Friday, June 27, 2008


Cancellations of Govt events to hurt hotels


The Sabah Hotels Association (SHA) has expressed fear that the Government’s decision to cancel all its official events and functions at hotels will cause serious financial difficulties and consequential damage to the hotel industry. Its President Christopher Chan said losses in revenue of some hotels for June alone as a result of the cancellations range from RM18,000 to RM240,000. He said revenue from the Government sector, including functions, meetings and seminars and accommodation amounts to over RM400 million annually in Sabah, and the loss from the 5 per cent sales tax alone amounts to over RM20 million in tax shortfall to the Government yearly. “The major hotel players have indicated they will experience a drop of 25 percent to as high as 40 percent in their annual income in the months to come, which translates to over RM100 million annually,” he said in a statement yesterday. Chan said SHA has already anticipated a drop in tourist arrivals for this year as a result of the increase in fuel surcharges imposed by all airlines. “This will result in lower room occupancy and possibly a drop in room rates as a result of higher rooms inventory and stiffer competition,” he said. Chan said SHA has submitted a Memorandum of Appeal to the Government through the Tourism, Culture and Environment Minister Datuk Masidi Manjun over the Government’s decision to cancel all its functions at hotels. According to him, the Government’s latest move as part of its cost-cutting measures in line with its recent decision to increase the fuel prices has no justification. He pointed out that over the years the hotel industry has been evolving to meet with the Government’s call to upgrade and improve on the facilities and services to international standards, whereby hotels are graded according to star rating based on criteria set by the Ministry of Tourism. He said the industry has also spent millions of ringgit on human resource development and training hotel staff to upgrade to not only the national skill standards but also international skill standards. “We understand the Government’s decision to cut its expenses and being thrifty in view of the recent hike in fuel prices but what we don’t understand is that why is the hotel industry singled out in this cost-cutting exercise,” he said. “Why are we (hoteliers) being penalized?” Chan said the hotel industry has just started to recover from the financial crisis and recession that struck a decade ago followed by the coxsackie outbreak and the SARS epidemic, Nipah virus, bird flu virus outbreak and other challenges. “The Sabah hotel industry endured all these calamities without much help from the Government and struggled to survive under all these bad weathers,” he said. “Now it seems that we are going back into doldrums of uncertainty. Such change in policies without justification does not auger well for the hotel industry.” Meanwhile, Chan described the latest announcement by the Federal Cabinet to discuss hotel tax reduction as a joke. “You cut off a leg and now try to replace it with a hand. Will you still perform normally and expect to be healthy?” he asked, adding that changing policies without foreseeing the impact of such change will be very damaging in the long run. Chan said that the 5 per cent sales tax collected from the tourism industry in 2007 translates into 15 percent of the Sabah’s Gross Domestic Products (GDP). “Tourism receipts for 2008 are expected to hit RM5. 16 billion and RM5.79billioninyear2009,andabout one third of these receipts go to the Federal Government coffers,” he said Chan said the anticipated drop in tourist arrivals will make it more challenging for the hotels in Sabah to maintain their average room occupancy, which has been going up from 65 per cent in 2005 to almost 80 per cent in 2007. “We forecast not only a drop in the average occupancy but also a drop in the average room rate across the board due to an increase in more than 1,500 rooms available for 2008 and stiff competition. “Sabah has always been dependent on air travel as the mode of transport by tourists to the State (96 %). With the expected shortfall in travellers and a drastic loss of an important market segment from the Government, the hotels will face a hard time and the scenario of the NPL from the hotel industry will be a very real prospect,” he said.