Thursday, October 19, 2006

Hotel room rates in M'sia move sharply higher

Hotel room rates in M'sia move sharply higher; But charges are still below Indonesia, Philippines and Vietnam

October 17, 2006
S Jayasankaran In Kuala Lumpur

AFTER years of depressed prices, Malaysia's hotels have begun to recover, with room rates moving sharply higher and shares in Shangri-La, Malaysia's only pure hotel play, rising 17 per cent to an eight-year high of RM1.95 apiece.

Even so, Malaysia's hotel rates remain one of the cheapest in Asia - good for travellers but less so for investors.

'It's embarrassing,' said Lim Beng Leong, the head of research of securities firm UOBKayHian in Kuala Lumpur. 'We are cheaper than Indonesia, the Philippines, even Vietnam.' The 'cheap' image has stuck to the country because, unlike hotels in Thailand, Indonesia or India which price room rates in US dollars, Malaysia has always set rates in the local currency.

After 1997, that got worse as the ringgit depreciated 40 per cent against the US dollar in the wake of the Asian financial crisis.

Last year, for example, the average room rate for hotels in Kuala Lumpur was RM204.69, or US$56 (S$88.50) - half the average in Indonesia or Thailand.

Even so, it's a step up from the average RM188 rate KL hotels charged in 2004. Higher occupancies (72 per cent last year) are pushing rates up at the more prestigious hotels.
Shangri-La, which has hotels in KL, Penang and Sabah, upped its rates for its flagship KL hotel to RM350 per night from RM320 per night last year. But that still pales before Mandarin Oriental, the most sought after five star hotel in the capital, whose rates come in at RM480 per night. Indeed, Mandarin is believed to be planning to increase this to RM600 per night by the end of the year.

Meanwhile, the sale of Malaysian hotel assets is beginning to fetch higher premiums. Listed contractor Ireka recently sold its flagship Westin Hotel in KL to Newood Assets, which is believed to be controlled by Thai whisky king Charoen Sirivadhanabhakdi, for RM455 million. The sale valued the hotel at RM1 million a room, a record by Malaysian standards and a significant increase on the RM900,000 a room valuation given to Mandarin Oriental when it was packaged as part of Kuala Lumpur City Centre Properties and listed three years ago.

The higher room rates come with Malaysia's increasing success in attracting tourists. Despite fears of avian flu last year, tourist arrivals to Malaysia hit an all-time high of 16.4 million visitors in 2005, up from about 6 million in 1999 and around 2 million when Mahathir Mohamad took over as premier in 1981 and began promoting tourism in a big way.

Hoteliers are also excited by Visit Malaysia Year, which coincides with Malaysia's 50th year of independence next year. Hoteliers are expecting a 15 per cent increase in visitors to more than 20 million.

Source : Hotels Mag

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