Families travelling for Hari Raya are increasingly choosing homestays and short-term rentals over budget hotels, especially when travelling in groups. For many, the decision comes down to space, convenience, and how far one booking can stretch across a family trip.

That shift is making Raya a less reliable peak season for budget hotels, even though travel still rises during the festive period. Higher living costs, flat room rates, and stronger competition from short-term rentals are all putting pressure on the sector.

Group Stays Are Winning More Raya Bookings

Malaysia Budget and Business Hotel Association president Dr Sri Ganesh Michiel said many travellers still look for homestays and Airbnb-style units first when heading back to their hometowns.

The preference is often practical. A larger group can stay together in one house or apartment instead of splitting across several rooms, which can make planning easier during a festive trip when travel and celebration costs are already adding up.

Budget hotels tend to benefit only after those options have run out. Festive demand is still there, but a big share of it is going elsewhere first.

Demand Is Strongest In Hometown Areas

Ganesh said rural areas usually see occupancy rise by as much as 80% during the first four to five days after Raya begins. After that, it tends to fall to around 50% to 60%, even though the festive season lasts much longer.

The strongest demand is expected in hometown destinations such as Kelantan, Terengganu, Muar, Batu Pahat, and Segamat, where occupancy may reach 95% during the first two days of Raya.

The pattern is different in major cities. Kuala Lumpur and other business-heavy locations are expected to stay relatively quiet as people leave urban centres and return to their hometowns.

That split means rooms may be harder to find in hometown areas at the start of Raya, while city stays may face less pressure over the same period.

Budget Hotels Are Struggling To Raise Prices

Malaysia has around 2,900 budget hotels, ranging from below one star up to three stars.

Ganesh said operators are facing rising costs, including laundry bills and wages, but many still cannot raise room rates easily. One reason is that most bookings now happen through online travel agencies, where travellers can compare prices quickly and switch to a cheaper listing with little effort.

He said walk-in rates usually range from RM80 to RM120, while online bookings often fall between RM60 and RM80. With about 96% of bookings now made through online platforms, hotels face strong pressure to keep prices low.

So while budget hotel rates may still look relatively affordable, fuller rooms do not always translate into stronger profit for operators.

Last-Minute Booking Is Becoming More Common

Ganesh said travellers are now waiting longer before confirming a stay. In previous years, many rooms would be filled about a month before Raya. Now, more people are holding off until much closer to their trip, helped by mobile apps that make it easy to compare options and book quickly.

That gives travellers more flexibility, but it also points to a more cautious spending pattern, with some households delaying bookings until plans are firmer or until they find a better rate.

More Operators Are Finding The Business Hard To Sustain

Ganesh said some budget hotel operators have ended up selling their businesses or leasing them to larger management companies in order to survive.

He added that occupancy has not shown a meaningful increase over the past two years, making it harder for smaller operators to keep going. A short festive spike in selected towns is no longer enough to offset the wider pressure from rising costs, pricing competition, and changing travel habits.

Accommodation choices during Raya are increasingly shaped by value, not just availability. For budget hotels, that same shift is making one of the busiest travel periods of the year less profitable than it once was.

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