Putting them up for the night


Steady growth and other promising tourism indicators mark Visit Penang 2015.

The record drop in the value of the ringgit is making Malaysia a cheaper destination for foreign tourists. Furthermore, it is encouraging Malaysians to have their vacation within the country instead of travelling abroad. In the coming months, if the logic holds, top tourist destinations such as Penang, KL and Malacca should benefit as a result of this1.

Foreign tourists on the rise

Due to the unavailability of data on GDP contribution to the tourism sector at state level, we use the number of hotel guests to measure the economic performance of the tourism sector in Penang. From this, we find that the tourism sector in Penang continued to grow in 2014 mainly due to the increased number of international tourists. Penang’s total hotel guests increased by about 46% to 6.85 million in 2014 compared to a total of 4.70 million hotel guests in 2013 (Figure 1).

Karen Lai

In 2014, 47.2% of hotel guests in Penang were foreigners. This follows the remarkable rise in 2014 by about 57% compared to 2013 (Figure 1). It is an encouraging signal and provides incentive for Penang to continue organising a variety of festivals and events to attract both domestic and international tourists every year.

Demand and supply

Naturally, along with the rise in the influx of domestic and foreign tourists, Penang saw an increase in various types of hotels over the past couple of years. The Penang Geographical Information System’s (Pegis) statistics show that the total number of hotels surged by nearly 40% to 235 hotels in 2014, up from 168 hotels in 20122. Of these, budget hotels made up the largest proportion of total non-star and star rating hotels, accounting for about 59% in 2014 with a growth rate of 41.8% compared to that in 2012.

Syerleena Abdul Rashid

The opulent facade of the E&O Hotel

The number of guesthouses also swelled significantly, by more than three-fold. They were concentrated primarily at the north-east district of the Island.

Likewise, Penang also recorded a growth in the number of all-star rating hotels, particularly three-star and four-star hotels.

Given the rise in the number of hotels, one would expect the average occupancy rate (AOR) of hotels in Penang to drop. However, the demand for hotel rooms continued to increase sharply to an AOR of above 60%, surpassing that of the national AOR of hotels in 2010-2014 (Figure 2). According to the Malaysian Association of Hotels (Penang Chapter), Penang’s hotel average occupancy rated above 65% in all months of 2014 except January and November (Figure 3)3.

Interestingly, this tells us that although the supply of hotel rooms have increased, the demand continues to rise alongside it. This, if anything, is reason to celebrate. It also tells us that the hospitality market in Penang has much room for growth. Growth is estimated to continue in 2015 as a result of the 2015 Visit Penang Year coupled with activities organised in the state, such as the George Town Festival.

Penang’s AOR plateaued at 65% from February to October 2014, but leapt in March and December 2014. It is interesting to note the AOR also varies considerably according to the different locations of the hotels. For example, city hotels outperformed beach hotels in most months in 2014 except January, February and August. This suggests that Penang’s hotels accommodated and continues to accommodate diverse guests throughout the year: those who prefer the sunny beaches, those who prefer the heritage sites of George Town and those who prefer upscale, opulent retreats.

It should be noted that in November 2014, when the Penang Bridge International Marathon (PBIM) was held, city hotels recorded higher occupancy rates of nearly 68% compared to the rates at beach hotels; this could be attributed to the close proximity of city hotels to the Second Penang Bridge.

The number of boutique hotels in Penang has definitely increased. Clove Hall, Yeng Keng Hotel and Museum Hotel, to name a few, are part of this new trend of boutique hotels4. Since the city council of Penang Island does not classify boutique hotels as a subgroup of hotels, the exact number of boutique hotels cannot be ascertained. On this, Danny Tan, marketing manager of Penang Global Tourism (PGT), says,” Boutique hotels were at one time a booming trend but right now, their growth has steadied. PGT is very fond of this new submarket but we are also weighing the balance between boutique hotels and contemporary hotels as not all international travellers appreciate the boutiques and hence are not willing to try them out.”

Government initiatives

On June 1, 2014, hotels in Penang began to collect the Local Government Fee of RM3 per room per night for four and five-star hotels, and RM2 per room per night for three-star hotels and below, including dormitories, budget hotels, hostels and guesthouses. “This is a great initiative from the state government and has gathered support from the tourism industry partners, especially hoteliers,” says Danny Law Heng Kiang, executive councillor of Penang State Tourism Development. “Our tourism budget is very, very small, and the fees collected will aid the tourism industry in Penang.”

Karen Lai

Yeng Keng Hotel.

The Local Government Fee Committee, chaired by the Chief Minister, was formed earlier this year to look into areas where the fee can be used. Possibilities include marketing and promoting Penang overseas through advertising campaigns; incentives for direct flights into Penang (the government is in the midst of discussions with AirAsia and Malindo Air for such flights from Seoul, Yangon and Bandung at the end of the year); participation in international trade shows like ITB and ATF; and incentives for meetings, incentives, conferences and exhibitions (MICE) events.

Furthermore, with wider acceptance of pioneering concepts such as glamping and Airbnb, we should see more innovations in the hospitality business in Penang.

1 However, it must be noted that if imported goods and services (such as food) are used to support the incoming of foreign tourists, some of these benefits will not be as significant (http://penanginstitute.org/v3/media-centre/ press-releases/729-press-statement-on-fall-ofthe- malaysian-ringgit).

2 Penang has a number of boutique hotels which are not reflected in the Pegis statistics.

3 It is important to note that the AORs produced by the Tourism Malaysia are analogous with that of Malaysian Association of Hotels – Penang Chapter. Since the monthly data for AORs are not made publicly available in Tourism Malaysia, the monthly AORs produced by the Malaysian Association of Hotels are used in the report.

4 www.luxurytravelmagazine.com/news-articles/ top-10-accommodation-trends-from-boutiquehotel- experts-16651.php

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