KOTA KINABALU: Hotel operators in the city are demanding a meeting with Kota Kinabalu City Hall (DBKK) immediately over the recent hike in hotel licensing fees, warning that the increased rates would lead to the shut down of most budget hotels.
The Malaysia Budget & Business Hotel Association (MyBHA) has strongly objected to the hike in fees, calling it unfair, unsustainable, and detrimental to the survival of budget hotels.
Licensing Fee Structure Under Fire
MyBHA national president Dr Sri Ganesh Michiel criticized the new fee calculation system that is based on revenue per available room instead of a fixed annual rate.
“These practices unfairly disadvantage hotels on a business-by-business basis, encouraging fiscal uncertainty and discouraging development and investment in Kota Kinabalu’s tourism sector,” he said in a statement.
Hotels are already burdened with tourism tax, business operation fee, and regulatory costs, and other businesses that derive benefit from tourism activities such as restaurants, transport operators, and tour companies are not subject to the same type of fiscal burdens, he continued.
Higher Costs May Impact Tothe urism Industry.
MyBHA warned that the hike in charges would force hotels to raise room rates, rendering budget hotels out of reach for local tourists, business travelers and daily commuters.
“A sudden increase in licensing charges will push up accommodation prices, and Kota Kinabalu will lose its status as a budget-conscious destination. The small hotels currently running on paper-thin profits might be forced to shut their doors, leaving people out of jobs,” Michiel said.
Unregistered Short-Term Rentals Are the Threat
The association also criticized DBKK for failing to regulate short-term rental accommodations (STRA) such as Airbnb, which are exempt from the same licensing scheme.
“DBKK must take the same regulatory measures against STRA operators so that there is fair competition in the accommodation sector. STRA must also be banned in hotel areas so that only licensed venues are permitted,” he added.
MyBHA warned that higher hotel room charges could push tourists into the uncontrolled STRA alternatives, additionally crippling approved hotels that remain within the controlled sphere.
Projected Impact on Sabah Tourism Development
There were 3.15 million tourists that visited Sabah in 2023, as per figures; however, increases in accommodation costs will discourage tourists from visiting, contend industry captains and jeopardize attempts at tourism development.
Michiel explained that hotels in other states do not go through such variable fees, as most state authorities impose a fixed and clear licensing fee.
“Should the variable system be implemented nationwide, it will be another burden to hotel operators here,” he cautioned.
Proposal for a Statewide Tourism Tax
Alternately, MyBHA has suggested a transparent, predictable, and equitably shared statewide tourism tax.
Revenue from this tax should be used for the purpose of tourism development, upgrading of facilities, and promotional activities, rather than spent entirely on the cost of local councils, Michiel suggests.
“Unlike DBKK’s model, a state-level taxation model will see that hotel contributions are handled fairly and re-invested in Sabah’s tourism sector,” he added.
DBKK Defends Fee Hike
The new system of licensing fee, introduced under the Hotel & Lodging Houses By-Laws 1966, has added a huge burden to the operating cost of hotels in Kota Kinabalu. The previous flat rate of RM10 per occupied room per year has been replaced by a per-occupied-room charge per month, based on DBKK’s hotel classification system.
DBKK justified the action, saying that the revenue collected would be utilized for city upkeep and development. The council further claimed that hotels could include the extra cost in their yearly tax returns.
MyBHA, however, rebutted that the hospitality sector has changed much since the 1960s, and hotels today are confronted with increasing operational expenses, increased competition from STRA, and pressure from online travel agencies (OTAs).
Government to Reconsider Licensing Fees
Sabah Tourism, Culture, and Environment Minister Datuk Seri Christina Liew informed the state cabinet on March 9 that currently, there are existing licensing fees which should be kept for the meantime. The issue would be re-evaluated after six months to see if it has resulted in any effect on the hospitality sector.
Michiel appealed to DBKK to advise industry players before the situation gets out of hand, pointing out that many budget hotels would be at risk of closure if the issue is not addressed at its root.
“The increase in hotel licensing fees is unwarranted and
threatens the survival of budget hotels in Kota Kinabalu. Ironically, the failure to regulate STRA and OTAs makes it even worse. We urge DBKK to help us seek a reasonable and sustainable solution,” he added.
