APPD Market Report Article
Kuala LumpurFebruary 28, 2022
Demand remains subdued due to border closures
- International visitation remains muted as borders remain closed due to COVID-19, totalling just 73,309 tourists as of YTD September 2021, representing a 98.3% y-o-y decline. Domestic demand, however, has improved since October 2021, following the government’s decision to allow interstate travel.
- On a positive note, there are growing signs of reopening, evidenced by the opening of the vaccinated travel lane (VTL) with Singapore in November 2021. Nonetheless, demand in the near term will likely remain domestic-led until international travel picks up.
Four hotels offering 759 rooms opened in 2021
- Hotel openings in 2021 remain limited as most of the planned openings were postponed to 2022 and beyond due to the pandemic. Key openings in 2H 2021 include the 321-room Capri by Fraser Bukit Bintang and the 188-room Fairfield Inn Kuala Lumpur Jalan Pahang. The 151-room Palm Garden Hotel was also rebranded into Palm Garden Hotel, Putrajaya, a Tribute Portfolio Hotel, managed by Marriott.
- Taking into account several hotel closures, total net increase in room supply was 154 in 2021. In 2022, approximately 3,700 rooms are expected to enter the market, with the substantial increase due to postponed openings over the last two years, owing to the COVID-19 pandemic.
RevPAR remains subdued but is seeing green shoots of recovery
- Revenue per available room (RevPAR) declined by 24.7% y-o-y to MYR 89 in 2021. Average daily rate (ADR) increased by 3.4% y-o-y to MYR 544, but was more than offset by the 6.1 percentage points decline in occupancy rates to 16.4%. Luxury hotel demand remains muted as international guests remain subdued due to continued border closures.
- On a positive note, trading performance has improved since the ban on interstate travel was lifted in October 2021. Monthly RevPAR reached a pandemic high of MYR 226 in December 2021, boosted by a strong pick-up in occupancy rates which similarly reached a pandemic high of 37%.
Outlook: Pace of recovery contingent on borders reopening
- 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 increasingly likely based on current government discussions.
- 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.