Malaysia’s tourism tax weighs on hotel shares

MALAYSIA - Malaysian hotel shares are likely to remain under pressure for a while after lawmakers on Thursday decided to impose a tax on hotel rooms in a bid to boost state finances bruised by low oil prices. The so-called tourism tax comes at a time when a weak Malaysian ringgit - it lost more than 20% against the US dollar over the past three years - raises appeal of the already-popular tropical Southeast Asian destination speckled with glitzy shopping malls, sun-soaked beaches, and lush rainforests. Analysts said the new tax -- to be paid by guests to operators of hotel and premises that accommodate tourists -- could add to the government’s revenue at the expense of hotel operators’ earnings. “The tax will add pressure on the hotel segment,” said KLCC Property Holdings’ Chief Executive Hashim Wahir. The company manages the Mandarin Oriental hotel in down town Kuala Lumpur. “I am not very optimistic” on hotel occupancy rate this year, Hashim added. Mandarin Hotel Group is a subsidiary of Jardine Matheson Holdings. To tackle the new charge, hoteliers are likely to pass the higher costs, at least partly, to the consumers, which will raise room tariff per night and potentially crimp occupancy rate, said Lee Meng Horng, an analyst at Hong Leong Investment Bank. “The tourism tax will take out some of the expected earnings gains made on increased tourist levels this year,” said Lee, “and if the ringgit reverses course and strengthens against the dollar, the impact will be even more pronounced.” The government estimates about 31.8 million visitors this year to Malaysia that could generate 118 billion ringgit ($26.6 billion) in tourism receipts. In 2016, some 26.7 million tourists visited Malaysia, according to data from the Tourism Ministry. Analysts said stocks that may be hurt in the nearterm include Genting Malaysia, which operates a hilltop casino resort that attracted more than 20 million visitors last year, and Shangri-La Hotels Malaysia that manages six hotels and resorts. Genting Malaysia is a unit of Genting that has business interests ranging from hospitality to plantation. (Nikkei Markets)