Singapore: Hotel Market Market Report - March 2019 Source: Anantara, Desaru Coast MARKET REPORT Desaru, Malaysia Hotel Market Overview MARCH 2021 Desaru Coast, Malaysia Market Report - March 2021 Source: : One&Only, Desaru Coast Reawakening Desaru: Malaysia’s with the plan to create a premium integrated destination once best kept secret resort. One part of this objective was to develop a lifestyle Located along Johor’s eastern coast, Desaru is situated and meeting destination that possessed supporting facilities in the Kota Tinggi District that faces the South China Sea to draw visitors. with nearly 22 kilometres of beachfront coastline. Desaru is located approximately 79 kilometres from Johor Bahru’s Desaru Coast master plan development city centre, about 83 kilometres from Senai International Khazanah Nasional (Khazanah) unveiled a multi-billion- Airport (SIA), approximately 78 kilometres to Woodlands ringgit development plan to rejuvenate Desaru about six Checkpoint, 114 kilometres to Tuas Checkpoint and just years ago. With 1,618 hectares (3,998 acres) of land and a short of 400 kilometres from Kuala Lumpur. 22-kilometre coastline, the integrated resort development is planned over multiple phases. As it stands now, Desaru During the 1980s, Desaru was given glorified expectations Coast includes four hotels, two world-class golf courses, on the rides of several mega projects that aimed at a waterpark, riverside retail and restaurants, and a attracting foreign investments and visitors. However, convention centre. those ambitions did not materialise. Historically, Desaru was a well-kept secret for Malaysians, and the occasional Phase one development covers about 2,000 acres, Singaporeans, to enjoy this scenic beach destination. representing about half of the entire development’s Historically, Malaysia’s tourism has been concentrated total acreage. The 27-hole golf course and the 18- along the west coast. There was no good infrastructure to hole course designed by Ernie Els opened in 2016 and draw visitors no quality hotels and restaurants or existing 2017, respectively. The golf courses are surrounded by nightlife to accommodate high-paying guests. prime landed and low-rise condominium residences of neighbouring development. The Adventure Water Park, The opening of the E22 highway (Senai - Desaru) in 2011 the entertainment lifestyle village - The Riverwalk, and the was a turning point. Desaru was revived and once again Desaru Coast Conference Centre were also developed and on the tourists’ radars seeking an authentic beachside currently in operation. experience rather than a crowded tourist town. The Desaru Coast Master Development Plan was conceived, and the Government tasked Khazanah Nasional (a sovereign entity) www.horwathhtl.com 2 Desaru Coast, Malaysia Market Report - March 2021 Source: Google All four hotels also have commenced their operations: the Desaru Coast hotel performance 365-room Hard Rock Hotel & Resort opened in September The first hotel that opened in Desaru Coast is the 365- 2018; the 275-room Westin Resort opened in April 2019; key Hard Rock Hotel that commenced its operation in the 123-key Anantara Resort & Villas opened in January September 2018. The annualised room nights available 2020, and the 45-key One&Only Desaru Coast opened (RNA) increased significantly in 2019 as it was the first full in September 2020. The opening of the One&Only marks year of opening for Hard Rock, as well as the 275-room Phase one’s completion, though the proposed 50 private Westin entered the market in April 2019. homes of One&Only Desaru Coast are still in the planning stage. Nonetheless, the room night demand (RND) growth outpaced the RNA growth, which was attributable to the Phase 2 of the Desaru Coast development will include ramp-up of the Hard Rock, indicating the two properties the Desaru Coast International Ferry Terminal. The new were able to induce new demand. As a result, market- ferry terminal will provide access to Desaru Coast from wide occupancy increased from 29 percent in 2018 to 33 Singapore (Tanah Merah Ferry Terminal), and Batam percent in 2019. and Bintan Islands in Indonesia, once completed by July 2021. The terminal will also be equipped with a Customs, Desaru Coast Hotel Performance Immigration and Quarantine (CIQ) office. It is located south of Desaru Coast, approximately 5 minutes’ drive from the 900 70% 800 One&Only. 60% 700 50% In addition to the ferry terminal, Phase 2 will also include 600 40% additional retail spaces, hotels, serviced apartments and 500 residences, as well as wellness or retirement villages. Phase 400 30% Occupancy % 300 3 is still in planning, but considerations include luxury 20% camping (“glamping”) as well as nature tours. Completing all (MYR) ADR / RevPAR 200 10% three phases is expected over 20 years. 