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HOTELS IN THE KLANG VALLEY - HEADING FOR A BETTER PROSPECT
by Rahim & Co Research Sdn Bhd

Higher occupancy rates can only be good news for hotel industries marking positive changes after the dull and uncertain market condition during the economic downturn in 1998/99. 2004 has certainly brought cheers to hotel sector in the Klang Valley when a higher average occupancy rate was registered i.e. 64.4% compared to 52% in 1999, chalking some 24% jump. In terms of supply, in 2004 Kuala Lumpur had 25,463 rooms from 220 hotels and Selangor 11,499 rooms from 88 hotels. The number of rooms expanded by 5.5% in Kuala Lumpur (from 24,140 rooms in 1999) and about 16% in Selangor (from 9,900 rooms during the corresponding year).

The chart below illustrates changes in occupancy rates of hotels (and serviced apartments) by area in the Klang Valley from 1999 to 2004. The occupancy rates picked up in year 2000 when occupancy rates improved from below the 50% mark to the 50%-65% range.

In 2004, hotels in the Golden Triangle area of Kuala Lumpur (such as the Mandarin Oriental and Sheraton Imperial) and Petaling Jaya (such as Sunway Lagoon Resort and Armada Hotel) recorded remarkable improvement in occupancy rates as economic and business activities improved. Serviced apartments like Darby Park and Sucasa also indicated encouraging occupancy rates during the year.

Average occupancy rates from hotels in the Klang Valley (1999 - 2004)

 

1999

2000

2001

2002

2003

2004

Kuala Lumpur

57

64

66

71

67

71

Petaling Jaya

52

60

61

65

65

71

Subang Jaya

51

58

55

56

62

68

Shah Alam

46

54

54

54

57

58

Sepang/Seremban

48

57

53

58

53

57

Cheras/Kajang/Putrajaya

56

55

55

57

52

59

Average

51.7

58.0

57.3

60.2

59.3

64.0

Source: MIHR 2005

The improving trend of occupancy rates was hampered in 2003 because of conflicting war in the Middle East and the threat of SARS epidemic which terribly weakened tourism industry. Average occupancy rate declined to 59.3% in 2003, with some hotels recording not more than 30% occupancy rate or even less. The year saw a dent in the hotel sector but fortunately the Government was quick to provide some relief measures. Some of the measures introduced were a 5% discount on monthly electricity bills for hotel operators, exemption on Human Resource Development Fund levy for tour and hotel operators for 6 months, service tax exemption for hotel and restaurants, Special Relief Guarantee Facility (SRGF) to tour operators, hotel operators and restaurants.

In addition to the relief measures, some major events had proven to boost the occupancy rates of Kuala Lumpur five-star hotels. These five-star hotels recorded an average increase to 55%, as foreign tourist arrivals were higher in second half of 2003. Some of the big events that had proven successful in positioning Malaysia on the world map while promoting the country as a potential tourist destination were The Sepang Formula 1 (F1), Le Tour De Langkawi and Formula One Power Boat Grand Prix.

In 2004, the hotel industry performed generally better with more stable environment on the global and economic front. Average occupancy rate surged from 59% in 2003 to 64% in 2004, indicating a healthy recovery of the hotel and tourism industry. Far to be complacent, the hotel industry still need to see the occupancy rates continue to increase and domestic tourism should continue to be aggressively promoted. The hotels operators and investors' concern on maintaining the yield between 10% to 15% is something worth to evaluate.

Barring any unforeseen circumstances, with many interesting annual events lining up in the near future, the tourism industry is expected to maintain or even increase the number of tourist arrivals. One significant project that is expected to draw higher tourist arrivals is the KLCC Convention Centre that is currently under-construction with its international events. With large foreign market still untapped, the ministry's strategy in promoting Malaysia as an affordable holiday destination could not go wrong.

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