Hotel room rates in Malaysia are shooting up by as much as 20 percent as hoteliers begin charging in US dollars and Euros to compensate for sharp increases in running costs, the industry body said today.

Malaysian Association of Hotel Owners executive director Shaharuddin Mohamad Saaid said the escalating costs were "unbearable for hotel owners" and that some establishments would be forced to close down if the increases were not introduced.

"Room rates have not changed in the last 10 years. It is still the cheapest in the region. We have first class hotels but we impose low rates. We are desperate now," he told AFP , adding that some hotels had already raised their charges while others planned to do so in coming months.

Shaharuddin said rates would go up by 10 to 20 percent to cover rising wage and fuel costs, but that he was confident the changes would not hurt the tourism industry.

"We cannot survive if we do not increase the rates. We also need money to refurbish the hotels. Based on current room rates, the return on investments is insufficient to cover our operational costs," he said.

"If we do not raise rates, we may end up with no five-star hotels in five years because the quality of hotels and service will decline and the big foreign spenders will give us a miss."

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Wages and electricity accounted for about 70 percent of operational costs and recent fuel price increases had had a severe impact on operational costs, he said.

There are some 2,000 hotels in Malaysia, with only 284 in the top-quality class. Currently, five-star hotels like the Shangri-La and Mandarin Oriental in the capital Kuala Lumpur only charge between US$100 to US$140 per night.

Shaharuddin said the government had given its approval for hotels to charge foreign tourists in US dollars and Euros.

Tourism is Malaysia's second-largest foreign exchange earner, grossing about RM30 billion in 2004 from 15 million visitors.