CBRE expects to see rebound in tourism activities in Malaysia
28 April 2022
PETALING JAYA (April 28): Coupled with Malaysia’s resilient domestic tourism market and the country’s growing popularity as a halal tourism destination, Kuala Lumpur is poised to reap the benefits of the country’s reopening to international travel, said CBRE in a statement introducing the recently released insights of the Kuala Lumpur Hotel Market Outlook & Prospects by CBRE Asia Pacific — a global joint venture partner of CBRE|WTW.
Supporting the report’s insights, CBRE|WTW chairman Foo Gee Jen said that the reopening of international borders on April 1 this year “will provide a positive outlook for the tourism sector and drive the tourism market to slowly gain back its momentum”.
Foo added the Malaysia Association of Hotels (MAH) anticipated hotel occupancy to reach 60% in the third quarter of 2022 (3Q2022), mainly contributed by international tourists. “To support this arrangement, entry procedures have been eased in comparison to last year and this may increase the demand for tourism products. Business travelling as well as leisure expenses on resorts located in Langkawi, Melaka, among other getaway islands will see a gradual rise in occupants as many have grown to worry less on Covid-19 numbers, which was initially [hindering] the very idea of travel.”
The statement further said that Malaysia’s tourism recovery in 2022 is expected to be driven largely by the return of Singapore travellers.
According to the report, Singapore has historically been the top source market for Malaysia, accounting for an average 46% of total arrivals between 2015 and 2019, and the resumption of the vaccinated travel lane (VTL) with Singapore is expected to have a strong and positive impact on Malaysia and KL’s economic and tourism market recovery in 2022.
Meanwhile, the city has recorded an upward trajectory in hotel revenue per available room (RevPAR) in the last quarter of 2021, CBRE said. It expects RevPAR to continue to increase in the coming years as international brands enter the market and luxury and upscale hotel projects are due to be completed.
Luxury and upper upscale hotel room supply will account for over 60% of the total new supply, according to the report. As of 2021, hotel room supply comprises 23% economy, 19% mid-scale, 15% upper midscale, 22% upscale, 12% upper upscale and 8% luxury. Nearly 5,000 hotel rooms are expected to be launched this year.
“Mid-scale hotels in the city continue to maintain a healthy gross operating margin range of about 40% to 50%, in line with other well-established markets in the region like Singapore,” CBRE said.
Investment volume is also expected to pick up in 2022, according to the report. “Price dislocation opportunities will be limited on the back of optimism for borders reopening and tourism recovery.”
Nonetheless, CBRE advises investors to focus on assets that are located in established leisure and corporate districts within the city and have a proven track record of strong operating cash flows. “The impending rise in construction costs due to the current supply chain constraints will also favour existing completed hotels as they are ready to tap on the demand spike from borders reopening.”
In terms of the lending environment, CBRE said it remains cautious and added that important factors to secure sufficient financing include asset quality, upside story and buyer’s profile. “With the economy and tourism industry picking up in 2022, our view is that financial institutions remain keen to participate in the growth trajectory of the hospitality sector in Malaysia.”
Steve Carroll, CBRE head of hotels & hospitality, Capital Markets, Asia Pacific, said in the statement that “KL has been a longstanding nexus for business and leisure travel in the region” and that “the city’s strong economic growth and the Malaysian government’s robust plan to reopen its borders to international travel and revitalise its tourism industry, coupled with improving fundamentals and notable infrastructure developments in the pipeline, make KL’s hotel market a prime candidate for investment in 2022 and beyond”.