Budget hotel operators want level playing field

KUALA LUMPUR (May 23): Budget hotels in the country are struggling to keep afloat mainly because of an oversupply of hotels in cities such as KL, lower tourism arrivals last year, completion from Airbnb and online travel agencies (OTA) while the tourism tax and Sales and Service Tax (SST) provided an extra “burden”, The Star reported today.

According to the Malaysia Budget Hotel Association (MyBHA) national president Leong Pui Kun, platforms such as Airbnb “were direct competitors to budget hotels” especially over the last two years.

“According to Airbnb, it has 44,000 listings throughout Malaysia and is growing fast.

“Women hosts on Airbnb nationwide earn a combined amount of RM159 million last year and we predict the amount to be more for male hosts.

“This amount goes out from the hotel industry yearly,” he revealed to the daily.

“Budget hotel operators are desperate for business, so they turn to OTA to manage their hotel bookings as many think they can market to a larger group of clients using OTA platforms.”

But operators using OTAs to market budget hotels have to endure lower profit margins to attract customers.

“Ultimately, this eats into hotel operators’ profitability because 20% to 30% of the room rates are paid as commission to OTA.

“The room rates are also low to keep price competitive and to attract customers.

“As a result, budget hotel operators end up earning lower profit margins,” Leong explained.

He told The Star that “a level playing field among all platforms” is needed.

“For example, Airbnb does not have to pay tourism tax. The fixed rate of RM10 per room per night is charged to foreigners staying in hotels or registered private accommodations.

“Compared to four- and five-star hotels, this fee is a low percentage of the overall room rate and most hotel bookings come from the corporate sector which does not mind paying tourism tax,” he said.

Tourists therefore preferred staying in Airbnbs as they did not have to pay tourism tax.

“There should be more incentives from the government to help the hotel industry because we, too, contribute to tourism.

“We are also appealing to increase the SST threshold to RM1.5 million compared to RM500,000 now where hotel operators are taxed,” he added.