Budget hotels in Malaysia are hurting from the drop in tourist arrivals since early last year, which has resulted in some having to lay off staff. Malaysia Budget Hotel Association (MyBHA) president PK Leong said the once-flourishing business had taken a nosedive, comparing it with the tourism industry in Thailand which he said had increased by 20%.

He added that the same increase was seen in tourist arrivals in other Asean countries as well, such as Indonesia and Vietnam.

"The whole of 2017 has been bad for us. Generally business dropped by 20% since 2016. The drop in business is prevalent in all budget hotels nationwide" he told FMT.

He added that in Kuala Lumpur, 10 budget hotels had ceased operating altogether.

"For those who have not shut down altogether, they have cut down on their staff strength to reduce overheads. It is now a question of survival. We hope to see better days.”

MyBHA is the umbrella body for all budget hotels, categorised as three-star and below in Malaysia. Leong attributed the decline in business to three main factors: fewer tourist arrivals, a drop in domestic tourism and the prevalence of Airbnb.

Although no official update has been given for the second half of last year, Tourism Malaysia revealed in September that there had been a 0.9% drop year-on-year for the first five months of last year, compared with 2016. Leong said the disposable income of Malaysians had also been dropping due to the higher cost of living. As such, he said, people were taking fewer vacations within the country.

"This too contributes to the drop in income for budget hotels. And this is compounded with Airbnb services popping everywhere.

"There are a lot of residential properties vacant, with homeowners unable to find a tenant" he said, adding that the vacant houses and apartments in Kuala Lumpur and other big towns had seen owners turning to Airbnb.

"Owners feel it is better to be able to get a bit of money rather than not getting any money at all.”

However, this has greatly affected the budget hotel industry business, he said.

Tourism tax Leong said the association was unsure if the dip in sales was also due to the tourism tax imposed by the tourism ministry since September last year where foreign tourists are charged a flat rate of RM10 per room per night for all hotel classifications.

He said this was because there was no data or research to show that the dip in sales was due to the tourism tax. He urged the government to attract more foreign tourists as neighbouring countries were doing better than Malaysia. He said the government had to counter any negative news and look at new ways to promote Malaysia.

"Right now, Sabah is doing well. A lot of Chinese tourists are visiting Sabah because they love the clear blue skies. For the peninsula, the government has to look at new ways. If nothing is done, we will be in trouble.”

It was previously reported that the number of tourists from China went up by 7.8% in the first five months of last year, compared with the same period in 2016.