Penang hoteliers are pushing for tighter controls on short-term rentals and unlicensed homestays, saying the surge in Airbnb-style listings has created unfair competition and is eating into their revenue.
Malaysia Association of Hotels vice-president Datuk Khoo Boo Lim told NST that licensed hoteliers have grown increasingly frustrated with the unchecked growth of short-term rentals, particularly illegal homestays operating without proper permits.
“Many young travellers prefer to chart their own travels, and many opt for Airbnb and homestays. But they should be licensed similar to how hotels operate. For example, permits for fire safety and security are a must,” he said.
Khoo said there is a need for uniform regulation covering both hotels and private short-term stays. He also questioned the ethics of property purchases made purely for Airbnb operations.
“The fact that house buyers are enticed to purchase properties only to lease them as an Airbnb may sound like an interesting investment option, but ethically, is it right? What about the bona fide hotels? Those who offer gainful employment,” he said.
The complaints come as Penang’s hotel occupancy tells a mixed story. Khoo said MAH members averaged about 60% occupancy in recent months, a recovery from the pandemic lean years, but one that falls short of what rising tourist arrivals should deliver.
He said direct flight arrivals and tourist figures in Penang do not correspond with hotel occupancy rates and revenue, pointing to what the industry believes is revenue leakage to the unregulated sector.
Penang currently has around 894 registered hotels and commercial accommodations listed on major booking platforms, offering approximately 22,500 rooms. Industry insiders say the gap between arrivals and hotel revenue suggests a large portion of visitors are staying in unlicensed properties.
State executive councillor Wong Hon Wai, who oversees tourism, offered a more positive note. He revealed that Cheong Fatt Tze – The Blue Mansion, The Qing Suites, and Soori Penang have all been awarded One MICHELIN Key under the MICHELIN Guide, the first Penang hotels to earn the hospitality industry’s equivalent of MICHELIN stars.
The state moved to address the regulatory gap in August when the Private Homestay (Penang Local Authorities) By-Law 2026 came into effect on 1 August. State local government committee chairman Jason H’ng Mooi Lye said Penang was the first state in Malaysia to enforce such a by-law, Bernama reported.
Under the by-law, short-term rental operators must obtain a licence and comply with regulations covering cleanliness, safety, operating conditions and prohibited activities. An administrative fee of RM50 applies for each application, with an annual licence fee of RM1,000 for premises with up to three rooms and RM200 extra per additional room. A separate annual TIP fee of RM1,800 also applies per unit.
The by-law gives local councils powers to inspect premises, investigate suspected offences and shut down non-compliant operations. Non-compliance may result in a fine of up to RM2,000, imprisonment of up to one year, or both.
Between 2020 and March 2026, the Penang Island City Council received 364 complaints linked to illegal short-term rental operations, while the Seberang Perai City Council recorded 24. Short-term rentals remain banned in government premises, healthcare and childcare facilities, workers’ hostels, private educational institutions, low-cost housing and People’s Housing Projects.
