TMR

Both states have strong advantages including O&G reserves, abundant RE resources and growing digital economies 

by SHAUQI WAHAB

SABAH and Sarawak are emerging as key drivers of Malaysia’s next phase of economic growth, powered by abundant natural resources, expanding digital infrastructure and rising investor interest in energ y and industrial development.

However, industry leaders said unlocking the full potential of both East Malaysian states will require stronger regional coordination, improved infrastructure, greater autonomy and sustained investment in human capital.

Speakers at Affin Bank Bhd’s Market Outlook 2026 forum in Kuala Lumpur last week said Sabah and Sarawak possess strategic advantages ranging from oil and gas (O&G) reserves to renewable energy (RE) resources and growing digital economies, but several structural and logistical barriers still need to be addressed. 

Qhazanah Sabah Bhd CEO Damshal Awang Damit said Sabah is still in the early stages of unlocking its vast economic potential despite being richly endowed with oil, gas and mineral reserves, as well as RE resources such as solar, wind and geothermal power.

Sabah remains behind Sarawak in terms of development and resource monetisation, but said the state’s strategic location within the Brunei Darussalam-Indonesia-Malaysia-Philippines East ASEAN Growth Area (BIMP-EAGA) provides substantial opportunities for trade and investment. 

Sabah also has potential to develop aerospace and satellite-launching activities because of its equatorial position, he added. 

Established in 1994, BIMP-EAGA was created to accelerate development in remote and less-developed areas across Brunei, Indonesia, Malaysia and the Philippines. The economic sub-region includes Sabah, Sarawak and Labuan in Malaysia; along with Kalimantan, Sulawesi, Maluku and Papua in Indonesia; Mindanao and Palawan in the Philippines; and Brunei. 

According to information published on the regional grouping’s website, the BIMP-EAGA economy was valued at US$1.34 trillion (RM5.29 trillion) in purchasing power parity terms in 2024, accounting for 18% of the combined GDP of the four participating countries. 

As of April 2026, the grouping’s rolling pipeline of priority infrastructure projects had expanded to 265 projects from 57 in 2017, with a combined value of US$174.6 billion aimed at improving regional connectivity and economic integration. 

Damshal said Sabah has already established institutions such as the Energy Commission of Sabah (ECOS) to strengthen state autonomy in energy management, but coordination between governments, agencies, investors and financial institutions remains a key challenge. 

“We have all the advantages, but it’s just how to unlock the potential,” he said during the forum. 

Digital, Energy Transformation

On digitalisation and energy transformation, Sarawak Energy Bhd (SEB) senior VP for strategy and corporate development Dr Chen Shiun said Sarawak’s energy sector has rapidly adopted advanced digital technologies to improve operations and customer engagement. 

He said hydropower plants can now be remotely operated from Kuching through upgraded digital systems, while consumers are increasingly using digital applications to monitor and manage electricity consumption. 

“Digitalisation is certainly one of the major pillars,” Chen said during the session titled Sarawak and Sabah: Malaysia’s Upcoming Economic Powerhouse. 

Meanwhile, Sarawak Chamber of Commerce & Industry (SCCI) president Datuk Philip Ting highlighted Sarawak’s progress under the Sarawak Digital Economy Blueprint 2030. 

Under the plan, the state aims to achieve 96% high-speed Internet coverage by 2030, establish five data centres, complete thousands of telecommunications towers and 5G sites, and fully digitalise government services. 

The initiatives are intended to support long-term economic transformation and improve connectivity across the state, particularly in rural areas. 

Separately, a recent research report by Kenanga Investment Bank Bhd (Kenanga Research) also pointed to several major development initiatives underway in Sarawak. 

The report highlighted a proposed deep-sea port project, noting that its long-term viability would depend heavily on Petroleum Sarawak Bhd’s upstream and gas commercialisation plans, as well as the successful execution of the Kuching Low-Carbon Gas Hub to drive throughput demand. 

Kenanga Research also noted plans for a new Kuching airport, which could improve airspace flexibility as the current airport’s operations are constrained by its proximity to West Kalimantan, Indonesia. 

