2/08/2010@12:00AM

LocalChainsSittingOutHotel
andTravelBoominMalaysia
NazaGroupofcompaniesisbestknownforselling
importedcars.ButinNovemberitmadeheadlines
announcingitwouldspend$231milliontobuildfive
hotelsaroundKualaLumpuroverthenextfiveyears.
Withthreehotelsalreadyinitsportfolio,Nazaseemed
onitswaytobecomingsomethingthatMalaysiasnever
hadasizablehomegrownhotelchainoutsideofthe
resortniche.
Notsofast.LastmonthChiefExecutiveS.M.Nasarudin
toldFORBESASIAthatNazasplanshavebeenscaled
backtojusttwohotels,atacostof$75million.OnewillcarrytheNazaTalyya
name,abrandthatcaterstothemasses,andtheotherwillbeeitheraluxury
orboutiquehotel.Hedeclinedtoexplainwhythreehotelsweredropped.
WhileMalaysianbusinesspeoplearereluctanttobuildlocalhotelchains,big
internationalbrandssuchastheMandarinOriental,NikkoHotels,Hiltonand
othershavejumpedintothemarket.TheHyattandFourSeasonschainswill
openhotelsinMalaysiainthenextfewyears.AnewDoubletreeinKuala
LumpurisexpectedtostartacceptingguestsinMay.
Whattheforeigninvadersseeisthecountrysgrowingtravelbusiness.
Malaysiasprofilehasrisenconsiderablysincetheworldstallesttwins,the
PetronasTowers,openedmorethanadecadeago.Moreandmore,the
countryfindsitselfonitineraries,withlowfareairlineAirAsiaperhaps
Malaysiasmostrecognizedbrandmakingiteasierandcheapertogettoand
aroundthecountry.Arrivalsofvisitorswhostayedatleastonenighthit23.7
millionlastyear,upfrom7.9millionin1999.Tourismisnowthecountrys
secondhighestrevenueproducer(behindmanufacturing),accountingfor
12.3%ofthegrossdomesticproductlastyear.
Atthesametimeamoreopenregulatoryenvironmentfortheindustry
comparedwithotherpartsoftheregionexceptSingaporeandHongKongis

attractinghotelinvestmentfromabroad.Foreignersfinditeasiertobuy
propertyandtomovetheirmoneyinandoutofthecountry.
Arelocalcompaniesmissingoutonagoodbusiness?Theydontseemtothink
so.WhiletheremaybeanundersupplyofhotelsinMalaysia,theres
apparentlyanoversupplyintheKlangValley,andtenmorethree,fouror
fivestarhotelsareslatedtoopenbytheendofnextyear,an8.7%increase.
Thatskeepingroomratesdownandhittingreturns.Averageratesin
Malaysiaarelowerthananywhereelseintheregion.Aroominafivestar
hotelcanbehadfor$100,unheardofinmostAsiancountries.Infact,a
WorldEconomicForumreportontravelandtourismfoundthatMalaysiawas
thefourthmostpricecompetitivecountryintheworldlastyear.Lowprices
meanthatoccupancyratesareholdingfirmattheirhistoricalaverageof60%
to70%,butthatsashadetoolowtodrawmanylocalinvestorsintothe
sector.
Whatsmore,thetravelindustrywashitlastmonthbythepublicityovera
seriesofattacksonchurches,mosquesandtemplesthatrockedthenation.
Investorswerealreadyjitteryduetorisingethnictensions,andafterthe
attacksthetourismministerconcededthattheymaywellaffecttourist
arrivals.
YetinmanywaysMalaysiaisideallysuitedforlongtermgrowthinthe
hospitalityindustrythatcouldnurturelocaloperators.Operatingcostsare
low,theinfrastructureissolid,andthecountrysalwayseagerindustrial
promotionauthoritiestoutthisasastrategicsector.Indeed,theeasternstates
ofSabahandSarawakonthefamedislandofBorneoarebecomingoutdoor
traveldestinations.Andthecountrysitscomfortablybetweenthetwo
extremesintheregion,undevelopedAsiaontheonehandandaseemingly
Westernizedversionontheother,makingitattractiveforvisitorswhowanta
tasteoftherealAsiawithoutthefuss.
Thelackofasuccessful,recognizablehomegrownhoteloperatorisapeculiar
distinctionforMalaysia.ThailandhasDusitThaniandCentaraHotels,for
example.MalaysianotablydoeshavetheShangriLachain,startedbytycoon
RobertKuok,butitlargelymakesitsmarkabroad.
IvoNekvapil,vicepresidentofthehotelassociation,blamesineptlocal
operators.Hesaysthatwhentheydojumpintothesectortheyoftendont
investenoughmoney.Toomany,hesays,lookforashortcuttheyfailto

understandtheircustomers,deliverqualityservice,carveoutanichefor
themselvesandsecureforeigntieupstogleanexpertise.Branding[in
hospitality]takes20yearsandmillionsofdollars,hesays.
ThisissomethingTuneHotelsseemstounderstandwell.Tuneistheclosest
Malaysiahascometobuildingahotelbrandonitshometurf.Cofoundedby
AirAsiaChiefExecutiveTonyFernandesin2007,itslookingtoofferlittle
beyondhighcomfortandsecurityatalowprice.Tunehasshownpromiseit
has7hotelsnow5inMalaysiaand2inIndonesiaandlastyearitsigned
contractstoopen44more.Butmostofthosewillbeoverseas.By2015Tune
hopestohave30hotelsinIndiaand64elsewhereinSoutheastAsiaand
China,comparedwithonly20inMalaysia.OthersareplannedforAustralia,
theMiddleEastandevenLondon.
OtherMalaysianhoteliersarealsosettingtheirsightsabroad.CititelHotel
ManagementplanstoopentwobranchesofitsExpressbudgetlinein
Malaysia,whereitnowhasfourhotels.Butitwillberelyingheavilyongrowth
inVietnam,Thailand,Australia,thePhilippinesandLondonwhicheachhost
oneCititelhoteltoboostitsearnings.
MalaysianpropertygianttaEnterprisenowrunsthreehotelsbutnonein
Malaysia.ItmayopentwohotelsinKualaLumpur,oneunderitsAavaAsian
flavorbrandthatitslookingtomarketofferingfivestarserviceandfour
staraccommodation.ItopenedanAavahotelinCanadainNovember.Itsaim
istodevelopitsownchain,butManagingDirectorAliciaTiahsays:Were
interestedinoverseasgrowthprimarily.Wedontwanttobeknownasalocal
brand.Wewanttocatermoretobusinesstravelers.Shesaysbusiness
travelersarewillingtospendmoreandMalaysiaisnotamaindestination
forbusinesstravelers,addingthatratesofreturntherearenotsofantastic
wewanttoinvestincountrieswheretheexchangeratehasachancetogoup.
Thetrendinhospitalitymayreflecttheexodusofcapitalfromthecountry,
whichhashurttheexchangerate.UBSsaysMalaysiasufferedthebiggest
foreignexchangelossesinAsiain2008.Thecountrysreservesfellbyathird
fromApril2008tolastNovember,to$96.3billion.
Butforeignhoteloperatorsusingstrongercurrenciescontinuetostakeout
turfinthecountryshotelsector.Some5,600hotelroomswithafourorfive
starratingareexpectedtocomeonlinewithinthreeyearsmostwillbebuilt
byoverseascompanies.Malaysiaisgettinglotsmoreplacesforpeopletostay,

butitmaystillhavetomakedowithoutabigbrandtocallitsown.