HOTEL room prices will likely go up by 30% next year when the sales and services tax (SST) rises from 6% to 8% on January 1.

Malaysian Association of Hotels (MAH) president Christina Toh said hoteliers have yet to decide on rates in the price-sensitive sector.

“We need to see the situation next year. (But) with the SST going up, we might raise rates by 30%,” she told The Malaysian Insight.

“It’s all inflationary. Otherwise, we will lose money.”

MAH has more than 1,000 members nationwide.

“Despite the budget announcement stating the SST wouldn’t apply to certain categories, operating costs are expected to increase due to the integrated supply chains.”

She said it is hard to gauge the effects of the SST on rates for now because it is unclear how the tax will be applied.

“Regardless of how hotels respond, the effect will be felt throughout the industry and is expected to influence room rates.”

The prime minister announced earlier this year announced a new SST rate of 8%. But he the food and beverages and telecommunication sectors would not be affected by the tax increase.

According to MAH data, a five-star hotel room costs RM453, four-star (RM268) and three-star (RM165).

Annually, room rates for five-star hotels rose 11.9%, four-star 12.3% and three-star 24.9%.

The Visit Malaysia Year 2026 campaign targets the arrival of 26.1 million tourists who are expected to spend RM97.6 billion.

As for the effects of a weakened ringgit, Toh said it will make the prices more attractive to visitors.

“However, any rate increase next year will be in line with global inflation.”

On the occupancy rate, she said it looks promising on the resort islands of Penang and Langkawi and in greater Kuala Lumpur and Malacca.

“The current average occupancy for three-star to five-star hotels is 60% nationwide and 70% in popular destinations. We hope it will peak to 80% in December.“

Cost-cutting measures

To determine how much they should charge for rooms, hoteliers must assess the competition and demand.

“Pricing strategies are intricate and tailored to each hotel’s circumstances. Hoteliers can also employ cost-cutting measures to maintain operations.”

She said as the new SST is also expanded to logistics, hotels will renegotiate their supplier contracts.

“They will also optimise and embrace environmental, social, and governance initiatives for sustainability.

“Additionally, some hotels might improve their offerings to attract more visitors to offset the cost increases.”

Toh also welcomed the RM350 million allocation to tourism in 2024, which represents a RM100 million increase from the previous year.

“The funds must be channelled into driving additional promotions and marketing, preserving and enhancing attractions, and providing grants to boost emerging Muslim-friendly tourism activities.” – November 3, 2023.