KOTA KINABALU: Hotel operators are calling for an immediate dialogue session with Kota Kinabalu City Hall over the recent hike in hotel licensing fees, warning that many budget hotels could be forced to shut down soon due to rising costs.
The Malaysia Budget & Business Hotel Association (MyBHA) has strongly rejected the increase, calling it unfair, unsustainable, and a serious threat to the survival of budget hotels.
Its national president, Dr Sri Ganesh Michiel, said the new licensing fee—calculated based on revenue per occupied room—turns what should be a fixed administrative charge into a fluctuating tax, creating unpredictable financial strain for hotel operators.
“This approach unfairly penalises hotels based on their business performance, creating an unpredictable financial strain that discourages growth and investment in Kota Kinabalu’s hospitality sector,” he said.
MyBHA said the additional licensing fee places an excessive burden on hoteliers, who are already contributing to tourism tax, business operation fees, and regulatory costs. Unlike other businesses that benefit from tourism—such as restaurants, retail shops, transport services, and tour operators—hotels are being singled out with yet another financial obligation.
“A sudden increase in licensing fees will inevitably lead to higher room rates, making it harder for local tourists, small business owners, and daily commuters to find reasonably priced lodging,” he said, adding that smaller hotels already facing stiff competition could shut down, resulting in job losses in the hospitality sector.
MyBHA also criticised KK City Hall for failing to regulate short-term rental accommodations (STRA), such as Airbnb operators, who are not subject to the same licensing fees and enforcement.
“DBKK (KK City Hall) must enforce equal regulatory measures on STRA operators to maintain fair competition in the accommodation sector. Additionally, STRA should be banned in locations where hotels are present, ensuring that only hotel developments are permitted,” he said.
The association warned that if hotel prices rise due to higher fees, tourists may opt for cheaper, unregulated STRA options, further hurting licensed hotels that comply with regulations.
Sabah recorded 3.15 million tourists in 2023. However, rising accommodation costs could discourage visitors, weakening the state’s tourism industry despite efforts to boost arrivals.
MyBHA noted that hotels in other states do not face similar fluctuating fees, as most local councils impose fixed and transparent licensing costs.
Michiel warned that the local council’s fluctuating model sets a dangerous precedent, which could lead to nationwide implementation, further burdening hotels across Malaysia.
Instead of unpredictable licensing fees, MyBHA proposed a statewide tourism tax, which would be transparent, predictable, and fairly distributed.
Michiel said the revenue from this tax should be directed towards tourism development, infrastructure improvements, and marketing efforts, rather than being used solely to fund local council initiatives.
“Unlike the local council’s approach, a state-level taxation model ensures that contributions from hotels are managed fairly and reinvested in Sabah’s tourism growth rather than burdening hotels alone,” he added.
The licensing fee hike, reinstated under the Hotel & Lodging Houses By-Laws 1966, has significantly increased operational costs for hotels in Kota Kinabalu, shifting from a flat RM10 per room per year to a monthly charge per occupied room, based on the council’s hotel classification.
KK City Hall had previously defended the decision, stating that the revenue generated would be used to maintain cleanliness and city development, while arguing that hotels could factor in the fee as part of their annual income tax declarations.
However, MyBHA argued that the hospitality industry has changed significantly since the 1960s, with hotels today facing rising operational costs, stiff competition from STRA, and pressure from online booking platforms.
Michiel urged the local council to engage with industry stakeholders before the situation worsens, warning that many budget hotels will struggle to stay afloat if the issue is not addressed.
“The increase in hotel licensing fees is unjustified, unfair, and threatens the survival of many budget hotels in Kota Kinabalu. At the same time, the failure to regulate STRA and OTAs only worsens the situation. We urge the council to work with us in finding a fair and sustainable solution,” he said.
On March 9, the Sabah Tourism, Culture, and Environment Minister Datuk Seri Christina Liew said the ministry is working to address concerns over the sharp increase in hotel licensing fees
She said the state cabinet has decided to maintain the fees for now, but a review will be conducted in six months to assess the impact on the industry.
