Hoteliers staring at RM1b losses

Even before MCO, hotel industry is suffering from cancellations and loss of businesses. MAH says the industry is under threat and people’s livelihood are at stake

by NUR HAZIQAH A MALEK/ pic by RAZAK GHAZALI

THE Movement Control Order (MCO) is expected to cost hotel industry players up to RM1 billion in lost revenues as borders remain shut and accommodations are shuttered as the authorities seek to end the spread of the coronavirus.

Malaysian Association of Hotels (MAH) CEO Yap Lip Seng said the association estimated the sector will incur RM560 million losses in revenue during the first 14 days of the MCO.

“An extension of another 14 days means that the hotel industry is set to lose over RM1 billion. Even before the MCO, the hotel industry was already suffering from cancellations and loss of businesses. The industry is under threat and people’s livelihood (workers in the sector) are at stake,” he told The Malaysian Reserve.

Last Wednesday, Prime Minister Tan Sri Muhyiddin Yassin announced the extension of the MCO until April 14, as part of the government’s effort to contain and flatten the curve of the Covid-19 infection nationwide.

MAH said presently about 9% of the workers in the hotel industry are already taking a pay-cut.

“17% are put on unpaid leave and 4% had been laid off. This is not inclusive of jobs related and extended from the hotel industry that are equally affected by the order,” he said.

Tourism industry players, among the most exposed to the outbreak, are facing a multitude of impacts due to the pandemic.

Mohd Akil Mohd Yusof

Malaysian Association of Tour and Travel Agents (Matta) VP Mohd Akil Mohd Yusof (picture) said with the tourism industry already posting mostly losses, the extension of the MCO is expected to hurt businesses.

“The extension is painful, but for the safety and health of the nation we’ll have to follow and adhere to it.

“Hopefully, we can come back early if the MCO is an effective method of prevention. Businesses will suffer, and we don’t know how people and government will cope to survive, but banks should not be strict during the next one year or so,” he said.

Bank Negara Malaysia (BNM) last week announced a six-month moratorium on loans, which is expected to help hotels and businesses from defaulting.

Mohd Akil said the announcement is considered a lifesaver for businesses and will improve their cashflow and expenses when revenues are thin.

“We don’t know as of yet as the interest accumulation is at the discretion of each bank. It is very difficult to say when businesses will have to pay back their borrowings, considering recovery could take more than six months or one year, if consumers start spending after the MCO is over,” he said.

Yap said the loan payment deferment does not reduce the burden and liabilities faced by business owners.

“Hotels and businesses still need to service the same loan amount and are still in the same debt, if not more due to accumulated interests.

“Hotels and businesses are not expecting a full recovery anytime soon. For the current situation to stabilise would easily take six months, and for full recovery with profits it will be at least a year.”

He said some businesses may just opt to close shop.

“We have proposed to the government and BNM to instruct banks to waive the interests for this period, at least six months, to give businesses room to breathe and sustain until full recovery,” he said.

Among the proposals from MAH is to ease utility bills — water and electricity payments. The association has urged the government to increase the discount to 30% and a waiver of maximum demand charges.

It has also requested a temporary reduction of employers’ contribution to the Employees Provident Fund (EPF) of a minimum reduction of 5% up to December 2020, as well as subsidies for employees’ payroll.

Matta is calling on the government to allow the private sector to stop mandatory contributions to the EPF, the Human Resources Development Fund (HRDF) and other levies such as Social Security Organisation and Employment Insurance System, and an immediate deferment of corporate and individual taxes for year of assessment 2019.

Matta in a statement also urged the government to help businesses pay 60% of employee wages up to a maximum of RM4,000 per employee for the next six months to avoid mass layoffs due to the extreme economic challenges faced by businesses caused by the Covid-19 pandemic.

“If such assistance and stimulus are not forthcoming very soon, liquidity issues will force many existing small and medium enterprises — tourism companies and facilities — to cease operations, resulting in a large number of workers losing their jobs”, said Matta president Datuk Tan Kok Liang.

“The tourism industry employs more than 3.5 million people (23.5% of our nation’s total employment), representing nearly a quarter of all jobs in Malaysia. It is expected that two in five people or 40% of the people would lose jobs, consequently this will create a ripple effect to other sectors,” he added.

The government when unveiling the RM250 billion stimulus package last Friday had allowed for the deferment of the HRDF payment and subsidisation of salaries to the tune of RM600 a month for three months for companies which witness more than a 50% drop in their income.