KUALA LUMPUR: As Malaysia’s tourism and hospitality industry eyes a post-Covid pandemic boom, hotel investors are being urged to look beyond traditional profit measures or risk owning assets that could quickly lose value in an evolving marketplace.
“Many investors assume that a profitable hotel automatically translates into value creation for owners. That assumption is flawed,” said Pragmatique Sdn Bhd (hotel asset management firm) managing director Dr Timmy Ho.
“Profit at the property level doesn’t mean much if ownership costs like taxes, corporate overheads or debt repayments eat into the returns. Only when investors are paid at or above their required rate of return can we say value has been created.”
Ho highlighted that owners often underestimate pre-acquisition and pre-opening costs, contingency buffers and specialised compliance requirements.
“Imagine finalising your budget and securing a bank loan, only to discover that 5% to 8% more is required for taxes you hadn’t accounted for. Or green compliance costs, some green capex (capital expenditure or capital expense) items are 5% to 20% above their conventional counterparts,” he said.
These blind spots, if left unchecked, can turn even seemingly profitable ventures into financial traps. The danger, Ho warned, lies in entering what he calls a “failing value equation”, where rising expenses and imbalanced management contracts leave investors with returns lower than safer asset classes such as retail or even fixed deposits.
“Failure to pay mortgages or coupon payments to bond holders can even result in losing the entire hotel asset to repossession or liquidation,” he cautioned.
While sustainability has often been treated as a marketing tool, Ho argued it is fast becoming a financial necessity. “Going green doesn’t just improve the planet, it helps the bottom line too,” he said.
From utility savings and waste reduction to attracting eco-conscious corporate clients, ESG-linked investments are reshaping competitive advantage.
Bursa Malaysia’s new sustainability reporting mandate is accelerating this shift. By 2025, companies with market capitalisation of RM2 billion and above must disclose their ESG practices, with smaller players following by 2030.
“If a hotel developer ever hopes to receive funding in the future, they will have to be ESG compliant,” said Ho, pointing to the billions allocated by Retirement Fund (Incorporated) and the Employees Provident Fund into green assets.
Yet, he remains critical of current reporting practices. “We’re seeing random, non-standardised metrics like consumption reported per room, per footfall or per square foot. Some disclosures are tokenistic, cherry-picking numbers like ‘trees planted’ one year and omitting them the next. Without proper assurance, the risk of greenwashing is very real.”
To navigate this increasingly complex landscape, Ho believes asset managers should be engaged from “Day Zero”. Unlike operators who prioritise revenue, asset managers focus on maximising long-term investment value.
“Trial and error is inapplicable when millions are at stake. A hotel asset manager ensures owners don’t end up stuck with a market-inappropriate hotel, in the wrong location, locked into a 30-year lopsided management agreement,” he explained.
Despite its importance, Malaysia lags behind regional peers in adopting hotel asset management. While groups such as YTL, Berjaya and Sunway have in-house teams, Ho noted that he is currently the only registered Malaysian member of the Hospitality Asset Managers Association (Hama). “Most owners simply don’t even know these services exist,” he said.
Looking ahead, Ho expects three major forces to define hotel investment value: location, inflation and technology.
Malaysia’s national hotel occupancy rate was just 54.9% in 2024, with sharp disparities between prime markets such as Genting Highlands (95.7%) and struggling secondary locations. “Almost half of the hotels in Malaysia are empty at any point in time. Overbuilding in certain locations is a clear threat,” he said.
At the same time, inflation in construction materials and manpower costs is eroding margins, while room rates remain stubbornly stagnant. Cost management, he argued, will be the true differentiator in delivering sustainable yields.
Finally, while artificial intelligence (AI) promises efficiency, overreliance could damage hospitality’s very essence. “No guest at a luxury hotel wants to fiddle with a self-check-in kiosk after a red-eye flight. AI must support human warmth, not replace it,” Ho said.
As Malaysia pushes towards becoming a global tourism hub, hotel investors face a future that will reward those who plan strategically, integrate ESG from the start and adopt professional asset management practices.
“The hotel industry is one of the least understood, deliberately shrouded in mystique,” Ho reflected. “Owners must realise that hotels are not just businesses, they’re hybrid assets demanding specialised knowledge. Those who fail to adapt risk not just poor returns, but losing everything.”