The local hospitality industry has been severely impacted by the coronavirus (Covid-19) pandemic and many hotels in Kuala Lumpur are facing partial closure as their occupancy rates have dropped to a massive low.
Several four and five-star hotels in Kuala Lumpur said their occupancy is currently below 10 per cent and their business is partially closed, albeit temporarily until the situation improves to remain viable.
The escalating number of infected cases has led to the country being placed under the Movement Control Order (MCO), until 14 April 2020. With the exception ‘essential services’, all other business activities have literally slowed or come to a complete halt.
It was reported that the Malaysian Association of Hotels (MAH) has projected a revenue loss of RM560.72 million for just the MCO period, with occupancy rates projected to fall to a staggering 11 per cent.
MAH president Kamaruddin Baharin said hoteliers are projecting a much lower occupancy rate for the coming months due to the pandemic.
“We are looking at an average occupancy for Malaysia of nothing more than 25 per cent in June, and that is if the MCO ends on April 14 and the outbreak is brought under control,” he said in a statement.
He said recovery is not expected until the third quarter, with the industry putting their bet on the year-end holidays to make up for losses suffered in the first half of the year.
Some city hotels are still surviving as they have long term staying guests coupled with short term guests who have extended their stay because of the MCO, said a top five-star hotelier who spoke on condition of anonymity.
"In order to break even, the hotel should have an average occupancy of 40 per cent with additional sales coming in from their food and beverage outlets, events and retail. However, the overall sales for some hotels are down by more than 90 per cent via an increase in customer cancellations both for accommodation and events.
"The hotels are running at a huge loss and this could go on for the next six to eight months, or longer, depending on the outcome of the Covid-19 situation. How quickly the hoteliers will recover from Covid-19 will depend on the effectiveness of containment measures," he said.
In March 2003, the Severe Acute Respiratory Syndrome (SARS) virus spread across the Asia-Pacific region, causing widespread disruption. There was a significant impact on the tourism industry due to travel restrictions and booking cancellations.
Although the spread of SARS was under control in four months, it took a further eight months for tourist arrivals to rebound and some 18 months for the market to fully recover.
The hotelier expects the impact from Covid-19 will be long term and he feels that the RM250 billion ‘Caring Economic Stimulus Package’ will do very little to cushion the impact going forward.
"There is nothing mentioned in the stimulus package to assist or enhance any part of tourism even after Covid-19," he said.
He said that when Covid-19 is no more and when the market recovers, hoteliers will face another issue, which is the average daily room rate.
"The majority of hotels will experience a slow-down in new reservations. What can be expected is a price war where the hotels drop their room rates to try and boost occupancy. By doing this, they will further drag down the hotel business. Hoteliers must adjust price sensibly when the market recovers and not undercut one another," he said.
Abolishing tourism tax
Knight Frank Malaysia managing director Sarkunan Subramaniam said the government should look at completely abolishing the tourism tax and assist the hospitality sector with more incentives.
He said the government should also look at reducing the service tax for F&B operators as their business has been hit badly by Covid-19.
"I think the government shouldn't rely too much on tax income especially in a situation like this. They should look at how to reduce taxes to boost the overall market. Extraordinary events need extraordinary ideas. The government should assist business owners to stay afloat during this difficult time," Subramaniam told NST Property.
Subramaniam said the impact on the hospitality/tourism and aviation-related sectors have been immediately felt since the outbreak of Covid-19 due to travel restrictions, events cancellations and individuals’ reticence to travel.
Because of Covid-19, hospitality, tourism and aviation-related segments are being hit the hardest evident by cancellations of flights, tour packages and hotel bookings following international travel restrictions and lockdown of countries, he said.
Subramaniam said, according to Tourism Economics, global travel is expected to drop by 10 per cent to 18 per cent, which is the biggest year-on-year drop amid the outbreak of Covid-19.
The hospitality sector will face financial pressure with lower returns, he said.
"Hoteliers have no choice to partially close their business due to Covid-19. Room occupancy has dropped to below 20 per cent from 60 per cent to 70 per cent and as a result of poor room sales, they have to lay off staff.
"I believe moving forward, cheaper travel and accommodation cost may motivate and drive the sector once the Covid-19 pandemic is contained, serving as a slice of positivity in this sector," he said.
Wage subsidy not much help
Kamaruddin said that the RM600 monthly wage subsidy (under the stimulus package) for three months, for employees earning below RM4,000 monthly, fall below industry expectations.
“The hotel industry had earlier proposed a minimum of RM1,000 per employee, or a minimum equivalent of 50 per cent of the employee’s monthly pay, for a period of six months. This is in response to a much lower occupancy rate projected for the coming months, looking at the situation worldwide,” he said.
According to him, 2,041 employees in the hotel industry had been laid off due to economic pressures and the extended MCO, while 9,773 were given unpaid leave and another 5,054 took pay cuts.
MAH, he said, expected the number affected to grow “over the next few months”.
The Malaysian Association of Tour and Travel Agents (MATTA) in a separate statement expressed disappointment in the stimulus package.
MATTA president, Tan Kok Liang, said the stop-gap measures failed to address the key issue of job retention in the tourism industry.
“What will happen after the handouts are fully given out by May when employees find themselves out of a job because the businesses they used to work for have been forced to close?” he asked.
The local tourism sector, which employs 3.5 million people and contributes 15.2 per cent to the nation’s Gross Domestic Product, has seen revenues fall by 90 per cent in March. The sector is looking at a near total-loss in business for the months of April, May, and June, according to the MATTA press release.
Source: https://www.nst.com.my/property/2020/03/579988/hotels-kl-partially-closed-business