Investments in Malaysian Hotels Plunge

From the Business Times:

Transactions involving the buying and selling of Malaysian hotels have plunged fivefold, from RM1.2 billion worth of transactions in 2005 to RM205 million last year, as owners preferred to hold on to their assets as property prices appreciated.

Last year also saw no foreign interests unlike in 2006 and 2007 where more than 60 per cent of the hotel investment volumes were by foreigners.

However, the momentum is expected to pick up this year, said real estate agent Previndran Singhe.

"Prices have now stabilised and so owners are willing to sell," Previndran told Business Times yesterday.

"The foreigners are returning and they are willing to pay the market price, as they realised that they are unable to bargain since there is no property crisis here," Previndran said.

He added that this was despite the fact Malaysia is known to have one of the lowest, if not the lowest, average room rates in the world, which could take an investor a decade to see return on investment.

"They see a potential for an upside in terms of rates," Previndran said.

Unless you've been living under a rock, hotels have been getting rocked due to their exposure to the financial crisis. Take a look at Shangri la's latest quarterly report in May:

The Group’s profit before tax for the quarter at RM14.012 million was 60% below that of RM35.463 million for the same period last year. Group profit attributable to shareholders was RM10.129 million compared with RM25.561 million in the first quarter of 2008.

With profits like these, as if the prices won't drop. Owners are willing to sell because hotels have been taking the brunt of the financial crisis and they don't want to be dragged down by the hotels they've chained themselves with!