KUALA LUMPUR: The increase in hospitality projects across Malaysia offers a significant economic opportunity for the country's development and construction industry without displacing other project types, industry players have noted.

This growth is driven by several factors, including a thriving tourism industry, economic expansion and investment, rising domestic travel, and increased demand from events and business tourism. Collectively, these factors position the hospitality sector as a key driver of economic growth and diversification.

On September 11, Marriott International announced an ambitious plan to expand its presence in Malaysia, with 20 new hotels in the pipeline.

According to Bernama, David S. Marriott, chairman of the board at Marriott International, said that the group—comprising 30 hotel brands—is open to mergers, acquisitions, and partnerships to achieve its expansion goals.

Juwai IQI co-founder and group chief executive officer Kashif Ansari stated that with the growth in tourism, there will likely be increased property investment in the hospitality sector, including not only hotels but also vacation rentals.

He said by the end of next year, the number of hotel rooms in Kuala Lumpur should be 18 per cent higher than in 2023.

"There are now about 1.4 million hotel rooms in Malaysia, and about 75,000 more are planned for construction, an increase of about 5 per cent.

"Malaysia's vacation rental market is growing rapidly, with expected 2024 revenue of RM5.3 billion, more than 220 percent higher than the 2020 level.

"By 2028, vacation rental revenue will soar even further, to RM6.9 billion. If projections hold, the market will expand at a compound annual growth rate of 7 per cent between 2024 and 2028," Kashif told Business Times.

He said the states with the greatest number of new hotel developments are likely to be Kuala Lumpur, Johor, Penang, Selangor, and Pahang.

However, Riyaz Hotels and Resorts chief executive officer and former chief executive officer of Malaysian Association of Hotels (MAH) Yap Lip Seng said regardless of tourism growth, hospitality projects remain volatile, with real estate or property gain and play as the main driving factor of developments.

"We expect to see more mixed developments, especially in key arrival cities or states such as Kuala Lumpur, Penang, Kota Kinabalu, and probably Johor.

"Langkawi, on the other hand, has already an extended pipeline of upcoming hotels, further strengthening its reputation of having the most number of 5-star hotels in a single destination," he added.

Yap said demand growth will be focused on mixed developments, such as residential and commercial.

"This might further draw affordability and property ownership gaps apart, making it more difficult for many to own a property, while wealthy ones invest more purely for commercial interests. The need to regulate home-sharing is even more so now," he added.

CCO & Associates (KL) Sdn Bhd executive director Chan Wai Seen said investments in hotels involve high capital expenditure, which may deter many investors from investing in new hotel development.

"Presently, we observe a number of property developers incorporating hotels within their mixed development to enhance the overall development profile.

"In addition, we also observe hotels being developed in suburban areas to cater to the hotel needs of the local residents. These hotels comprise predominantly high-quality select service hotel brands," he said.

According to Chan, major hotel chains always look for opportunities to establish new hotels in Malaysia.

He added that this depends on negotiations with the owners and the suitability of the hotel brands.

"I think there will be more international hotel chains being developed in the market as compared to locally managed hotels in the next five years. 

"This is attributed to the stronger hotel brands when compared to the local brands," he noted.

Nevertheless, Chan said this could potentially lead to an oversupply of hotel rooms if too many hotel projects are developed.

He also observed that locally run hotels are increasingly competing with both international hotel chains and Airbnb accommodations, further intensifying market pressure.