Malaysia’s Hospitality Industry—What Are the Talent Challenges?

The rise in tourism to Malaysia has led to an increase in hospitality sector jobs, fuelling the already-high attrition levels. How can employers in the Malaysian hospitality industry overcome their talent challenges?

Malaysia’s Hospitality Industry—What Are the Talent Challenges?

11 Nov 2016 by  Kenneth Ng

With a breadth of beautiful landscapes, a depth of cultural experiences, and the world-renowned “Malaysia Truly Asia” slogan, it’s no wonder that the tourism industry in Malaysia has effectively stimulated the nation’s economy for the past decade.

In 2010, the World Travel & Tourism Council (WTTC) reported the total GDP contribution of Malaysia’s tourism industry at a sizeable 11.8% with RM124 billion. In 2016, projected figures show a total contribution of 13.5% with RM 163 billion to the overall nation’s GDP figures and employment rates have followed the same vein. This year, the tourism industry in Malaysia—including hospitality, transport, and retail—has contributed an estimated 12.0% to the nation’s employment so far, with 1.66 million jobs.

The growth of tourism in Malaysia is matched by an increased demand on hotels, and subsequently, increased supply of rooms throughout the country—as much as 81% from 2010 to 2015.

These numbers are fuelled by 3 factors:

1. The weakened Malaysian Ringgit—which encourages an influx of international tourists but discourages domestic traveller spend, as shown in statistics from The Department of Statistics Malaysia (DOSM).

2. The increased accessibility from China and India— which makes Malaysia a holiday destination of choice for tourists from these two countries. Flights between India and Malaysia have seen an increase of 20,000 seats per week, while the newly-introduced 15-day visa-free travel from China to Malaysia will continue to encourage travel from this dense population.

3. The advancements in local infrastructure—which has inflated overall hotel and room demand, to create the growth in supply that we see in the market today. Malaysia Tourism Data reports room supply growth going up by as much as 81% from 2010 to 2015.

Amid this optimism, what challenges lie ahead for the hospitality industry in Malaysia?

Firstly, the Aon Hewitt Malaysia 2015 Hotels & Hospitality Industry Survey shows that while the employment rate in Malaysia’s hospitality industry is high, so is the attrition rate. Across all support staff in the hotel and hospitality industry, the attrition rate of 18% is double that of the general Malaysian workforce. Employees cite better external opportunities, work-life balance, and further studies as the top three reasons for leaving their jobs—all reasons to drive HR to focus on overcoming talent attraction and retention issues in the coming year.

Secondly, the Malaysian government recently put the Minimum Wages Order 2016 into effect, which mandates that all organisations provide a minimum wage of RM 1,000 a month to all employees in Peninsular Malaysia, and RM 920 to all employees in East Malaysia & Labuan. As a result, the escalating people cost has driven hotels to shift from a basic salary structure supplemented by service points to a clean wage structure. In the Aon Hewitt Malaysia 2016 Hotels & Hospitality Survey, we discovered that 33% of hotels have made the shift this year—a significant increase from 7% just one year ago.

Finally, disruption has increased competition for the hospitality industry from both a talent and business standpoint. With better opportunities and work-life balance in other industries, talent attraction and retention continues to be a critical people challenge. At the same time, homestays with the ‘AirBnB model’ pose a threat to hoteliers’ market share—with 5,542 registered homestays in Malaysia as at May 2016. and Brickfields in Kuala Lumpur ranking third in the world as a top growth neighbourhood (1,230% growth).

Notwithstanding, the hospitality sector in Malaysia continues to receive considerable investment—from the opening of 20th Century Fox World Genting to the upcoming Hard Rock Hotel Desaru Coast, a 365-room hotel/waterpark/golf resort, both scheduled for late 2017. This places even greater pressure on HR professionals in the hospitality industry to strengthen their talent management strategies and employer brands now, so that they can stay ahead of the competition for the best talent and motivate their current employees to stay and strive.

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If you need help on developing an effective talent management strategy for your employees in the hospitality industry, get in touch with us.

Kenneth Ng

Kenneth is an Associate Consultant with the Rewards Consulting Team based in Kuala Lumpur, Malaysia. He currently manages Aon Hewitt’s Compensation & Benefits Surveys, where he analyses salary & benefits data across more than 200 organisations annually. Survey industry exposure includes Healthcare, Retail, Property & Construction, Energy/Power Generation, Hotels & Hospitality and the Total Compensation MeasurementTM (TCM) Study. His consulting experience includes conducting Job Evaluation exercises, Salary Benchmarking, sustainable Salary Structure Review & Design and the associated Cost Impact Analysis.

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Kenneth Ng
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