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Taking into account the right balance of rooms and rates [03-04-2012]  
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We are aware of at least four new hotels opening in Bukit Bintang, from luxury Banyan Tree to boutique hotel Wolo.

Around Suria KLCC, we have news of The Four Seasons Place, The Grand Hyatt and The Regent having a presence.

Starwood Hotels & Resorts will open six new hotels in Malaysia, including W and St Regis and Accor SA expects to add 10 hotels like Ibis Styles.

While this is positive news for the country, as Malaysia has always wanted to woo upscale brands to our shores, will there be one room too many to hold rates?

The entry of luxury brands has a tendency to help improve not only service levels but room rates in a country as they tend to create a trickle-down effect.

These upscale hotels become the rate leaders which enable brands which are a notch below to up their rates.

Malaysia has for many years borne the title of having the lowest, if not the lowest, hotel rooms rates in the world. To shy away from this, it's not unusual to hear Malaysia often being referred to as a value-for-money destination.

The prevailing rates, albeit not on par with a similar product say in Bali or Singapore, enjoyed by the hotels now actually have a history.

It took Malaysian hoteliers seven years to get rates back to pre-1997 crisis level. So in 2009, these hotels took a different path. The hotels value-added but maintained rates. It is never easy to raise rates once it starts falling.

Now, with so many new hotels coming onstream, it will be interesting to see if the luxury brands set the benchmark for a higher prevailing rate or will we instead see a surplus of rooms which could create a price war.

Previously, hotels competed with other hotels. More recently, we have noticed that the number of serviced suites growing which is an alternate stay option for travellers as well as new competition for hotel operators.

Minister of Tourism Datuk Seri Ng Yen Yen had said that by 2020, Malaysia will need more high-end hotels with the requirement for 8,600 five-star rooms and 30,000 four-star rooms.

Surely, these projections were based on projected arrivals in 2020 of 36 million tourists and possibly demand from domestic tourists.

Based on 2011 arrivals, tourist arrival has to grow by a total of 45 per cent to achieve the 2020 target.

In 2011, arrivals only grew two out of the 12 months compared with in 2010, resulting in Malaysia missing its arrival goals.

Bank Negara Malaysia had revised gross domestic product to grow by between 4 per cent and 5 per cent from an earlier projection of 5 per cent and 6 per cent due to an expectation of a moderation in the global economy. Will this be reflected on tourists arrivals this year?

There are already concerns that flight cancellations by AirAsia X and Malaysia Airlines could see a dip in arrivals.

Will Malaysia have one-hotel- room-too-many which is not supported by growth in demand? Let's assume that someone is taking count so that the right balance is achieved and hotels don't have to compromise on the rates.

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