MARKET OVERVIEW
68
ANNUAL REPORT 2015
FRASERS HOSPITALITY TRUST
Hospitality Industry Performance
Kuala Lumpur has experienced very
little hotel performance indicator
growth in past years.
The picture in 2015 is similar as
occupancy decreased by 11.1%
to 63.9% for 1H 2015, from 71.8%
in 1H 2014. This pronounced
decrease has been due to various
factors including underperforming
resources markets as Malaysia is an
oil exporting nation. Negative media
coverage related to the Malaysia
Airlines twin tragedies has impacted
confidence in the nation’s aviation
and stopover demand. Thirdly,
political instability such as the
Bersih demonstration at the end of
August and smaller demonstrations
throughout 2015 have also
discouraged potential visitors.
There was a 3.7% decrease in ADR
to MYR390.66 (USD90.60) in 2014
from MYR381.65 (USD88.51) in 2013.
Comparing 1H 2015 with 1H 2014,
there was a decrease of 4.9% in ADR
from MYR381.01 (USD116.78) to
MYR362.24 (USD98.94). Room rates
have been stagnant in Kuala Lumpur
for the past eight years.
There was a 1% increase in RevPAR
to MYR284.19 (USD65.91) in 2014
from MYR281.06 (US$65.18) in
2013. For 1H 2015, with a decline in
both occupancy and ADR, RevPAR
was MYR231.37 (USD63.19), a
15.5% decrease from MYR273.70
(USD83.89) for 1H 2014.The
hotel market in Kuala Lumpur
is extremely competitive, with
serviced apartments often having no
minimum stay restrictions.
At the end of 1H 2015, the decreases
in key performance indicators are
even more pronounced in US dollars
terms with decreases of 15.3% in
ADR and 24.7% in RevPAR. This is
the worst loss for any major market
in the Asia Pacific region in 1H 2015
according to STR.
Existing Supply
As of 2014, there are 80 hotels in
the 3 to 5 star categories totalling
27,456 rooms. The largest portion of
current hotel room supply is in the
5 star category, 24 hotels with 41%
of room supply or 11,238 rooms. 4
star hotels are the second highest
with 26 hotels with 8,555 rooms,
representing 31% of supply. There
are 30 hotels with 7,663 rooms or
28% of supply in the 3 star category.
Future Supply
There are 3,700 total rooms in the
pipeline, representing 13% of current
supply although not all of these may
progress to completion.
The majority of future developments
to 2017 are in the 5 star category.
There are 6 hotels with 1,536 rooms
in the KL Golden Triangle and 4
hotels with 812 rooms within the
decentralised areas.
There are four pipeline hotels in the
4 star category, two hotels with 403
rooms in the Golden Triangle, one
hotel with 198 rooms in the Central
Business District and one hotel with
275 rooms in the decentralised
areas.
Notable future openings include the
50 room Banyan Tree Signatures
Pavilion Hotel, the 208 room St.
Regis Hotel, the 253 room RuMa
Hotel, the 312 room Clermont
Hotel Damansara Heights, 150
room W Hotel & Residences, the
231 room Four Seasons Place, and
the Harrods Hotel Bukit Bintang,
details unavailable. There are a very
high number of pipeline serviced
apartments; most of the hotels
mentioned above also have a
serviced apartment component.
The high number of upscale and
luxury pipeline rooms are due to
the strength of Kuala Lumpur’s
corporate demand. Although,
compared to other Southeast Asian
cities such as Bangkok and Jakarta,
future supply is low.
Hospitality Market Outlook
Malaysia is a high economic growth
country, surrounded by similar
emerging economies with increasing
propensity to travel. The long term
outlook for hotels is positive but
at present, consumer and investor
confidence in the Malaysian
economy is extremely low.
In the short term, if hoteliers
can ride through the remainder
of 2015 unscathed while the
political situation improves, hotel
performance may return to 2014
levels by the second half of 2016.
This depends on Malaysia’s ability to
increase visitor confidence. Malaysia
should swiftly implement the
mooted visa changes for Chinese
tourists, a significant potential
demand generator. It may also seek
to improve its reputation in security
among East Asian tourists.
The government has designated
2015 as the “Malaysian year of
festivals”, many events such as
the Indian Film Academy Awards,
the International Craft Festival,
and the 37th World Arm Wrestling
Championship were held. Malaysia is
also the chair of ASEAN in 2015.
The ruling party ETP intends to
transform Malaysia into a high-
income, fully developed economy
by 2020. Kuala Lumpur already
contributes 30% of Malaysia’s GDP
and it is a key pillar of the economic
plan. There are many infrastructure
projects which may generate
demand in new areas. Construction
projects include the KL118 Tower,
scheduled for completion in 2019.
Transport projects including the HSR
service between Kuala Lumpur and
Singapore, which would reduce the
journey to 90 minutes, are eagerly
anticipated and may improve
occupancy and ADR in some areas.
There has been little room rate
growth in Kuala Lumpur over
the past eight years. Although
international brands would like to
enter the market, there is serious
concern over future growth given
the lacklustre trading performance.
Of all the major Asian cities,
Kuala Lumpur has the lowest 3
to 5 star ADR rates. Given the
macroeconomic difficulties in
Malaysia this year, it is likely that
we will continue to see depressed
occupancy, ADR and RevPAR for
remainder of 2015.
