Investments in Malaysian hotels plunge

However, there are signs of foreign investors returning to the Malaysian hotel market, says a real estate agent

Transactions involving the buying and selling of Malaysian hotels have plunged fivefold, from RM1.2 billion worth of transactions in 2005 to RM205 million last year, as owners preferred to hold on to their assets as property prices appreciated.

Last year also saw no foreign interests unlike in 2006 and 2007 where more than 60 per cent of the hotel investment volumes were by foreigners.

However, the momentum is expected to pick up this year, said real estate agent Previndran Singhe.

"Prices have now stabilised and so owners are willing to sell," Previndran told Business Times yesterday.

At the same time, there are signs of foreign investors returning to the Malaysian hotel market as real estate agencies including Previndran's company Zerin Properties Sdn Bhd, have been approached by them looking for deals.

Zerin Properties has closed over RM1 billion worth of hotel deals in the past five years.

"The foreigners are returning and they are willing to pay the market price, as they realised that they are unable to bargain since there is no property crisis here," Previndran said.

He added that their interest in Malaysian hospitality is spurred by the country's strong tourism market.

"We welcome more tourists here than in Singapore or even Thailand," he said.

He added that this was despite the fact Malaysia is known to have one of the lowest, if not the lowest, average room rates in the world, which could take an investor a decade to see return on investment.

"They see a potential for an upside in terms of rates," Previndran said.

This year has already seen the sale of the Novotel Hydro Majestic in Kuala Lumpur to The Nomad Residences Sdn Bhd.

Other hotels up for sale and may see deals closed include Sime Darby Bhd's sale of Hotel Equatorial Malacca and Hydro Hotel Penang in Batu Ferringhi.

IGB Corp Bhd has also voiced its intention to dispose of its Renaissance Kuala Lumpur Hotel.

By Business Times (by Vasantha Ganesan)