In addition, the report said Sarawak is intensifying efforts to develop its semiconductor industry through existing investments such as X-Fab Silicon Foundries and potential new initiatives focused on gallium nitride transistors and chip design, particularly for the automotive sector. 

The research house added that water coverage improvement projects remain ongoing throughout the state, supported by increased budget allocations following the consolidation of the water regulator in August 2025. 

Major Obstacles 

Despite the strong growth prospects, panellists at the forum agreed that human capital remains one of the biggest obstacles facing both states. 

Chen said better education, skills development and social mobility are needed to ensure rural and lower-income communities can participate meaningfully in the evolving economy. 

“The soft skill is really something that we really need to bring up to the next level,” he said. 

Damshal argued that coordination among stakeholders remains the primary challenge, particularly among governments, government-linked companies and financial institutions. 

He called for stronger cooperation between Sabah, Sarawak, Brunei and the wider BIMP-EAGA region to formulate more effective development strategies. 

“We need more effective coordination, rather than bottom-up approaches,” he said. 

Ting identified human resources and logistics as Sarawak’s two biggest challenges, noting that the state requires hundreds of thousands of skilled workers while also facing transport and accessibility constraints because of its geography and low population density. 

“Human resource is definitely one of the biggest challenges,” he said. 

The discussion also touched on Sabah’s future energy mix. Damshal said the state currently has no coal-powered electricity generation but continues to face energy shortages and reserve limitations. 

While RE remains a priority, he suggested that cleaner coal technologies combined with biomass and carbon capture solutions could help address Sabah’s energy requirements more quickly. 

Chen stressed that Sarawak and the federal government must continue working closely on energy security and resource management to ensure mutually beneficial outcomes for both the state and Malaysia as a whole. 

On talent retention, Ting said many Sarawakians working abroad are emotionally inclined to return home, but employment opportunities and long-term career prospects remain the deciding factors. 

He added that Sarawak has been actively organising outreach programmes globally to encourage professionals to return and contribute to the state’s development.

• This article first appeared in The Malaysian Reserve weekly print edition

The post Sabah, Sarawak advance digital, energy transformation appeared first on The Malaysian Reserve.

Mounting pricing pressure in key tourism and urban markets is fuelling calls for tighter enforcement ahead of VM2026 

by AKMAR ANNUAR 

UNREGISTERED short-term rentals are intensifying price pressure across key tourism and commercial centres, raising concerns that compliant hotels will be squeezed hardest amid Visit Malaysia 2026 (VM2026) and preparation for VM2027. 

Malaysia Budget & Business Hotel Association (MyBHA) national president Dr Sri Ganesh Michiel said the group has received feedback from members nationwide linking revenue losses to the growth of unregistered online lodging and short-term rental accommodation (STRA) listings. 

“Based on member reporting and market observation, revenue erosion is estimated at between 20% and 40% per property, with smaller, independent budget and business hotels 

bearing the greatest impact due to intense price competition from non-compliant operators,” he told The Malaysian Reserve (TMR). 

Sri Ganesh said the most affected markets include Selangor, Kuala Lumpur (KL), Penang, Johor, Melaka, Perak and Sabah, particularly urban centres and high-demand tourism areas where hotels compete daily with residential units marketed like rooms but operating outside the same compliance perimeter. 

The most affected markets include Selangor, KL, Penang, Johor, Melaka, Perak and Sabah, says Sri Ganesh (Source mybha.org)

Operators said the impact shows up first in sharper discounting, weaker midweek corporate demand and more volatile weekend pricing, especially near transport hubs, hospitals, industrial zones and tourist clusters where budget hotels typically anchor domestic travel. 

They said the wider risk is a sustained price war that erodes service standards and staffing just as Malaysia tries to improve visitor satisfaction, repeat arrivals and destination reputation. 

Hotel operators stress they are not resisting short-term rentals as a concept, but are challenging what they describe as an uneven playing field when unlicensed units do not meet the baseline obligations that hotels must shoulder daily. 

