Tax to be based on star ratings
A new tourism tax plan approved by the Malaysian parliament could negatively affect major operators like Genting Malaysia Bhd., according to Malaysian investment bank CIMB.
The new statute allows the government to impose a tax on hotel stays; it’s up to the Tourism and Culture Minister to set the tax rate, reported GGRAsia.
Tourism and Culture Minister Mohamed Nazri Abdul Aziz estimated that revenue from the tax could reach MYR654 million (US$147.3 million) based on an occupancy rate of 60 percent and 11 million room nights. “With proper promotion and 80 percent occupancy rate, MYR872.8 million can be collected,” the minister said. The tax would fund the country’s tourism industry, he told local media.
The rate would depend on the star rating of the hotel in question. CIMB’s note said it was likely the respective tax rates for two-star, three-star, four-star and five-star hotels would be set at MYR5, MYR10, MYR15 and MYR20 respectively.
“It is not clear when the new tourism tax will take effect,” said CIMB analyst Ivy Ng Lee Fang. “We are of the view that this is negative for the hotel industry in Malaysia, as it may lead to an uneven playing field between licensed and unlicensed hotel operators, as the latter are not regulated.
“On top of this,” she added, “hoteliers may not be able to pass on all the additional tax to the tourist as the hotel occupancy rate in the country was only 61.9 percent in 2015.” Genting Malaysia might be “negatively impacted” if it can’t pass on the tax to its customers.
The company is currently renovating Resorts World Genting, Malaysia’s only casino resort. Genting Malaysia currently operates seven hotels in the country, with more than 10,000 rooms with occupancy rates of 93 percent in 2016, according to the firm’s annual report.
“We estimate that the new tourism tax bill could potentially reduce the group’s fiscal-year 2018 forecast net profit by MYR35 million, or 1.6 percent, assuming the group absorbs the costs,” said Ng.
Genting Malaysia reported net profit of MYR2.88 billion for full-year 2016, up 129 percent from the previous year, GGRAsia reported. The firm also runs casinos in the United States, the Bahamas and the United Kingdom.
Among Asian countries, Malaysia has benefited most the influx of Mainland Chinese tourists after a political dispute between China and South Korea over of a U.S.-supplied missile defense system, according to a note from Maybank IB Research cited by GGRAsia.
Based on data from ForwardKeys.com, a Spain-based research service, the Maybank team said Malaysia is “the prime Asian beneficiary from the China National Tourism Administration discouraging Chinese tours to South Korea.”
