CBRE expects Malaysia tourism business to rebound
PETALING JAYA (April 28): Coupled with Malaysia’s resilient domestic tourism market and the country’s growing popularity as a halal tourist destination, Kuala Lumpur is poised to reap the benefits of the country’s reopening to international travel, said CBRE in a statement featuring the recently released Outlook Outlook and Outlook for the Kuala Lumpur Hotel Market by CBRE Asia Pacific – a global joint venture partner of CBRE | WTW.
Supporting the information in the report, the president of CBRE | WTW’s Foo Gee Jen said the reopening of international borders on April 1 this year “will provide a positive outlook for the tourism industry and encourage the tourism market to slowly regain momentum.”
Foo added that the Malaysian Hotel Association (MAH) expects hotel occupancy to reach 60% in the third quarter of 2022 (3Q2022), driven mainly by international tourists. “To support this arrangement, entry procedures have been relaxed compared to last year, which could increase demand for tourism products. Business travel as well as leisure spending at resorts located in Langkawi, Melaka, among other getaway islands, will see a gradual increase in occupancy numbers as many have become less concerned about Covid-19 numbers, who was originally [hindering] the very idea of travel.
The statement further said that the recovery of tourism in Malaysia in 2022 is expected to be largely driven by the return of travelers from Singapore.
According to the report, Singapore has always been Malaysia’s top source market, accounting for an average of 46% of total arrivals between 2015 and 2019, and the resumption of the Vaccinated Traffic Lane (VTL) with Singapore is expected to have a strong and impact positive on Malaysia and the recovery of the economic and tourist market of KL in 2022.
Meanwhile, the city recorded an upward trajectory in hotel revenue per available room (RevPAR) in the last quarter of 2021, CBRE said. He expects RevPAR to continue to increase in the coming years as international brands enter the market and luxury and high-end hotel projects are to be completed.
The supply of luxury and high-end hotel rooms will account for more than 60% of the total new supply, according to the report. As of 2021, hotel room supply includes 23% economy, 19% mid-range, 15% upper-mid-range, 22% high-end, 12% high-end and 8 % luxury. Nearly 5,000 hotel rooms are expected to be launched this year.
“The city’s midscale hotels continue to maintain a healthy gross operating margin of around 40% to 50%, in line with other well-established markets in the region such as Singapore,” CBRE said.
The investment volume is also expected to increase in 2022, according to the report. “Opportunities for price dislocation will be limited due to optimism about the reopening of borders and the recovery of tourism.”
Nonetheless, CBRE advises investors to focus on assets located in the city’s established leisure and business districts that have a proven track record of strong operating cash flow. “The impending increase in construction costs due to current supply chain constraints will also favor existing completed hotels as they stand ready to exploit the spike in demand resulting from the reopening of borders.”
In terms of the lending environment, CBRE said it remains cautious and added that important factors to ensure sufficient funding include asset quality, bullish history and buyer profile. “As the economy and tourism recover in 2022, we believe that financial institutions remain keen to participate in the growth trajectory of the hospitality sector in Malaysia.”
Steve Carroll, Head of Hotels and Hospitality at CBRE, Capital Markets, Asia Pacific, said in the statement that “KL has been a long-standing nexus for business and leisure travel in the region” and that ” The city’s strong economic growth and robust Malaysian government plans to reopen its borders to international travel and revitalize its tourism industry, coupled with improving fundamentals and notable infrastructure developments underway, are making the hotel market KL a prime candidate for investment in 2022 and beyond.”