Report
Desaru Coast, Malaysia: Hotel Market Overview
While the pandemic devastated the hospitality industry in 2020, Desaru in Malaysia welcomed two luxury resorts, namely Anantara and One&Only. While not a panacea to the damage dealt to the global tourism industry, it does send an encouraging signal to those with bullish perspectives on the destination.
Historically, Desaru was a well-kept secret by Malaysians, and the occasional Singaporeans, who have been enjoying this scenic beach destination. As the Desaru Coast master plan development is carried out, Desaru was revived and again on the radar of tourists seeking an authentic beachside experience. In this market report, we assess the lodging assets’ performance in Desaru Coast and compare Desaru and Langkawi shoulder-to-shoulder in terms of market segmentation, nationality mix, accessibility and other characteristics.
Although Desaru is still at the infancy stage of being a premium luxury resort destination, it is in possession of many features and characteristics befitting of a luxury resort destination, such as a sense of authenticity, tranquillity, the convenience of access, abundant amenities and uniqueness.
Desaru Coast Master Development Plan
Khazanah Nasional, a Malaysian sovereign entity, spearheaded a multi-billion-ringgit development plan to rejuvenate Desaru. The development spans 1,618 hectares and includes a 22-kilometer coastline. Phase one, covering about 2,000 acres, includes:
- Four hotels: Hard Rock Hotel (365 rooms), Westin Resort (275 rooms), Anantara Resort & Villas (123 keys), and One&Only Desaru Coast (45 keys).
- Two world-class golf courses designed by Ernie Els.
- Adventure Water Park.
- The Riverwalk, an entertainment lifestyle village.
- Desaru Coast Conference Centre.
Phase 2 and Beyond
Phase 2 will include the Desaru Coast International Ferry Terminal, providing access from Singapore and Indonesia, expected to be completed by July 2021. This phase also plans for additional retail spaces, hotels, serviced apartments, residences, and wellness or retirement villages. Phase 3 is still in the planning stages, considering luxury camping and nature tours.
Hotel Performance
The market saw an increase in annualized room nights available (RNA) in 2019 due to the ramp-up of Hard Rock Hotel and the opening of Westin Resort. Despite the COVID-19 pandemic, the introduction of Anantara and One&Only in 2020 helped sustain demand, though the overall occupancy declined due to the increased supply.
- 2018: 29% occupancy
- 2019: 33% occupancy
- 2020: Despite new luxury resorts, overall demand increased but not enough to offset supply growth, resulting in a 5% occupancy decline.
Comparison with Langkawi
Desaru Coast aims to replicate the success of Langkawi, a premier leisure destination in Malaysia. Both destinations are highly leisure-driven with limited corporate demand. Langkawi attracts more long-haul international tourists, while Desaru Coast relies more on domestic and Singaporean markets.
- Nationality Mix (2019):
- Desaru: 44% domestic, 27% Singapore, 14% Mainland China, 5% other Asia.
- Langkawi: 29% Europe, 13% other Asia, 11% Middle East, 9% Singapore, 6% Mainland China.
Market Mix
Both Desaru and Langkawi markets are dominated by Direct FITs (Fully Independent Travelers). Desaru has potential corporate demand due to its proximity to industrial hubs like Pengerang, Pasir Gudang, and Senai.
- Market Mix (2019):
- Desaru: 60% Direct FIT, 19% Wholesale FIT, 12% MICE, 2% Leisure Group.
- Langkawi: 50% Direct FIT, 35% Wholesale FIT, 9% MICE, 3% Leisure Group.
Seasonality and Average Length of Stay (ALOS)
Desaru experiences strong seasonality due to monsoon winds and rain between November and February. The average length of stay is shorter in Desaru (1-2 nights for domestic/Singaporean guests, 2-4 nights for international guests) compared to Langkawi (approximately 3 nights).
Accessibility
Desaru benefits from its proximity and easy accessibility to Singapore via road and ferry, and Senai International Airport. The upcoming Desaru Coast International Ferry Terminal will further enhance accessibility.
Future Outlook
Desaru Coast is poised for growth with anticipated occupancy rates of 48% in 2021, driven by domestic demand. The market is expected to see gradual recovery, reaching 50% occupancy by 2022 and peaking at 68% by 2025. The completion of new developments and improved accessibility will bolster Desaru’s appeal as a premium holiday destination.
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