City&Country: KL hospitality industry growing

The hospitality industry in the Klang Valley looks set to grow further this year on the back of positive economic growth and a rise in tourism and travel in Malaysia.

“We are of the opinion, due to the positive economy, that occupancies and average room rates will increase. This, coupled with new tourism markets for Malaysia such as China, will spur the market,” says Zerin Propeties CEO Previndran Singhe.

Average room rates (ARR) for 4 and 5-star hotels in Kuala Lumpur rose in 3Q2010, according to the Klang Valley Hospitality Market 3Q2010 report by Zerin Properties Research.

For July to September, the ARR for 5-star hotels in Kuala Lumpur was RM370, a 4.52% increase from RM354 a year ago, the report shows.

For 4-star hotels, the rate is up to RM230, a 6.5% rise from the RM216 recorded in the previous corresponding period. Market data for the hospitality industry lags behind that of other property sectors because of its long-term operation.

“The average room rates for 4 and 5-star hotels have increased because the general demand for hotel accommodation has risen, together with that of the regional market,” says Previndran. The ARR for 3-star hotels however has remained at RM164 since the last corresponding period.

Occupancy rates have also risen. The average occupancy rate of Klang Valley hotels was 61.68%, slightly up from a year ago. The overall occupancy for 5-star hotels during 3Q2010 was 70.24%, compared with 64% a year ago. For 4 and 3-star hotels, the average occupancy was 69% and 70.44% respectively, up from 68.18% and 66.79% in the previous corresponding period.

In terms of supply, there were an estimated  36,443 rooms in the Klang Valley as at last September, of which 26,101 rooms or 71.62% were within the KL city centre. The current supply of 3, 4 and 5-star hotel rooms in KL city stands at 4,380, 9,332 and 7,261 rooms respectively.

In 3Q2010, DoubleTree by Hilton Kuala Lumpur, located at the former Crown Princess Hotel, added 540 rooms to the market but there were no new entries of hotels for the quarter, according to the report.

This year, at least three new hotels will add to the current supply. These are the 515-room 5-star Pullman Kuala Lumpur in Bangsar, which  will be the largest Accor hotel in Southeast Asia; the 300-room 4-star Royale Surian in Mutiara Damansara in Petaling Jaya; and the 445-room 4-star Park Regis, formerly Rendezvous Hotel, at Taragon Puteri Kuala  Lumpur.

“The new supply is good for the industry as the hospitality industry is growing,” says Previndran. The tourism ministry is aiming for 25 million visitors to the country this year.

More hotels are in the pipeline, including the 450-room 5-star Grand Hyatt Hotel on Jalan Pinang, Kuala Lumpur, scheduled to open in 2012; the 240-room Four Seasons Hotel in the KLCC area in 2013; and the 200-room St. Regis in KL Sentral in 2014.

The growth in the number of luxury hotel brands offering internationally recognised products augurs well for the industry, says Previndran.

The arrival of more prestigious brands will enhance the image of Kuala Lumpur city as a preferred international destination. This will act as a great catalyst to perk up activities in the local hospitality market, according to the report.

“Hoteliers have to know that KL is seen as a tourism travel hub for Greater Asia and this will increase demand for hotels,” Previndran says. “There are a lot more opportunities for KL to be a tourist hub to other Asian destinations. I think the rise of low-cost carriers has made this possible. We get a lot of tourists from Australia coming into Kuala Lumpur and flying out and returning to KL, then flying to Sabah and back again.”

As for the rest of Malaysia, Previndran says places like Langkawi island in Kedah, Kota Kinabalu in Sabah, as well as Melaka and Penang are experiencing growth in occupancy and ARR as well.
“Langkawi still has the highest average room rates for 5-star hotels — in excess of RM1,000. Melaka is experiencing a growth spurt due to its heritage status and state government tourism efforts,” he says.

In addition to hotels, serviced apartments too are seeing an uptrend. “Serviced apartments are an alternative accommodation,” Previndran says. “In the Klang Valley, demand is picking up because there are more business activities taking place so people are travelling with their families when they come for contract work. Long-term stay for business is increasing in Malaysia.”

The occupancy rate for serviced apartments in 3Q2010 was about 75% compared with a year before, when it was just above 70%.

There are 26 serviced apartment properties with a total of 4,339 units in Kuala Lumpur. Only one new serviced apartment opened in 3Q2010, namely the 300-room Parkroyal Serviced Suites at Bukit Bintang.

This article appeared in City & Country, the property pullout of The Edge Malaysia, Issue 846, Feb 21-27, 2011