Sri Ganesh said MyBHA has written to and engaged multiple authorities, including local councils, the Tourism, Arts and Culture Ministry (MOTAC) and several state governments, requesting stricter regulation, licensing and zoning inspections, joint enforcement operations, and verification of registration and safety compliance. 

“MyBHA believes enforcement is not sustained due to the absence of a clearly mandated single lead agency, overlapping jurisdiction and manpower constraints at local council level,” he said. 

He said enforcement actions and notices tend to be isolated and short-lived in some locations, with listings reappearing after initial action, which has reinforced calls for clearer accountability and more systematic monitoring. 

MyBHA’s argument centres on the compliance load that hotels say is non-negotiable, spanning licensing, inspections, safety certifications, tax obligations and consumer protection responsibilities. 

“Licensed hotels are subject to extensive regulatory and safety requirements, including fire safety certification from the Fire and Rescue Department, local council licensing and inspections, payment of Sale and Services Tax (SST) and tourism tax, guest identity verification and compliance with data protection and consumer liability laws,” Sri Ganesh said. 

He said many unregistered units operate without inspections or safety certification, and without clear accountability, which distorts pricing while exposing guests and residents to safety and security risks. 

He added that this is particularly sensitive in strata settings, where accommodation activity intersects with building rules, resident security controls and emergency readiness. 

The Housing and Local Government Ministry (KPKT) said enforcement is currently constrained because there is no specific regulation dedicated to STRA, and action is often taken by local authorities using existing provisions such as nuisance controls. 

KPKT said local authorities may also act based on hotel by-laws under the Local Government Act 1976 (Act 171), while the regulation of certain building types and strata settings may sit with joint management bodies (JMB) or management corps (MC), depending on the property and the applicable house rules. 

“A key challenge is the online nature of STRA activity, where listings can be created, modified or removed rapidly across digital platforms, making sustained enforcement difficult without a clearer framework and coordinated responsibility,” it said in a written reply to TMR. 

Sri Ganesh said fragmented structure helps explain why complaints keep recurring, because detection often falls on hotels and residents, while local enforcement teams face manpower constraints and limited tools for continuous monitoring. 

He said the most urgent policy fix that could deliver results within six to 12 months is a mandatory requirement for all online accommodation listings to display a valid registration or licence number, enforced at the platform level. 

He added that it should be supported by a centralised national registry accessible to enforcement agencies, clearer designation of a single lead authority and firmer platform-level responsibility to reduce the recurrence of non-compliant listings. 

Officials said policy work is already moving in that direction through planning and tourism-related measures intended to guide state governments and local authorities more consistently. 

KPKT, through PlanMalaysia, said it has completed a short-term rental planning guideline (GPP STRA), which is expected to be tabled for Cabinet consideration and later discussed at the National Council for Local Government (MNKT) as a reference for states and local authorities. 

MOTAC is also working with KPKT on amendments to the Tourism Industry Act 1992 (Act 482), with the intention of issuing a guideline to serve as a reference for local councils, JMBs, MCs, operators, and hosts. 

Industry players said the sequencing matters because VM2026 is not only a marketing push, but also a stress test for the accommodation ecosystem in cities where hotel stock is finite during peak periods. 

MyBHA said if registration gaps persist, a larger share of tourism demand could shift to unlicensed supply, weakening the economic returns to compliant operators that support formal employment, tax collection and destination standards. 

KPKT says enforcement is currently constrained because there is no specific regulation dedicated to STRA (Source: penerangan.gov.my)

Sri Ganesh said licensed budget and business hotels remain the backbone of domestic and regional tourism by absorbing volume demand, supporting local hiring and maintaining minimum service standards at scale, but they are being undercut by operators who do not comply with basic licensing, safety or consumer protection requirements. 

Hotel operators also warned the issue extends beyond profitability into reputational risk, because accommodation failures — including safety incidents, scams, hygiene problems or neighbourhood disputes — tend to reflect on the destination rather than the individual listing. 

