GEORGE TOWN: The curtains appear to be coming down on some 210 unlicensed hotels here.
Many are established businesses which appear well kept and include award-winning and popular budget, heritage and boutique hotels.
But most are facing a tough time meeting government regulations.
It is learnt that many of these successful hotels are either closing down or looking for buyers because they see no hope of obtaining hotel licences from Penang Island City Council (MBPP).
Without a licence, they face a second layer of problems such as trouble getting other permits and various business services. They also eventually face a constant string of summonses and compounds.
MBPP gave 168 of them temporary licences that will expire on Dec 31 and they have to meet all requirements before then. But many are pessimistic.
"I closed down my beautiful boutique hotel early this year. My guests loved how we preserved the pre-war heritage of our building. But MBPP would not give us a licence," said a lady entrepreneur who started a budget hotel and a backpackers hostel in the heritage enclave three years ago.
After discovering that it would cost more than RM100,000 (S$36,400) and up to three years to convert her premises from residential to commercial before she could qualify for a licence, she closed her hotel in Lorong Lumut.
She had also sold her backpackers hostel in Chulia Street, adding that "small hotels have no place to survive in George Town".
Another boutique hotel owner in Chulia Street said he was looking for a buyer.
The owner said he had a shock when told he had to pay over RM200,000 in lieu of parking lots.
"The guidelines state I must provide eight parking lots because of the size of my hotel. How can I do that when my hotel is a pre-war house on a narrow street?"
A backpackers hostel owner on Chulia Street said even though he had a temporary licence, he planned to close because his landlord had no plans to spend over RM200,000 to convert his pre-war house for commercial use.
One backpackers hostel owner in Love Lane, however, was not worried.
"We are providing a valuable tourism service. You think the government will close us down? Where are budget travellers going to stay if we are gone?"
When told of this, however, Local Government Committee chairman Chow Kon Yeow made his displeasure clear.
"They are testing the government. Comply or close down. Those hotels are in residential units. We are going to be strict with enforcement from next year."
On the payment in lieu of parking lots, he clarified that the payment was not sector-specific.
"All commercial properties must create parking lots. Even churches and temples must comply. But hotels in the heritage zone feel the pinch because they usually cannot provide even one parking lot so they will have to pay a high contribution."
"There must be a control on development. The heritage area is subject to Unesco scrutiny.
"If we let entrepreneurs freely create hotels here, our heritage status will be in trouble.
"If they cannot comply, they will have to close down," said Chow.