Malaysia budget hotels urge govt to regulate OTAs

The Malaysia Budget and Business Hotel Association (MyBHA) is urging the government to enact laws to regulate online travel agencies (OTAs), claiming that the price war among the OTAs have hurt their profit margins amid the Covid-19 downturn.

Regulations proposed by the MyBHA include setting a ceiling price on the sales commissions of OTAs as well as to enforce guidelines on short-term residential accommodation in order to protect its members whose businesses are on the verge of collapse.

MyBHA national deputy president, Sri Ganesh Michiel, told TTG Asia that MyBHA members are now completely reliant on OTAs due to changing booking patterns brought on by the Covid-19 pandemic.

According to Sri Ganesh, more than 90 per cent of bookings now come from OTAs, whereas in pre-Covid times, walk-in clients formed the majority of bookings.

He explained: “OTAs have an upper hand. They announce campaigns and promotions and activate them without the knowledge of the hotelier on a case-to-case basis, thus selling rooms at rates lower than our recommended selling price. This creates an unhealthy price war among the (OTAs).

“On top of that, they charge overly-high sales commission of 40 per cent which bleeds the operator and makes it impossible to cover operating costs. There is also a tendency to increase sales commission without any discussion or consent from the hotel operator.”

Citing more examples of what he dubbed “the new normal technology colonisation”, Sri Ganesh shared: “A tactic often used is to advance monies to OTAs based on past revenue forecasts. In return, hotels must provide OTAs with a stipulated number of rooms at a discounted rate or at a very high commission.

“OTAs also threaten not to promote the hotel or to suspend or terminate the hotel account if the operator refuses to cooperate in accordance with the requirements of OTAs.”

What is further distressing MyBHA members is that the Star Rating given by the Ministry of Tourism, Arts and Culture has been made redundant as OTAs tend to display ratings and reviews posted by users, whose complaints cannot be verified. Sri Ganesh also lamented that hotel operators have no control over customers who have been blacklisted by the hotel for misdeeds, but are now booking rooms through OTAs.

MyBHA also called on the government to enforce guidelines on short-term residential accommodation at non-hotel condominiums or residential units which are sold by OTAs. Sri Ganesh claimed that these types of accommodation have become increasingly popular with locals as they need not adhere to the Covid-19 SOPs set by the authorities.

Also, owners of the units do not have an operating licence from the Ministry of International Trade and Industry or a business licence, and do not pay any tax from the rental of their units.

Sri Ganesh stressed: “It is not just hotel industry players who have long suffered by this industry threat due to the absence of laws to regulate OTAs and enforce guidelines on short-term residential accommodation. The government has also directly suffered losses due to no service tax collection for short-term residential accommodation.”

Urging the government to take urgent action in order to speed up the recovery of the hotel industry, he asked: “If the government can control the ceiling prices of Covid-19 test kits and the price of certain food items, why can’t they set a ceiling on OTA commission rates?”