Tax compliance is another pressure point as authorities consider how platform-based and informal rental income is declared, verified and enforced. 

The Inland Revenue Board (IRB) said the growth of homestays and platform-listed short-stay rentals is creating new income streams, but it also raises compliance risks when hosting activity is not properly declared, particularly where income is received through platforms, cash or e-wallets.

“A key concern is the non-reporting of rental income, particularly when earnings are received through platforms, cash, or e-wallets,” it said in a written response to TMR. 

IRB said misunderstandings can also arise when properties are actively managed with frequent bookings, leading to reporting errors and underpayment, while informal operators often lack proper documentation that complicates verification of income and expense claims. 

It added that some cases involve weak records around what qualifies as deductible rental expenses, including instances where personal or renovation-related costs are treated as rental expenses without clear supporting documents. 

On enforcement, IRB said it uses a risk-based, data-driven approach that analyses filings alongside third-party information, transaction patterns and lifestyle indicators, and may engage digital platforms and intermediaries where appropriate to better understand income flows and strengthen compliance risk assessment. 

Legal practitioners said the regulatory landscape is more complex in strata settings, where governance under strata law intersects with broader licensing and planning regimes, particularly when residents seek to restrict short-term stays over security and nuisance concerns. 

RDS Advocates & Solicitors partner Bahari Yeow Tien Hong said a key governing authority remains the Federal Court decision in Innab Salil & Ors vs Verve Suites Mont’ Kiara Management Corp [2020], which affirmed that a management corporation under the Strata Management Act 2013 may enact house rules prohibiting short-term rentals, even where land is held under “commercial building” conditions. 

Yeow said enforcement can still stall due to limited harmonisation across regulatory layers, because there is no comprehensive federal legislation directly regulating short-term rentals, leading to fragmented approaches and divergent state and local requirements. 

He said any future regime requiring platforms to display a valid registration or licence number must be aligned with strata law, state planning laws and tourism legislation, and should include transparent criteria and enforceable obligations to reduce disputes and inconsistencies. 

Yeow says any future regime requiring platforms to display a valid registration or licence number must align with strata law (Pic courtesy of Bahari Yeow Tien Hong)

Platform players, meanwhile, are urging clarity and consistency as Malaysia moves towards a more formal framework for STRA. 

Asia Travel Technology Industry Association (ATTIA) MD Mark Chan said the group is engaging policymakers as Malaysia works towards national STRA guidelines, with a focus on ensuring the rules are workable across different local councils and operating models. 

“As discussions continue, it is important that any future framework recognises the diversity of accommodation types and operating models, and is practical to implement across different local jurisdictions,” he shared with TMR. 

Chan said short-term rentals have become part of Malaysia’s tourism mix by widening accommodation supply during peak periods and spreading visitor spending beyond traditional hotel districts. 

He added that ATTIA is pushing for clearer, more consistent rules that reduce confusion and strengthen consumer safeguards. 

Based on information gathered by TMR from operators and agencies, hotel groups are pressing for a framework that is enforceable at scale, arguing that complaint-driven action will remain reactive if listings can be changed, moved or relisted faster than inspection cycles can keep up. 

They argued compliance is more than administrative red tape, because it underpins safety, consumer accountability and fair competition and prevents a “race to the bottom” that could cheapen Malaysia’s tourism brand. 

They said the most workable early step is to require registration or licence numbers to be displayed on online listings, supported by a registry that enforcement officers can verify quickly and penalties that also cover intermediaries that host and monetise illegal stays. 

Separately, public information about Airbnb’s processes indicates the platform collects and remits Malaysia’s tourism tax of RM10 per night per listing for bookings made on the platform where applicable, while Malaysian citizens and permanent residents are exempt under existing rules. 

The same public information indicates Airbnb requires identity verification for hosts, co-hosts and guests before using the platform, which may include government-issued identification and, in some cases, a selfie, with personal information handled under its privacy and data protection policies. 

