Luxury hotels to comprise a third of Kuala Lumpur’s new openings this year | Real Estate Asia
, Malaysia

Luxury hotels to comprise a third of Kuala Lumpur’s new openings this year

Notable upcoming openings include lyf Raja Chulan Kuala Lumpur and Crowne Plaza Kuala Lumpur City Centre.

According to the latest statistics from Tourism Malaysia, international visitor arrivals further declined by 83.4% y-o-y to 4.3 million in 2020 as international borders remain closed due to the COVID-19 pandemic. As a result, all top source markets registered y-o-y declines, with Singapore and China seeing the largest y-o-y declines.

International visitation saw a slight m-o-m uptick in 3Q20, but fell in 4Q20 following a rise in COVID-19 cases in the country. According to JLL, while International visitation is expected to remain muted in the near term, the expiry of the MCO in April 2021 may lead to the recovery in domestic visitation, which was a key demand driver in 2020.

Here’s more from JLL:

Planned 1Q21 openings postponed amid continued uncertainties

There were no openings in 1Q21, as planned openings were postponed to 2H21 and beyond as international and domestic demand remained limited due to continued border closures and the MCO respectively. However, future supply is expected to pick up for the rest of 2021, with seven lodging properties offering 1,980 rooms slated to enter the market.

The significant uptick in 2021 is due to the backlog of planned openings from 2020. However, depending on the COVID-19 situation, several could potentially be delayed beyond 2021. The luxury segment is expected to account for around one-third of total upcoming room openings in 2021. Notable upcoming openings include lyf Raja Chulan Kuala Lumpur and Crowne Plaza Kuala Lumpur City Centre

RevPAR remains subdued due to low occupancy rates

Revenue per available room (RevPAR) declined by 85.4% y-o-y to MYR 46 as of YTD February 2021. Occupancy rates declined by 48.5 percentage points to 9.3% as both international and domestic demand remained suppressed due to continued border closures and MCO respectively. This has begun to put pressure on average daily rate (ADR), which saw a 9.3% y-o-y decline to MYR 493.

Despite the muted occupancy performance due to COVID-19, luxury hotels largely maintained ADR throughout most of 2020. We note, however, that ADR has been on a downward trend since 2021, weighed down by a further slump in occupancy following the reimposition of the MCO in January 2021.

Outlook: Domestic visitation will be key to performance

Luxury RevPAR is likely to remain subdued in the near term given that international visitation, a major demand driver for luxury hotels, is expected to remain depressed due to continued global travel restrictions. ADR is also likely to face increasing pressure amid a rise in competition due to limited demand, which could lead to further declines in RevPAR.

On a positive note, MCO’s expiry in end-April 2021 could stimulate the recovery in domestic visitation, which could partially cushion the declines as seen in 3Q20. Malaysia has eased several curbs since March 2021, with inter-district travel now allowed. Continued relaxation of the MCO should eventually lead to a recovery in domestic demand, especially if international travel remains closed.

Note: Kuala Lumpur Hotels refers to Kuala Lumpur's luxury and upscale hotel market.

 

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