“Malaysia’s hotel sector sees flat Q1 2025 occupancy despite 6.74M tourist arrivals. MAH cites geopolitical tensions and cautious spending.“
Kuala Lumpur, 26th May 2025, 10.45am – Malaysia’s hotel industry experienced a slow start in the first quarter of 2025, as lingering economic uncertainties and geopolitical tensions curbed international travel demand, according to the Malaysian Association of Hotels (MAH).
Although inbound tourist numbers showed a significant year-on-year increase, hotel occupancy and room rates did not reflect the same level of optimism, said MAH president Datin Christina Toh.
“Yes, we’re seeing more inbound travellers, especially from China, but not as many as anticipated—even with visa-free policies and increased flight frequencies,” Toh told.
She noted that regional tensions—particularly the ongoing India-Pakistan conflict—have led to last-minute trip cancellations, including a major corporate group booking at a five-star hotel in Kuala Lumpur.
Strong Tourist Arrivals, But Weak Hotel Performance
According to data from Tourism Malaysia, the country recorded 6.74 million visitor arrivals in January and February 2025—a 31.3% increase from the 5.13 million during the same period last year and 14.5% higher than pre-pandemic levels in 2019.
Top source markets included:
- Singapore: 3.1 million visitors (+50.8% y-o-y)
- China: 816,765 visitors (+43.1%)
- India: 222,822 visitors (+42.4%)
Despite this growth, the tourism surge did not translate into hotel occupancy gains, suggesting more travelers are opting for budget hotels or Airbnb alternatives, said Toh.
Key Hotel Performance Metrics in Q1 2025
MAH’s Q1 2025 hotel survey revealed:
- Average Occupancy Rate (AOR): 54.3% (↓1% y-o-y)
- Five-star hotels: 55.3% (↓4.5%)
- Four-star hotels: 55.9% (↑0.7%)
- Three-star hotels: 49.5% (↓2.3%)
- Average Daily Rate (ADR):
- Overall: RM330 (↓6.6%)
- Five-star: RM507 (↓2%)
- Four-star: RM277 (↑0.7%)
- Three-star: RM171 (↓39.9%)
- Revenue Per Available Room (RevPAR):
- Overall: RM179 (↓7.5%)
- Five-star: RM280 (↓6.4%)
- Four-star: RM155 (↑1.4%)
- Three-star: RM85 (↓41.3%)
Toh said Q2 2025 also appears “not so promising”, even with the ongoing ASEAN Summit 2025 hosted in Kuala Lumpur.
“There’s actually been some postponement of travel plans due to road closures during the summit,” she added. “Many visitors are delaying their trips until after the event.”
Outlook: Cautious Optimism for Summer and New Hotel Launches
MAH expects better performance during the summer holiday season from June to August. Market observers are also anticipating a boost from new luxury hotel launches in the Klang Valley.
According to Knight Frank Malaysia, the hospitality segment is gradually recovering, particularly in city-centre hotels that are benefiting from the rise in foreign arrivals.
“While occupancy rates are still slightly below pre-pandemic levels, the trend is upward,” Knight Frank noted in its Real Estate Highlights 2H 2024 report.
New premium hotel brands set to enter the Malaysian market in 2025 include:
- Kempinski Hotels
- Waldorf Astoria
- Park Hyatt
These openings are expected to drive average daily rates higher and further position Kuala Lumpur as a premium travel destination.
