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Hoteliers See Slow Recovery From SARS Impact
Saturday, June 21, 2003

By Kang Siew Li

THE hotel industry expects a slow recovery from the after-effects of the Severe Acute Respiratory Syndrome (SARS) outbreak in the region.

A hotel operator said it would take at least six months to make up for the lost revenue as visitors stay away because of SARS fears.

"This year is practically gone. We (the local hotel industry) lost two months (April and May) of income to SARS and if this goes on for another month, we will run out of budget, which makes the work to recover lost ground all the more difficult," Value Hospitality group general manager Dennis Tan told Business Times.

"Even if people start to travel this month, the volume will not be like it was before because it will take another three to four months for the hotels to fully recover," he added.

Value Hospitality saw occupancy rates of the Malaysian hotels under its management at just 35 per cent, down by more than one-third, in April and May. The company manages seven hotels in Kota Kinabalu, Bintulu, Miri, Bongawan, Klang, Kuala Lumpur and Kajang, and a golf course in Bongawan.

"The good news is that we saw a slight pick-up in occupancy since the lifting of the World Health Organisation advisory on Singapore on May 31, indicating that business people in Singapore are travelling again.

"This is important because Singaporeans account for some 45 per cent of total tourist arrivals to Malaysia," said Tan, adding that occupancy rates of the seven hotels it manages have climbed back to some 50 per cent.

Tan said tourist hotels in Malaysia would take longer to recover from SARS because tourists would put off travel until the outbreak was completely eradicated.

"Several hotels in Kuala Lumpur, which are dependent on tour groups from SARS-affected countries such as Taiwan and China, are still experiencing hard times," he noted.

Tan believes that tourist traffic from China will continue to slow over the next three months as SARS is still a predominant issue there.

He warned that if bookings do not pick up by next month, many hotels may be forced to retrench staff to balance their books, with a high possibility that some may go out of business.

"Labour costs constitute 35 to 40 per cent of a hotel's total operating costs and thus, staff are often the first target of budget cuts.

"In fact, this (retrenching workers) was what many hotels in Singapore did in March and April," he said.

In Singapore, hotels are reporting about 15 to 20 per cent occupancy rates compared with 60 to 70 per cent at this time last year.

Tan said Value Hospitality has given a contingency plan to managers of the hotels it manages.

"The contingency plan will be activated if the current situation does not improve over the next three months," he said, acknowledging that this includes cutting staffs.

Meanwhile instead of just focusing on managing three and four-star hotels, Value Hospitality is looking for opportunities to manage five-star hotels as well.

The company guarantees it can improve the profits of five-star hotels with a minimum of 300 rooms by RM2.4 million per year, four-star hotels with 200 rooms by RM1 million per year, and three-star hotels with 100 rooms by RM300,000 per year.

It is also looking to manage hotels for owners of a small group of hotels. Currently, the seven hotels under its management belong to individual owners.

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