Hospitality Market

The development pipeline remains active, with 60 incoming hotels providing 10,996 rooms and a further 29 planned hotels contributing 5,064 rooms.

Within Klang Valley, no new hotel openings were recorded during 1H2026. However, the rebranding of the former Glenmarie Hotel & Golf Resort as Hilton Shah Alam Glenmarie reflects the growing importance of international brand affiliations. Future supply remains heavily concentrated in Kuala Lumpur, which accounts for approximately 88% of incoming rooms. Nearly all upcoming supply is concentrated within the luxury and upper-upscale segments, reflecting investor confidence in Kuala Lumpur's ability to capture higher-spending travellers.

Operators are focusing on brand positioning, guest experience, lifestyle offerings and MICE capabilities to differentiate themselves in an increasingly crowded marketplace. Notable examples include Kimpton Naluria Kuala Lumpur's Connection Hub, Capital A's discussions to extend the AirAsia brand into hospitality, and the RM 45 million redevelopment of Summit Hotel USJ and planned repositioning of Hotel Maya Kuala Lumpur under KiN Hotel Group.

Leading hotel brands collectively serve over 700 million loyalty members worldwide. Major programmes such as Marriott Bonvoy, Hilton Honors and IHG One Rewards collectively serve over 583 million members. Their established international customer base is expected to support long-term occupancy performance and benefit upcoming branded luxury hotels in Kuala Lumpur, particularly Waldorf Astoria Kuala Lumpur and The Regent Kuala Lumpur.

Occupancy among selected 5-star hotels improved to 63%, while ADR reached approximately RM 416 per night, remaining the highest among all hotel categories. The sustained strength of higher-rated hotels reflects continued demand from higher-spending guests, brand-conscious travellers and event-led demand.

In 2025, MyCEB secured 393 business events generating approximately RM 4.1 billion in economic impact, providing a strong pipeline heading into 2026. Malaysia's participation in IMEX Frankfurt 2026 further strengthened efforts to secure future international business events.

Wyndham Hotels & Resorts opened five hotels and signed three additional properties in Malaysia in 2025, including Wyndham Garden Kuantan J-City, Wyndham Grand Ipoh and Orion Tower Kuala Lumpur. Richmond Asia Group plans to expand its Malaysian portfolio to 20 hotels by 2033 and has partnered with Barceló Hotel Group for its upcoming Richmond Estelar hotel in Kuala Lumpur.

The modest increase in hotel inventory over the past year suggests that operators and developers remain selective amid rising operating costs, persistent manpower challenges and continued labour competition from Singapore. Looking ahead, nine hotels are currently in the development pipeline contributing an estimated 1,359 additional rooms.

The market continues to be dominated by the 3- and 4-star segments, which accounted for approximately 85.5% of total 3- to 5-star hotel room supply in 1Q2026. Johor's luxury hospitality segment remains relatively underpenetrated, with only nine 5-star hotels currently in operation, accounting for 14.5% of total room supply.

Among notable upcoming developments, the former Thistle Hotel will be relaunched as the 410-key JW Marriott Hotel Johor Bahru, targeted for opening in December 2026.

Frasers Hospitality has been appointed to manage the 275 hotel suites at Richmond Mayor in Mount Austin under the Capri by Fraser brand, with opening slated for 2030.

Singapore remained the dominant source of international visitors, accounting for approximately 77.4% of total arrivals (4.7 million visitors), with the upcoming RTS Link expected to further strengthen cross-border mobility. Arrivals from China recorded the strongest growth, increasing by 14.6% y-o-y from 325,514 visitors in 1Q2025 to 372,972 visitors in 1Q2026, mainly supported by the mutual visa exemption arrangement between Malaysia and China.

However, ADR declined to RM 384 per night, largely due to changes in the hotel sample set (exclusion of selected luxury beach resorts in Desaru). The 4-star hotel AOR eased slightly to 51.7%, although ADR increased to RM 290 per night. The 3-star segment recorded an improvement in AOR to 45.0%, although ADR declined to RM 174 per night amid increasing competition from expanding mid-tier hotel supply and alternative accommodation, including Airbnb and homestays.

Within this segment, 4-star and 5-star hotels collectively represent 50.3% share of supply, highlighting Penang's mature tourism sector and its ability to cater to a diverse mix of leisure, business and MICE travellers. The development pipeline remains active, with nine hotels comprising approximately 2,040 rooms currently under development and a further nine hotels with 1,375 rooms having obtained planning approval, collectively introducing an additional 3,415 rooms over the medium to long term.

The softer performance was largely attributable to the 4-star segment, which recorded the most notable decline in occupancy, accompanied by a reduction in room rates.

In contrast, selected 3-star and 5-star hotels recorded improvements in occupancy, with AOR increasing to 69% and 65.9% respectively. However, ADRs within both segments declined to RM 179 and RM 494 per room night respectively, indicating a more competitive pricing environment as operators sought to maintain market share.

The review period also witnessed two newly launched integrated developments: The Playground Kota Kinabalu (364 Lifestyle Suites and 13 retail lots, developed by Golden Land Bhd) and Arus Nova (183 suites in Tanjung Aru, developed by Fortress City Sdn Bhd).

Growth was primarily driven by international arrivals, which exceeded the 2019 level by circa 2%, while domestic arrivals continued to recover gradually. Visitor arrivals as of January to April 2026 recorded y-o-y growth across both international and domestic segments, registering an increase of circa 17.2% in total arrivals compared to the same period in 2025.

However, in 1Q2026, overall performance moderated despite slight improvement in total tourist arrivals, suggesting the increase in tourist arrivals did not translate proportionately into stronger demand for 3- to 5-star hotels, likely attributed to a more price-sensitive visitor profile or heightened competition from alternative accommodation.

International visitors remained the key demand driver, while stronger domestic growth, particularly from Sabah, points to a broadening tourism base, supporting the state's target of attracting five million visitors in 2026.

Strengthening international connectivity and the expansion of the business events industry continue to support tourism growth. Batik Air Malaysia's inaugural Guangzhou–Kuching charter flight is expected to strengthen tourism and business linkages with China, while Business Events Sarawak (BESarawak) continues to support the state's position as a key MICE destination.

The improvement reflects growing visitor arrivals, enhanced air connectivity and sustained efforts to position Sarawak as a preferred destination for both leisure travel and business events.

Sarawak continues to invest in tourism infrastructure including the proposed New Kuching International Airport (NKIA) at Tanjung Embang and the proposed Damai cruise terminal. The recognition of the Sarawak Delta Geopark as a UNESCO Global Geopark and the opening of the Brooke Dockyard Industrial Heritage Museum further strengthen Sarawak's tourism proposition. Together with more than 300 tourism-related events planned under Visit Malaysia 2026, these initiatives are expected to sustain tourism growth and support long-term demand.

Beyond traditional hotels, short-term rental activity remains concentrated in Kuching, which recorded 1,108 active listings annually. However, growing activity in Miri, with 98 active listings, suggests that tourism demand is gradually expanding beyond the state capital.