100 0 0% 2018 2019 2020 ADR RevPAR Occ. Source: Horwath HTL www.horwathhtl.com 3 Desaru Coast, Malaysia Market Report - March 2021 Source: Hard Rock Hotel, Desaru Coast Source: The Westin, Desaru Coast The market saw two additional new luxury resorts in 2020, Nationality Mix, 2019 namely the 108-key Anantara Desaru Coast in January Generally speaking, Desaru Coast relies more on the and the 45-key One&Only Desaru Coast in September, immediate markets such as the domestic and Singapore contributing to another year of noticeable annualised RNA markets, where Langkawi attract more medium-long haul increase amidst the pandemic. Both resorts were able to markets, such as Europe and the Middle East. This is induce pent-up demand for higher-end luxury demand and mainly the combined consequences of different geographic enter the market at a higher occupancy because of their location and international awareness. unique positioning, differentiated product offerings and lower key counts. Nationality Mix, 2019 100% 2% 4% 11% Thus, despite the demand subdued for the Hard Rock and 90% 5% the Westin, the overall demand increased. However, it was 9% 5% 80% not sufficient to offset the supply increase, which resulted 6% 70% in a 5-percentage point decline in occupancy. Because of 29% Middle East 60% 27% Americas the COVID-19 pandemic, the Hard Rock temporarily closed Europe 50% Other Asia from April 3rd to May 31st, and the Anantara temporarily 13% 40% Mainland China closed from April 11th to June 30th. Furthermore, the Singapore 30% high ADR introduced by the Anantara and the One&Only 12% Domestic 44% 20% properties resulted in a 39 percent ADR increase and a 19 5% 10% percent RevPAR improvement. 14% 0% Desaru Coast Langkawi Where is Desaru Coast’s lodging Source: Horwath HTL market compared to Langkawi? Langkawi has been credited as the premier leisure The relatively convenient access (without flying) to Desaru destination in Malaysia, which Desaru Coast aims to Coast from Kuala Lumpur and Klang Valley (the dominant become. Both Desaru and Langkawi luxury resort market market source) and the destination’s pristine natural are highly leisure-driven, and both are experiencing pent- setting make it an attractive place for domestic travellers. up demand for international-standard good quality resort Domestic guests also came from Johor Bahru. Desaru is properties. For this reason, it is vital to understand Desaru one of the better beach destinations in West Malaysia, with Coast’s performance insights and benchmark them against good quality hotels. Hence, it is not surprising that Desaru Langkawi’s. It must be pointed out that 2019 was the first is popular with domestic demand. full year of operation for Desaru Coast. Desaru Coast attracts Singaporeans because of the great accessibility by land or ferry, the affordability and the www.horwathhtl.com 4 Desaru Coast, Malaysia Market Report - March 2021 Source: Anantara, Desaru Coast Source: : One&Only, Desaru Coast high quality of available products. With the new CIQ ferry help the destination gain awareness in the Middle East. terminal opening in 2021, Desaru Coast is expected to The low level of demand could also be due to the limited welcome more guests from Singapore and Indonesia, as availability of free-standing villas in the market. It has been well as international guests using Singapore’s Changi as the established that guests from the Middle East, especially arrival airport. Desaru should have a competitive edge in the high-paying ones, prefer detached villas with their own attracting demand from Singapore (especially for weekend pools due to the privacy these accommodation units afford trips) due to its proximity, ease and options of travel (either them. by car or ferry), and the availability of more seafood and shopping options. Market Mix, 2019 Both Desaru and Langkawi are highly leisure driven markets Mainland China visitors travel to Desaru as part of multi- with negligible Corporate demand. Langkawi achieved a destination travel packages covering Singapore and Johor higher capture of Wholesale FIT because Langkawi is a Bahru. This segment also includes Chinese expatriates living more mature beach destination with much more room in Singapore that travel to Desaru for weekends or holidays. inventory than Desaru Coast. The availability of seafood and shopping in Johor Bahru or Desaru could potentially attract an increasing number of Market Mix, 2019 guests from China. Other Asia, mostly including Indonesia, 100% 4% 2% 3% 3% Hong Kong and Taiwan. 90% 9% 12% 1% 80% 2% The traditional western markets constitute a relatively 70% 19% 35% Others small portion. As the Westin and the Hard Rock ramp up 60% Leisure Group while leveraging their well-known brands and the new CIQ 50% MICE ferry terminal facilitating access from Changi Airport and Corporate 40% Wholesale FIT increasing awareness of Desaru Coast, the market should Dire ct FIT 30% 60% reach more western guests. There are numerous direct 50% 20% air links between Singapore and Europe/USA that would 10% benefit Desaru Coast. Travellers from these long-haul 0% markets are likely to combine their trips to Desaru with Desaru Coast Langkawi Singapore, as the former holds little interest apart from Source: Horwath HTL beach and golf.