Industry captains say SST hike will stifle domestic tourism

Noel Achariam

The Malaysian Budget and Business Hotel Association says it is disappointed the government is not considering its members’ plight. – The Malaysian Insight file pic, October 26, 2023.

BUDGET hotel rates could spike by 50% when the sales and services tax (SST) goes up to 8%, the Malaysian Budget and Business Hotel Association said.

The operators want Putrajaya to listen to their pleas and not ignore that several budget hotels have already shut.

Association president Sri Ganesh Michiel said the group was disappointed the government was not considering its plight.

“They are going to increase the SST from 6% to 8% instead of giving us leeway to sustain the industry.

“With the 2% increase, the whole industry’s operating costs will go up, including laundry services, pest control, air-conditioner servicing and maintenance,” Ganesh said.

He said operators would have no choice but to increase room prices.

The current rates for a three-star hotel is between RM150 and RM200, RM100-RM150 for two-star hotels, and RM100 for one-star hotels.

“We have no choice but to raise prices by 50%. We are not making any profit.”

When tabling Budget 2024, Prime Minister Anwar Ibrahim announced the proposal to hike the SST rate.

However, to avoid burdening the people, Anwar said the food and beverages and telecommunication services would not be subject to the rate hike.

Ganesh said tourism operators had brought several issues plaguing the industry to the government, but it did not listen.

He said his group sent a memorandum to Anwar in August on the industry’s plight and to look into the group’s suggestions.

“We have already voiced several times that the threshold level (for SST) be raised from RM500,000 to RM1.5 million for budget hotels.

“Only when their income reaches RM1.5 million should they have to pay SST.

“Budget hotels are getting business, but they are not making any profit due to low rates and service costs to maintain hotels have increased,” Ganesh said.

He said since January, roughly 50 hotels have shut. The group has 2,800 members nationwide who operate three-star to one-star hotels.

Tourism players say illegal hotel operators offer rooms at lower rates than legitimate businesses do and don't have to impose SST, so tourists end up choosing the cheaper rooms. – EPA pic, October 26, 2023.

Regulate illegal players

Another issue, Ganesh said, was that authorities have failed to regulate illegal accommodation providers.

“These illegal operators don’t pay SST, so they can offer units at lower rates,” he said.

“The public will go for the cheaper rooms because they don’t have to pay SST.

“For example, a budget hotel offering a room at RM100, plus 8% GST (goods and services tax), but around the corner, an Airbnb is being offered at RM100 or less. People would choose the (Airbnb).”

He said there were around 70,000 illegal short-term rental units.

“We are unsure that the industry can be sustained in the future. We also cannot increase our prices because there is competition with online travel agencies,” Ganesh said.

Ganesh said tourism operators were maintaining their businesses for now, but have not seen profits.

He said the government must promote local tourism by offering tax incentives so people could support the industry. – October 26, 2023.

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