Budget hotels want taxes reviewed amid Airbnb competition

Kenneth Oh, head of the Malaysia Budget Hotel Association’s (MyBHA) Kuala Lumpur chapter, said revenue for budget hotels or hotels with three stars and below have suffered a 15 per cent to 20 per cent decline in revenue. — Reuters pic
Kenneth Oh, head of the Malaysia Budget Hotel Association’s (MyBHA) Kuala Lumpur chapter, said revenue for budget hotels or hotels with three stars and below have suffered a 15 per cent to 20 per cent decline in revenue. — Reuters pic

KUALA LUMPUR, May 23 — Local budget hotels called for a review of tax policies to help them cope with competition against Airbnb and low profit margins from online hotel booking sites.

Kenneth Oh, head of the Malaysia Budget Hotel Association’s (MyBHA) Kuala Lumpur chapter, said revenue for budget hotels or hotels with three stars and below have suffered a 15 per cent to 20 per cent decline in revenue, with some of the 500 budget hotels in Kuala Lumpur even suffering losses in the past two years.

“This has resulted in some operators selling off their properties due to lack of business,” he was quoted saying by local daily The Star.

MyBHA national president Leong Pui Kun noted that Airbnb listings throughout Malaysia numbering 44,000 now is growing fast, adding that local female Airbnb hosts earned a total of RM159 million last year and predicted the amount to be more for male hosts.

“This amount goes out from the hotel industry yearly,” he said of the amount of money that local Airbnb hosts are making.

Leong said budget hotel operators desperate for business have resorted to turning to online travel agencies (OTA) — like Booking.com and Agoda —- to manage their hotel bookings, believing that they can market their hotel to a larger number of clients.

But he said using such OTA eats into the profits of budget hotel operators, as 20 per cent to 30 per cent of the room rates are paid as commission to the online booking sites, while the room rates offered are also kept low to attract customers with competitive prices.

“As a result, budget hotel operators end up earning lower profit margins,” he was quoted saying.

Aside from such competition, budget hotels also have to cope with taxes.

Leong reportedly highlighted the absence of a level playing field, noting that Airbnb customers do not have to pay the tourism tax and that this has led to tourists favouring Airbnb over hotels.

A tourism tax of RM10 per room per night is imposed on foreigners staying in hotels or registered private accommodations.

Leong contrasted the effect of the tourism tax on budget hotels and hotels with four or five stars, noting that RM10 is only a low percentage of the latter’s overall room rates and that the corporate sector that usually books rooms in these hotels do not mind paying the tourism tax.

Leong said MyBHA is now discussing with Tourism Malaysia for a review of the tourism tax, and are also appealing for the government to only impose the Sales and Services Tax on budget hotel operators if their revenue hits RM1.5 million instead of the current threshold of RM500,000.

Aside from competition and tax, The Star also noted that there is an “oversupply” for hotel rooms in Kuala Lumpur and that the number of tourists that entered Malaysia fell from 25.95 million in 2017 to 25.83 million last year.

Kuala Lumpur City Hall (DBKL) executive director (Socio-Economic Department) Datuk Ibrahim Yusoff reportedly said DBKL is currently collecting data on Airbnb hosts, with a study required on how to license such businesses as it involves all sorts of business models.

“Without suitable policies in place, the government is losing in taxes,” he was quoted saying by The Star when noting that DBKL would be pursuing this issue.

The Star said local Airbnb hosts in Kuala Lumpur have to register with DBKL since last year, but said there are currently no laws for the regulation of Airbnb.

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