Hospitality investments trending up

By New Straits Times

Foreign investments in the local real estate sector are not confined to just commercial and residential properties: Money is being put into the leisure/resort sector as well.

According to Zerin Properties chief executive officer Previndran Singhe, foreign investors accounted for a hefty 85 per cent of the value of hotel transactions last year, compared with 44 per cent the previous year.

Increasing investments in the hospitality market are a growing trend, he said, adding that foreign investments in hotels in Malaysia grew by 64 per cent in 2006, with both hotel funds and investment funds driving the demand.

Among the hotel transactions, Previndran added, were the 571-room Crown Princess which was transacted at RM240 million or RM420,315 per room, Grand Centrepoint (100 rooms for RM12.5 million/RM125,000 per room) and Westin (452 rooms for RM455 million/RM1 million) in Kuala Lumpur; and Sheraton Subang (502 rooms for RM140 million/RM278,884) in Selangor.

The others were Ferringhi Beach Hotel (350 rooms for RM43 million/RM122,857 per room) and Midtown Hotel (96 rooms; RM12 million/RM125,000) in Penang; Holiday Villa (258; RM55 million/RM213,178) in Langkawi; Holiday Villa (160; RM31 million/ RM193,750) in Kedah; Holiday Villa (100; RM21.87 million/RM195,286) in Kuantan; and Berjaya Palace Hotel (160; RM21 million/ RM131,250) in Sabah.

In the four- and five-star hotel sector in KL, local investors accounted for 58 per cent of the ownership as of December 2006 and foreigners the remaining 42 per cent.

In 2005, hotel transactions in KL included the Mandarin Oriental in KL City Centre (642 rooms; RM600 million/RM933,000), Sheraton Imperial (398; RM225 million/ RM565,000) and Nikko Hotel (470; RM235 million/RM500,000).

Elsewhere, the transactions included Sheraton Perdana (207; RM77.5 million/ RM374,396) in Langkawi; Merlin Inn (66; RM13.5 million/RM204,545) in Cameron Highlands; Merlin Johor Baru (149; RM10.46 million/RM70,201); and Sheraton Kuantan (267; RM36.6 million/RM137,078).

Previndran envisages the advent of resort homes in Langkawi, Kuala Terengganu and Kuantan in Peninsular Malaysia as well as Kudat, Kota Kinabalu, Tuaran and Papar in Sabah, given the country's gorgeous islands, breathtaking sceneries, spectacular diving spots, laid-back charm and good quality of life.

For Far East Consortium International Ltd (Fecil) deputy chairman and chief executive officer Tan Sri David Chiu, growing tourist arrivals, which rose from 15.7 million in 2004 to 16.4 million in 2005 and on to 17.6 million last year, was a key factor in his decision to invest in the local hospitality real estate.

Other reasons are the improving infrastructure, Malaysia's evolvement as a shopping haven, low hotel rates, and of course commendable real gross domestic product growth.

Besides Malaysia, which is expected to see a 10.8 per cent increase in tourist arrivals next year, Fecil also owns and operates hotels in Hong Kong, Macau and China.

According to the Leisure Stock Report for the second quarter of this year from the Valuation and Property Services Department's National Property Information Centre (Napic), the average occupancy rate at five-, four- and three-star hotels was well maintained at 65.4 per cent, 60.8 per cent and 62.6 per cent respectively.

The average occupancy rate for hotels in KL ranged from below 50 per cent at those in Jalan Ipoh and Jalan Raja Laut to near 100 per cent at hotels in Jalan Bukit Bintang, Jalan Changkat Bukit Bintang and Jalan Masjid India.

In Selangor, the rate ranged from 60 per cent at hotels in Shah Alam to 70 per cent in Subang and above 80 per cent in Sepang.

In Johor, the figures varied from below 20 per cent in Muar to above 70 per cent in Batu Pahat and Kluang.

In Penang, the average occupancy rate of hotels in the city centre and those at beachfronts ranged from 65 per cent to almost 90 per cent, while Genting Highlands, dubbed Asia's leading integrated leisure and entertainment resort, saw an average rate of 75 per cent for a five-star hotel and over 90 per cent for a three-star.

The country has a total of 2,180 hotels and 149,820 rooms, with KL, Johor, Pahang, Sabah and Sarawak accounting for over 200 hotels each.

KL has the highest number of "incoming supply" of hotels and rooms, at 16 and 5,066; followed by Johor's nine and 3,038; while Selangor, Pahang and Terengganu are getting four hotels each, offering 3,163, 994 and 725 rooms.

Of the total of 128 "planned supply" of hotels offering 33,713 rooms, KL again accounted for the lion's share of 95 hotels with 21,650 rooms. Terengganu was a distant second with six hotels offering 482 rooms while Negeri Sembilan and Pahang each will have five new hotels offering 1,805 and 4,977 rooms.