Open a Hotel/Hostel in Malaysia

Updated on Friday 17th February 2023

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Tourism is one of Malaysia’s top sources of foreign income and the country is one of the most visited Asian countries. Tourist attractions include the beautiful islands and beaches but other types of tourism, such as medical tourism are popular here.

Entrepreneurs who open a hotel in Malaysia need to follow a few steps and observe the local laws and regulations for these types of establishments. In this guide, our lawyers in Malaysia walk you through the most important steps for investing in the accommodation and tourism business in the country.

How to start a hotel in Malaysia

Malaysia is a popular tourist destination and investments in the hotel industry, accommodation, and tourism, in general, are among the most significant in the country.

Opening a hotel or a hostel in Malaysia involves a few steps and foreign investors need to be prepared to become accustomed to running a business in Malaysia. Investors looking to start their own accommodation business should take some time to prepare a business plan and conduct local market research in the area where they wish to set up their business. Peninsular Malaysia is a developed and diverse region, which also includes the capital city of Kuala Lumpur. The East Coast is a tourist attraction because of its beaches and islands, although traditionally largely inhabited by the Muslim population. 

Hotels and hostels in Malaysia will provide services according to their size and type. Hotels receive their star rating based on how they meet minimum requirements for aesthetics, common areas, bedroom requirements, services, hygiene, safety standards, and staff.
Some of the main issues to take into consideration when starting this type of business are listed below:
  • The location: the hotel/hostel can be located near attractions but is not mandatory to be in a central location, it should offer easy access to local transportation and be in a safe area.
  • The establishment: investors can decide to buy or to rent a house that will be converted into a hostel or buy an old hotel (in this case the investment will be more substantial).
  • The laws: it is always useful to consult with specialists on the local laws, such as our team of lawyers in Malaysia.
  • The services: the hotel/hostel can also offer additional services such as a café or a bar and in this case, subsequent steps will be needed for licensing and management, and staff.
  • The design: the hotel should be comfortable and should have a social area as well as designated services such as lockers, laundry, kitchen, and others (some only applicable to hostels).
  • The staff: hiring bilingual staff will be important for the business, as many tourists will speak English.
  • The marketing: investors should consider having a sound marketing strategy in place as well as investing in a marketing plan. 
These are just some of the general items investors should be aware of when investing in an accommodation facility. Understanding all of the costs associated with opening this type of business is important, this is why we recommend drawing up a business plan that will include the costs for starting the business and the eventual additional services that can maximize their revenue stream.

One of our attorneys in Malaysia can give you detailed information on these requirements as well as the special permits and licenses hotels and hostels must obtain if they provide other services apart from accommodation (restaurant, bar, entertainment, etc.). 

Company incorporation in Malaysia

Foreigners who start a hotel in Malaysia begin by incorporating a company. The subsequent procedures involve obtaining special approvals and hiring employees in Malaysia.

The first step for company formation is choosing the business form. There are several types of companies in Malaysia, however, for a hotel or hostel, our team of attorneys in Malaysia recommends incorporating a private limited company or the Sdn Bhd. This is the most common business form because it is suitable for small businesses and it is a separate legal entity from its founders. Shareholders only have limited liability according to the amount they have contributed to the capital. The number of shareholders is limited to 50 and this company cannot offer its shares to the public. 
The steps for company formation are the following:
  1. Choose a company name: it needs to be a unique one and its availability is checked before registration.
  2. Prepare the documents: the next step is to draft the Articles of Association, a step during which our team of lawyers in Malaysia can help.
  3. File the documents: the registration application together with the company’s documents are deposited with the Companies Commission (SSM).
  4. Receive the certificate: when all of the documents are in order, investors will receive the Certificate of Incorporation in approximately three days.
  5. Subsequent steps: included here are filing the statutory forms with the SSM as well as convening the first Board of Director meeting. 
Investors should be aware that several fees are applicable for these procedures and they are set by the competent authorities. A company in Malaysia will need to have a local registered office which in this case can be at the same address as the hotel/hostel although it is not mandatory. 
The experts at our law firm in Malaysia can provide investors with more details about these steps and about the VAT registration.

The Ministry of Tourism and Culture issues licenses for Tourist Accommodation Premises and other licenses relevant to the tourism industry. The Ministry also oversees the implementation of the Tourism Industry Act.

Investments in tourism in Malaysia may require special Government approval. We recommend that you talk to one of our attorneys in Malaysia for details on full foreign ownership in this business field.

We invite you to discover the services offered by our corporate lawyers in Malaysia if you are facing legal problems. We will advise you on legal procedures and defense strategies for your rights. What is good to know is the fact that those who want to conclude partnerships or business contracts can confidently call on our specialists. Moreover, we are at your disposal with support for the business negotiations you have planned.

The tourism sector in Malaysia 

Malaysia has many attractive places, from modern city architecture, most notably the Petronas Towers, to beautiful beaches and lush rainforests. Tourists can explore the Cameron Highlands and then enjoy a cup of tea, they can immerse themselves in the underwater world with snorkeling or scuba diving, they can visit Legoland and the Hello Kitty Town in Johor, they can dine in luxury restaurants as well as visit a living cultural museum.
Malaysia offers a mix of cultures and religions and this multiculturalism has shaped its gastronomy and environment. There are eleven states and two federal territories that tourists can explore and a third federal territory, Labuan, which is primarily a financial center. 
Tourism is an important contributor to the country’s economy. The figures below highlight this:
  • in 2018, there were 25,8 million tourist arrivals in the country
  • the highest number of tourists was recorded in December, 2,352,442; the month with the fewer tourists was April, 1,957,248. 
  • in 2017, the number of tourists was 25.9 million while in 2016 the number was 26.7 million. 
Opening a hotel or a hostel in Malaysia will require thoughtful planning, a budget that will also cover unforeseen costs and a good business plan. Investors can contact our law firm in Malaysia for detailed information about the regulations in the accommodation industry and for specialized assistance for starting this type of business.

You can contact our law firm in Malaysia for more information on how to open a business in the country.