Malaysia’s tourism industry taxis towards recovery

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Higher tourist spending and longer holiday stays are supporting Malaysia’s efforts to reignite its tourism industry, bolstered by a more favourable exchange rate.

Despite weaker arrival figures in the first quarter of the year, high-profile developments, including Malaysia’s role as chair of ASEAN this year and planned changes to visa requirements for Chinese tourists, could help put the country back on the map after a challenging 2014.

Tough times

Tourist arrivals were down 8.6% year-on-year (y-o-y) in the first three months of 2015, at 6.5m, due in large part by a drop in visitors from China, Australia, Singapore and Japan, according to figures from the Immigration Department of Malaysia, continuing a trend from the second half of last year.

“Over the first quarter of 2015, there has been a significant slowdown in tourist arrivals due to converging factors, which include the unfavourable media coverage of last year’s aviation tragedies and security issues in Sabah. Chinese arrivals in particular have dropped, and we have yet to see a reversal of that trend,” Mirza Mohammad Taiyab, director-general of the state agency for tourism promotion, Tourism Malaysia, told OBG.

Taking the positives

However, the number of visitors from some other Asian markets has been on the rise. Tourists from Nepal numbered 47,235 in the first three months of the year, up 14.6% y-o-y, while South Korean arrivals increased 11.2% to 121,178.

Tourist spending in local shops was also up, posting 10.8% y-o-y growth in the first quarter, according to Tourism Malaysia. With shopping representing 28.1% of total tourist outlays, followed by accommodation, at 26.3%, the solid increase in retail earnings could help offset the drop in arrivals.

Data from Tourism Malaysia, which showed an increase in the average length of stay, spelled further good news for the industry, with the average trip lasting 6.7 nights, compared to just five in 2015.

Spending levels are being driven in part by the weaker ringgit, which has lost almost 8% of its value against the US dollar so far this year, according to Bloomberg. While not good news for importers, the fall in the currency has made Malaysia more attractive as a holiday destination, Mirza explained, with visitors’ money going further and early bookings on the rise.

“The weaker ringgit has encouraged a lot of foreign operators to book rooms in advance, which will significantly reduce their selling prices,” he told OBG. While Malaysia has yet to see a reversal in the fall off in tourism arrivals, in particular from China, Mirza said a stepping up of promotional activities, Malaysia’s chairing of ASEAN and a renewal of confidence in the country as a destination would see the sector rebound in the latter half of the year and into 2016.

Reengaging China

In late June, the government announced plans to relax visa requirements for Chinese tourists travelling in groups in a bid to reach a target of 2m visitors from China this year. Arrivals fell 9.9% last year to 1.6m and remained down 27% y-o-y in the first quarter of 2015, according to Immigration Department figures.

Chong Yoke Har, deputy director-general for planning at Tourism Malaysia, told local media the regulations were being changed on a six-month trial basis as part of the country’s tourism promotion strategy, which is proving essential in a climate where regional rivalry for mainland visitors is on the rise. “We found out that the competition is getting very strong now, every market is paying special attention to China’s market,” Yoke Har said in June.

However, some local industry players are concerned with the lack of concrete information following the scheme’s announcement. “If we had waived the visa procedure sooner, we probably could have seen an influx of tourists from China in the country by now,” the president of the Malaysian Association of Tour and Travel Agents, Hamzah Rahmat, told local press in July.

Now boarding

The visa-free scheme is seen as one in a series of steps on the road to recovery for Malaysia’s tourism industry. Other measures, which include the restructuring of Malaysia Airlines and the launch of a new state-owned regional airline, bode well for a turnaround in 2016.

The rebooted Malaysia Airlines, expected to begin operating under a new brand name in September, will focus more on regional traffic, while flymojo, the government-owned and privately operated carrier launched in March, is expected to start covering regional routes in the first quarter of next year, flymojo’s managing director, Janardhanan Gopala Krishan, announced at the annual Langkawi International Maritime and Aerospace exhibition – better known as LIMA – in March.

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