Hotel prices to increase following sales tax hike: Industry reactions differ

Diverse predictions for hotel price increase in Malaysia

13 Feb 2024 09:52am
Image for illustrative purposes only. - 123RF. (Small picture: Christina, Sri Ganesh Michiel, dan Aiman Wasa)
Image for illustrative purposes only. - 123RF. (Small picture: Christina, Sri Ganesh Michiel, dan Aiman Wasa)

SHAH ALAM - Hotel prices in Malaysia are expected to see an upward trend, ranging from 10 per cent to 30 per cent following the increase in the Sales and Service Tax (SST) rate to eight per cent, effective March 1.

Malaysian Association of Hotels (MAH) President Datin Christina Toh said besides SST, peak season factors such as school holidays or celebrations could also impact the increase in prices.

"But in terms of prices among Asean countries, Malaysia has one of the lowest hotel room rates in the market.

“For example, in Laos, we have to pay $130, which is RM619, for a five-star hotel room, while $100 (RM476) for a four-star hotel room.

"If compared to our country, it is still cheap," she told Sinar.

Prime Minister Datuk Seri Anwar Ibrahim announced the SST increase in the 2024 Budget, excluding food and beverages, and telecommunications.

Despite the tax hike, Christina remains optimistic about tourism, attributing it to ongoing promotions and government support, such as visa exemptions for specific nationalities.

"The increase has no effect. That is one of the reasons why we want to attract more foreign tourists to our country because our prices are still reasonable.

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"In addition, we also receive support from the government in terms of (entry without) visas for Chinese and Indian citizens, as well as for tourists from other Asean countries," she said.

However, Malaysia Budget and Business Hotel Association (MyBHA) President Dr Sri Ganesh Michiel painted a different picture, expecting prices to soar up to 50per cent.

He stressed the domino effect of the new SST rate on the entire supply chain, impacting costs of cleaning services, utilities, and transportation.

To ensure business sustainability, hotel owners may be forced to raise prices, he said.

"The price increase is due to actions that raise operating costs such as tax increases.

"For example, suppliers that supply products to hotels are also affected by the increase in SST.

"The same goes for laundry services; if they pay SST, they will certainly have to raise the cost of washing towels, bedspreads, pillowcases, and hotel blankets," Ganesh said.

Meanwhile, Ridel Boutique Hotel owner Aiman Wasa said they plan to raise room prices in line with the charges to be imposed by suppliers.

Aiman said suppliers have started sending notices that they will raise prices by around 20 per cent starting March 1.

"Room prices must go up. If suppliers raise prices, we also must do the same; this does not include an increase in water tariff rates.

"Competition in this business is very high, but we cannot raise prices too high.

"That is one of the reasons why many hotel businesses are closed.

"When prices go up, there are no customers, and when prices are not raised, costs go up," he added.