Time for the Hotel Industry to “Remove the Box”

The hotel industry is one of the worst-hit industries during this crisis. A lot of studies have been conducted to help us understand the impact on the economy and our organization's bottom-line. Industry experts, through their various associations, have predicted that the average hotel occupancy in Malaysia for the year will stand at around 25% or less.

According to a recent study by Malaysia Association of Hotels (MAH), the industry is looking at a potential loss of RM6.3b in rooms revenue alone. Assuming rooms revenue accounts for 60% of the total hotel revenue, with F&B and other income accounting for the remaining 40%, the industry is facing a RM10.5b in potential losses.

MAH represents about 1,000 hotels out of the 4,880 hotels registered with the Ministry of Tourism Arts & Culture (MOTAC). However, these 1,000 hotels with 164,000 rooms represent 56% of total rooms inventory available throughout Malaysia.

 The number of hotels closing for business is increasing by the day, indicating not only loss of business, but also loss of jobs. The current estimate is that 1 million travel industry personnel (including hotel, airline, cruise and travel agents) will lose their jobs by the end of this year.

While we take stock and moan how the hotel industry's poor prospects, let us focus our attention on what we can, and should, do moving forward.

According to a study by the University of Singapore Technology and Design, China is expected to be the first to get back to normalcy while Malaysia's magic date is predicted to be July 6. Whether we like it or not, we should look at China as one of our main feeder markets, besides the domestic market of course. Consider appointing representatives or affiliates based in key cities in China to work with online platforms and mainstream travel agents there and start re-promoting Malaysia as a destination. Hoteliers need to actively prepare for this, and as soon as China reopens its doors, hotels must already be "Chinese friendly" at all service touch points

A financial reprojection is necessary to understand your hotel's new breakeven point. We often hear that the breakeven point (BEP) in an operating hotel is at 40% occupancy levels

At least for the short to mid-term, hotels will be looking at domestic travellers as a main source of customers. This will indeed be the fastest strategy to regain some occupancy. Malaysians still love the "Cuti-Cuti Malaysia" short getaways

Hotels may in the near future need to be certified "Social Distance Compliant" by authorities after they have practised and passed SOPs set by authorities. This is going to be very similar to the HALAL certification we see displayed on public areas. This could be something we will all be used to in the near future.