GEN Malaysia to feel pinch of new tourism tax: CIMB

Apr 10, 2017 Newsdesk Latest News, Rest of Asia, Top of the deck  

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The Malaysian parliament passed on Thursday a tourism tax law that could be a negative for hotel operators in the country, including Genting Malaysia Bhd, says a note from Malaysian investment bank CIMB. The impact of the new tax is however likely to “be minimal,” said analyst Ivy Ng Lee Fang in a note on Saturday.

The tourism tax statute allows the Malaysian government to impose tourism tax on a hotel stay. The Tourism and Culture Minister will set the tax rate, according to the legislation.

Tourism and Culture Minister, Mohamed Nazri Abdul Aziz, was quoted by local media as saying in parliament that the potential revenue from the tax could reach MYR654 million (US$147.3 million), if an occupancy rate of 60 percent can be achieved for the 11 million “room nights” available in the country. “With proper promotion and 80 percent occupancy rate, MYR872.8 million can be collected,” the minister said.

The tax would provide a sustainable fund for the development of Malaysia’s tourism industry, he reportedly added.

According to media reports, the amount of such tax would vary depending on the star rating of the hotel concerned. CIMB’s note said it was likely the respective tax rates for 2-, 3-, 4- and 5-star hotels would be set at MYR5, MYR10, MYR15 and MYR20.

“It is not clear when the new tourism tax will take effect,” said the CIMB analyst. “We are of the view that this is negative for the hotel industry in Malaysia, as it may lead to an uneven playing field between licensed and unlicensed hotel operators, as the latter are not regulated,” said Ms Ng.

She added: “On top of this, hoteliers may not be able to pass on [charge] all the additional tax to the tourist as the hotel occupancy rate in the country was only 61.9 percent in 2015.”

The analyst said casino and resort operator Genting Malaysia might be “negatively impacted” if it is unable to pass on such additional tax to its customers.

Genting Malaysia has been investing heavily in a revamp of its Resorts World Genting casino complex – Malaysia’s only casino resort. The company currently operates seven hotels in Malaysia, with more than 10,000 rooms in total. As at end-2016, the group’s average occupancy rates stood at 93 percent, according to the firm’s annual report.

“We estimate that the new tourism tax bill could potentially reduce the group’s fiscal-year 2018 forecast net profit by MYR35 million, or 1.6 percent, assuming the group absorbs the costs,” said CIMB’s Ms Ng.

Genting Malaysia reported net profit of MYR2.88 billion for full-year 2016, up 129 percent from the previous year. The firm also runs casinos in the United States, the Bahamas and the United Kingdom.

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