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Malaysia: Hotel indicators on the upside
February 19 2013

Sustained long-term growth is projected for Malaysia’s economy, which should bode well for the country’s hotel industry.

  • Malaysia was the ninth most visited country during 2011.
  • Hotel supply is expected to increase 7% by 2014, according to STR Global.
  • Joining the OneWorld alliance this year, Malaysian Airlines will be able to benefit from partner airlines on some strategic routes to Europe and Australia. 

No one will be very surprised that I have picked Malaysia as one of the most exciting hotel destinations around the world. It was the ninth most visited country during 2011 with 24.7 million tourist arrivals, and it likely will have remained in the top 10 during 2012 when new data is released by the United Nation World Tourism Organization.

David Grossniklaus

Economic growth fueled by trade agreements with neighboring countries in the Association of Southeast Asian Nations region combined with a young and dynamic workforce offers some of the ingredients for long-term growth. While the global economy might show signs of contraction and increased inflation, real gross domestic product in Malaysia is expected to grow at almost 5% per annum until 2020, according to the Economist Intelligence Unit.

Looking at the big picture
Malaysia’s GDP growth is expected to have reached 5.2% in 2012, according to the EIU.  According to a World Travel and Tourism Council report, travel and tourism directly contributed 6.7% to the country’s total GDP in 2011 and is expected to contribute 4% during 2012. The travel and tourism sector provided direct employment to more than 750,000 people during 2011 and indirectly contributed to more than 1.5 million jobs across Malaysia. The WTTC data suggest that travel and tourism will continue to benefit employment growth by 2.8% per annum until 2022.

Supporting Malaysia’s economic travel industry growth, the airline industry plays a key role in the pace of hotel development. New airplane orders can be translated to new supply not only in capital Kuala Lumpur but also in the more remote regions such as Sabah or Sarawak.

Joining the OneWorld alliance earlier this year, Malaysian Airlines will be able to benefit particularly from partner airlines on some strategic routes to Europe and Australia. Improved connection with key source markets certainly will be beneficial for the hotel industry. This is particularly true as Tourism Malaysia reported tourist arrivals during 2012 declined for those coming from Australia (-9%), United Kingdom (-0.4%) and New Zealand (-19.2%).

Malaysia and China recently signed an economic agreement that will boost economic exchanges between both countries. Arrivals from China should increase in the long run, building off the 12.4% increase recorded during 2012, according to Tourism Malaysia.

Hotel performance
Hotels in Malaysia during 2012 experienced mixed results in the three key performance metrics tracked by STR Global, sister company of

Occupancy decreased 0.6% to 66.7%, average daily rate was up 3% to 340.96 Malaysian ringgits ($110.07) and revenue per available room increased 2.3% to 227.36 ringgits ($73.40).

Hotel supply is expected to increase 7% by 2014, according to STR Global.


Kuala Lumpur
Hotel occupancy in Kuala Lumpur increased 1.4% to 74.3% during 2012 while ADR grew 4.5% in local currency to 354.52 ringgits ($114.45), according to STR Global.

Despite the addition of two large hotels that opened at the end of 2012—the Grand Hyatt (455 rooms) and the Majestic Hotel (300 rooms)—and the 482-room Aloft, which will open this year, hotel performance is expected to remain unchanged in 2013, according to Horwath HTL’s “Hotel yearbook 2013: Scenarios for the year ahead.”

Looking forward, STR Global hotel pipeline data shows that the city’s hotel inventory will to continue to grow by 5.5% through 2014. Brand such as Regent Hotels & Resorts and Four Seasons Hotels and Resorts have projects expected to open during 2015.

The regions
Penang looks to continue a period of strong demand growth, with an uptick in supply during the next three years to accommodate an increase in tourist arrivals, according to the Horwath HTL report. 

Meanwhile, Langkawi, an archipelago of 104 islands in the Andaman Sea some 30 kilometers (18.6 miles) off the mainland coast of northwestern Malaysia, is hurting. The region has seen its own building boom in recent years, which, when coupled with broader economic challenges, has dampened hotel performance. Langkawi saw occupancy decline 9.2% to 58.9% during 2012. ADR in local currency dropped 7.9% to 620.66 ringgits ($200.74), according to STR Global.

The good news is new hotel supply on the island is expected to remain practically unchanged (+0.3%) until 2014, which should help stabilize rate and occupancy, according to STR Global.

Developers are getting their shovels ready in other regions as well, such as Johor, where a Sheraton and Amanresort are planned, according to the Horwath HTL report.

Looking at the main economic drivers and the prospect of growth in the travel and tourism industry, I have placed Malaysia on my watch list of destinations that will see a significant transformation in the coming years.

David can be contacted on Follow him on Twitter @dgrossniklaus.

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