky to receive a boost from domestic tourism between June and September last year, as well as during the Christmas and New Year holidays,” Lim says.

In 2021, however, the industry does not anticipate a repeat of last year's performance. “Travel restrictions are projected to be tightened even more, and AOR will hover around 20% over the next six months,” he adds, adding that ADR would be “highly dependent on quarantine hotel operations.”

AOR was 25.38 percent in the first four months of this year, while ADR was RM196.44.

Will there be more hotel closures in the future? This, according to Lim, is "inevitable." In addition to the 100 hotels that had to close their doors either temporarily or permanently last year, he believes that another 50 hotels will close temporarily during the current lockdown.

The three-decade-old Hotel Equatorial Penang announced in January that it would close permanently on March 31. Two months later, Mutiara Johor Bahru, which opened in 1982, announced that it would close on June 1.

“At this rate, we are unlikely to see a start of recovery until 2023,” Lim said.

Many hotels have turned to different sources of income to assist them get through the Covid-19 problem, he says. “At the moment, hotels that serve as quarantine centers are performing well. Aside from that, short staycations and even events or meetings are the only hope for hotels [when permitted], as without them, owners risk draining their reserves and falling deeper into debt.

“At this time, the biggest difficulty for hotels is cash flow, which is heavily reliant on the Social Security Organization's wage subsidy program (WSP)” (Socso). Only roughly 42% of hotels that sought have gained permission to date, according to our recent survey.”

Furthermore, just 26% of those eligible for cash from the previous WSP have got them, while the remainder are still pending, some for long to three months.

“Hotels are caught in general by their inability to plan ahead, since they have no idea when or if travel will be permitted again anytime soon. Without a plan in place, hotels would have to consider whether or not they can continue to operate,” Lim laments.

He goes on to say that the business is in serious need of government direction, such as the freeing of borders or the creation of travel bubbles. More critically, the industry requires more support because the majority of the prior programs are set to expire this month.

While a large portion of the industry's staff has already been laid off since last year, Lim warns that if the present lockdown is extended and no progress in the tourism sector's reopening is made, more people would lose their jobs unless the government provides additional support.

Vaccination is critical to the industry's recovery. “We need the government to accelerate [the National Covid-19 Immunization Program], particularly for economic frontline workers like hoteliers.”


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