Airbnb has also published responsible hosting resources, including reference building by-laws developed with legal partners for strata settings, a code of conduct for hosts and guests, and a neighbourhood support channel that allows residents to flag urgent concerns in multiple languages. 

Hotel operators say such measures may help with platform governance, but they do not replace licensing, inspections and tax compliance obligations imposed on regulated accommodation providers. 

Utusan Malaysia recently reported that budget hotel operators, including those operating around the RM3,000-per-month segment, are suffering losses amid the rise of unregistered online lodging platforms, reinforcing calls for stricter and sustained enforcement ahead of Visit Malaysia 2026. 

Industry leaders are saying the next six to 12 months will be decisive because once visitor volumes rise, delayed policy intervention could lock in an uneven market that rewards non-compliance while weakening the formal hotel sector’s ability to reinvest in standards and staffing. 

They said a credible framework must balance accommodation diversity with enforceable standards, ensuring visitors are protected, communities are not strained and compliant operators are not pushed to the margins by cheaper, unregulated supply. 

• This article first appeared in The Malaysian Reserve weekly print edition

The post Budget hotels warn of 40% revenue hit from illegal short-term rentals appeared first on The Malaysian Reserve.

Mounting pricing pressure in key tourism and urban markets is fuelling calls for tighter enforcement ahead of VM2026 

by AKMAR ANNUAR 

UNREGISTERED short-term rentals are intensifying price pressure across key tourism and commercial centres, raising concerns that compliant hotels will be squeezed hardest amid Visit Malaysia 2026 (VM2026) and preparation for VM2027. 

Malaysia Budget & Business Hotel Association (MyBHA) national president Dr Sri Ganesh Michiel said the group has received feedback from members nationwide linking revenue losses to the growth of unregistered online lodging and short-term rental accommodation (STRA) listings. 

“Based on member reporting and market observation, revenue erosion is estimated at between 20% and 40% per property, with smaller, independent budget and business hotels 

bearing the greatest impact due to intense price competition from non-compliant operators,” he told The Malaysian Reserve (TMR). 

Sri Ganesh said the most affected markets include Selangor, Kuala Lumpur (KL), Penang, Johor, Melaka, Perak and Sabah, particularly urban centres and high-demand tourism areas where hotels compete daily with residential units marketed like rooms but operating outside the same compliance perimeter. 

The most affected markets include Selangor, KL, Penang, Johor, Melaka, Perak and Sabah, says Sri Ganesh (Source mybha.org)

Operators said the impact shows up first in sharper discounting, weaker midweek corporate demand and more volatile weekend pricing, especially near transport hubs, hospitals, industrial zones and tourist clusters where budget hotels typically anchor domestic travel. 

They said the wider risk is a sustained price war that erodes service standards and staffing just as Malaysia tries to improve visitor satisfaction, repeat arrivals and destination reputation. 

Hotel operators stress they are not resisting short-term rentals as a concept, but are challenging what they describe as an uneven playing field when unlicensed units do not meet the baseline obligations that hotels must shoulder daily. 

Sri Ganesh said MyBHA has written to and engaged multiple authorities, including local councils, the Tourism, Arts and Culture Ministry (MOTAC) and several state governments, requesting stricter regulation, licensing and zoning inspections, joint enforcement operations, and verification of registration and safety compliance. 

“MyBHA believes enforcement is not sustained due to the absence of a clearly mandated single lead agency, overlapping jurisdiction and manpower constraints at local council level,” he said. 

He said enforcement actions and notices tend to be isolated and short-lived in some locations, with listings reappearing after initial action, which has reinforced calls for clearer accountability and more systematic monitoring. 

MyBHA’s argument centres on the compliance load that hotels say is non-negotiable, spanning licensing, inspections, safety certifications, tax obligations and consumer protection responsibilities. 

“Licensed hotels are subject to extensive regulatory and safety requirements, including fire safety certification from the Fire and Rescue Department, local council licensing and inspections, payment of Sale and Services Tax (SST) and tourism tax, guest identity verification and compliance with data protection and consumer liability laws,” Sri Ganesh said. 

