APPD Market Report Article
Kuala LumpurDecember 1, 2021
Demand remains subdued due to closed borders and MCO
- International visitation remains muted as borders remain closed due to COVID-19, totalling just 50,000 tourists as of YTD June 2021, representing a 98.8% y-o-y decline. Domestic demand also slumped in the quarter due to the ban on interstate travel to Kuala Lumpur as part of the MCO 3.0.
- On a positive note, Malaysia may fully reopen to international visitors by early December 2021, if the upcoming pilot travel bubble project in Langkawi in November 2021 successfully takes off. The interstate travel ban was also recently lifted from 11 October for fully vaccinated individuals, which should provide a boost to domestic demand.
No major hotel opening in 3Q21
- Hotel openings in 2021 remain muted as majority of the planning openings have been postponed to 2022 and beyond due to COVID-19. The 99-room Ramada Encore by Wyndham Chinatown Kuala Lumpur remains the only major opening so far this year.
- Future supply is expected to be limited for the rest of 2021, comprising of just three hotels with 747 rooms. Amongst these, only one, namely the 321-room Capri by Fraser Bukit Bintang, will be located within the city centre. However, given the fluidity of the COVID-19 situation in Malaysia, announced openings for the rest of the year could potentially be delayed into next year.
RevPAR remains subdued due to low occupancy rates
- Revenue per available room (RevPAR) declined by 58.7% y-o-y to MYR 56 as of YTD September 2021. Occupancy rates declined by 14.6 percentage points to 11.1%, as demand remained suppressed due to continued border closures and the ban on interstate travel to KL between May and October 2021. This has begun to put pressure on average daily rate (ADR), which saw a 4.5%-y-o-y decline to MYR 505.
- Occupancy rates were steadily increasing on a m-o-m basis since it bottomed out in January 2021, but slumped in May due to the MCO 3.0 and remained in the single digits for most of the quarter. ADR, however, has seen m-o-m increases over the same period which suggests that hotels have not lowered rates despite the lack of demand.
Outlook: Reopening key to full recovery in trading performance
- Luxury RevPAR is likely to remain subdued until there is a notable recovery in international visitation, which is a major demand driver for luxury hotels. The pace of recovery will therefore be contingent on when borders will reopen, which appears likely over the next few months with rising vaccination rates and gradual reopening observed in the Asia Pacific region.
- Near-term demand is likely to remain mostly domestic-led, particularly with the recent ease of domestic travel curbs, which will provide a much-needed boost to occupancy rates. While this should provide some reprieve to the current subdued performance, international demand will remain key to the full recovery in trading performance.