The serviced residence market in Malaysia has seen an average growth of 40 per cent over the last two years, according to property experts CH William Talhar & Wong (WTW).
This year’s supply is projected to increase to 10,491 units, from 7,415 units last year. It indicates the belief investors, developers and hotel companies have on the potential of the sector. Yet, with existing average occupancy hovering between 60 and 75 per cent, is the onslaught of supply justified?
The rampant increase has already given rise to several problems in which solutions need to be identified and acted upon, according to existing and established serviced residence operators.
They say the market has not quite segregated itself into clear groups and is now a mix of purpose-built standalone serviced residences; hotels which provide serviced residences and condominium-type residences which are sold and leased back to the developer to be run as “serviced residences”. It is the latter category that has become a point of contention as most do not follow legislation and do not provide the minimum serviced residence facilities.
A lack of a classification or definition of what exactly constitutes a serviced residence is the underlying issue. The Malaysian Association of Hotels (MAH) has just submitted a proposal to the government asking for a rating system specific to serviced residences with a price range for each category and to administer a standard list of requirements that would be the prerequisite for operating as a serviced residence.
Committee of Service Residence Operators (COSRO) for MAH chairperson, Mr Derrick Lim, said: “This is an important move for the market because the reputation of the hospitality industry in Malaysia is at stake.”
Under this proposal, developers and operators who want to run service residences will have to become a member of either the Malaysian Association of Hotel Owners, MAH or the Budget Hotel Association. Valid hotel licences must also be approved and certain standards of safety and service facilities must be met.
Meanwhile, are investors and developers about to be burnt, or rewarded, by their investments in serviced residences?
PNB Darby Park will be opening an additional 112 units later this year, positioning these new suites as comparable to the Ascott or the Mandarin Oriental Hotel apartments.
The Westin Hotel has also come up with Executive Residences. Ritz-Carlton is opening its Residences in 2005, while The Ascott Kuala Lumpur will be adding to its portfolio with its new Somerset Sri Bukit Ceylon and the Marc Service Residence just next door to the premium market operator.
Add that to a whole host of hotels converting rooms in to serviced residences and other new properties opening up in the suburbs, and the market looks pretty crowded.
But some of the bigger players in the market such as PNB Darby Park, MiCasa, SuCasa and Lanson Place opine that the market is not saturated and that there is still room for growth.
Apparently, the influx of supply will not affect occupancies or translate into a price war.
The Ascott Kuala Lumpur director of sales, Mr Melvin Quah, disagrees. He said: “Everyone wants a slice of the cake, but the cake is not getting any bigger.”
It is now up to the properties to provide well-built facilities, quality services and good maintenance in order to hold their own should an oversupply occur.