He said many unregistered units operate without inspections or safety certification, and without clear accountability, which distorts pricing while exposing guests and residents to safety and security risks. 

He added that this is particularly sensitive in strata settings, where accommodation activity intersects with building rules, resident security controls and emergency readiness. 

The Housing and Local Government Ministry (KPKT) said enforcement is currently constrained because there is no specific regulation dedicated to STRA, and action is often taken by local authorities using existing provisions such as nuisance controls. 

KPKT said local authorities may also act based on hotel by-laws under the Local Government Act 1976 (Act 171), while the regulation of certain building types and strata settings may sit with joint management bodies (JMB) or management corps (MC), depending on the property and the applicable house rules. 

“A key challenge is the online nature of STRA activity, where listings can be created, modified or removed rapidly across digital platforms, making sustained enforcement difficult without a clearer framework and coordinated responsibility,” it said in a written reply to TMR. 

Sri Ganesh said fragmented structure helps explain why complaints keep recurring, because detection often falls on hotels and residents, while local enforcement teams face manpower constraints and limited tools for continuous monitoring. 

He said the most urgent policy fix that could deliver results within six to 12 months is a mandatory requirement for all online accommodation listings to display a valid registration or licence number, enforced at the platform level. 

He added that it should be supported by a centralised national registry accessible to enforcement agencies, clearer designation of a single lead authority and firmer platform-level responsibility to reduce the recurrence of non-compliant listings. 

Officials said policy work is already moving in that direction through planning and tourism-related measures intended to guide state governments and local authorities more consistently. 

KPKT, through PlanMalaysia, said it has completed a short-term rental planning guideline (GPP STRA), which is expected to be tabled for Cabinet consideration and later discussed at the National Council for Local Government (MNKT) as a reference for states and local authorities. 

MOTAC is also working with KPKT on amendments to the Tourism Industry Act 1992 (Act 482), with the intention of issuing a guideline to serve as a reference for local councils, JMBs, MCs, operators, and hosts. 

Industry players said the sequencing matters because VM2026 is not only a marketing push, but also a stress test for the accommodation ecosystem in cities where hotel stock is finite during peak periods. 

MyBHA said if registration gaps persist, a larger share of tourism demand could shift to unlicensed supply, weakening the economic returns to compliant operators that support formal employment, tax collection and destination standards. 

KPKT says enforcement is currently constrained because there is no specific regulation dedicated to STRA (Source: penerangan.gov.my)

Sri Ganesh said licensed budget and business hotels remain the backbone of domestic and regional tourism by absorbing volume demand, supporting local hiring and maintaining minimum service standards at scale, but they are being undercut by operators who do not comply with basic licensing, safety or consumer protection requirements. 

Hotel operators also warned the issue extends beyond profitability into reputational risk, because accommodation failures — including safety incidents, scams, hygiene problems or neighbourhood disputes — tend to reflect on the destination rather than the individual listing. 

Tax compliance is another pressure point as authorities consider how platform-based and informal rental income is declared, verified and enforced. 

The Inland Revenue Board (IRB) said the growth of homestays and platform-listed short-stay rentals is creating new income streams, but it also raises compliance risks when hosting activity is not properly declared, particularly where income is received through platforms, cash or e-wallets.

“A key concern is the non-reporting of rental income, particularly when earnings are received through platforms, cash, or e-wallets,” it said in a written response to TMR. 

IRB said misunderstandings can also arise when properties are actively managed with frequent bookings, leading to reporting errors and underpayment, while informal operators often lack proper documentation that complicates verification of income and expense claims. 

It added that some cases involve weak records around what qualifies as deductible rental expenses, including instances where personal or renovation-related costs are treated as rental expenses without clear supporting documents. 

On enforcement, IRB said it uses a risk-based, data-driven approach that analyses filings alongside third-party information, transaction patterns and lifestyle indicators, and may engage digital platforms and intermediaries where appropriate to better understand income flows and strengthen compliance risk assessment. 

Legal practitioners said the regulatory landscape is more complex in strata settings, where governance under strata law intersects with broader licensing and planning regimes, particularly when residents seek to restrict short-term stays over security and nuisance concerns. 

RDS Advocates & Solicitors partner Bahari Yeow Tien Hong said a key governing authority remains the Federal Court decision in Innab Salil & Ors vs Verve Suites Mont’ Kiara Management Corp [2020], which affirmed that a management corporation under the Strata Management Act 2013 may enact house rules prohibiting short-term rentals, even where land is held under “commercial building” conditions. 

Yeow said enforcement can still stall due to limited harmonisation across regulatory layers, because there is no comprehensive federal legislation directly regulating short-term rentals, leading to fragmented approaches and divergent state and local requirements. 

He said any future regime requiring platforms to display a valid registration or licence number must be aligned with strata law, state planning laws and tourism legislation, and should include transparent criteria and enforceable obligations to reduce disputes and inconsistencies. 

Yeow says any future regime requiring platforms to display a valid registration or licence number must align with strata law (Pic courtesy of Bahari Yeow Tien Hong)

Platform players, meanwhile, are urging clarity and consistency as Malaysia moves towards a more formal framework for STRA. 

Asia Travel Technology Industry Association (ATTIA) MD Mark Chan said the group is engaging policymakers as Malaysia works towards national STRA guidelines, with a focus on ensuring the rules are workable across different local councils and operating models. 

“As discussions continue, it is important that any future framework recognises the diversity of accommodation types and operating models, and is practical to implement across different local jurisdictions,” he shared with TMR. 

Chan said short-term rentals have become part of Malaysia’s tourism mix by widening accommodation supply during peak periods and spreading visitor spending beyond traditional hotel districts. 

He added that ATTIA is pushing for clearer, more consistent rules that reduce confusion and strengthen consumer safeguards. 

Based on information gathered by TMR from operators and agencies, hotel groups are pressing for a framework that is enforceable at scale, arguing that complaint-driven action will remain reactive if listings can be changed, moved or relisted faster than inspection cycles can keep up. 

They argued compliance is more than administrative red tape, because it underpins safety, consumer accountability and fair competition and prevents a “race to the bottom” that could cheapen Malaysia’s tourism brand. 

They said the most workable early step is to require registration or licence numbers to be displayed on online listings, supported by a registry that enforcement officers can verify quickly and penalties that also cover intermediaries that host and monetise illegal stays. 

Separately, public information about Airbnb’s processes indicates the platform collects and remits Malaysia’s tourism tax of RM10 per night per listing for bookings made on the platform where applicable, while Malaysian citizens and permanent residents are exempt under existing rules. 

The same public information indicates Airbnb requires identity verification for hosts, co-hosts and guests before using the platform, which may include government-issued identification and, in some cases, a selfie, with personal information handled under its privacy and data protection policies. 

Airbnb has also published responsible hosting resources, including reference building by-laws developed with legal partners for strata settings, a code of conduct for hosts and guests, and a neighbourhood support channel that allows residents to flag urgent concerns in multiple languages. 

Hotel operators say such measures may help with platform governance, but they do not replace licensing, inspections and tax compliance obligations imposed on regulated accommodation providers. 

Utusan Malaysia recently reported that budget hotel operators, including those operating around the RM3,000-per-month segment, are suffering losses amid the rise of unregistered online lodging platforms, reinforcing calls for stricter and sustained enforcement ahead of Visit Malaysia 2026. 

Industry leaders are saying the next six to 12 months will be decisive because once visitor volumes rise, delayed policy intervention could lock in an uneven market that rewards non-compliance while weakening the formal hotel sector’s ability to reinvest in standards and staffing. 

They said a credible framework must balance accommodation diversity with enforceable standards, ensuring visitors are protected, communities are not strained and compliant operators are not pushed to the margins by cheaper, unregulated supply. 

• This article first appeared in The Malaysian Reserve weekly print edition

The post Budget hotels warn of 40% revenue hit from illegal short-term rentals appeared first on The Malaysian Reserve.