Tourism Defying Predictions


Economic News

22 Jul 2010
Text size +-
Malaysia's tourism industry could be in for a soft landing in 2009 in the face of the international economic downturn, though the sector may be hard pushed to equal the record levels of arrivals and revenue of 2008.

Tourism has become an increasingly important sector in the Malaysian economy, contributing around 7% to the country's GDP and is its second-highest foreign exchange earner. Last year, Malaysia hosted 22m foreign visitors, with the tourism sector generating $13.7bn.

Predictions made earlier this year were that the sector would be hard hit by the economic crisis. In mid-February, the then-tourism minister, Azalina Othman Said, warned that the global recession would hurt the sector, saying that arrival numbers were expected to fall by 9.3% to 20m this year. At the beginning of the year, Datuk Seri Najib Tun Razak, who became prime minister on April 3 after serving as Malaysia's finance minister and deputy prime minister, said he expected a 9% decline for the tourism industry in 2009.

However, so far the results have been better than expected. According to Tourism Ministry figures, arrivals for January were actually up 5.1% at 1.8m compared to the same month in 2008, while they were only slightly down for February at 1.6m.

According to John Koldowski, the director of the Pacific Asia Travel Association's (PATA) Strategic Intelligence Centre, following a period of downturn the tourism and travel industry across the Asia-Pacific region should see a rebound in the third and fourth quarter of 2009 or even earlier, with Malaysia likely to perform well.

Presenting the preliminary results of a PATA study on forecasts for 2009-11, Koldowski said that while the economic slowdown in neighbouring Singapore, Malaysia's biggest tourism market, would impact arrivals numbers, more Singaporeans would likely holiday closer to home.

"For instance, travellers who wanted to go to Beijing may now cross the strait and go to Kuala Lumpur," he said on April 3. "You lose some and gain some; at the same time Malaysia did well in attracting Middle Eastern tourists and this is likely to continue."

Indeed, Malaysian authorities are working to further increase its performance in the Middle East. Last year, 264,338 tourists from the Middle East travelled to Malaysia, a 7.8% jump on 2007. In mid-April, the state's promotions agency, Tourism Malaysia, announced it was stepping up activities in the Middle East region, both as a means to build on last year's achievements and to develop a higher profile for the future.

Malaysia Airlines's recent fuel surcharge decrease may lead to growing flight bookings. In February the airline slashed fuel charges on several routes, including on trips to India, Australia and New Zealand. Passengers will see savings of $50 to $320 depending on their travel plans.

Malaysia was working to ensure it was in a strong position to attract prospective visitors when the effects of the recession eased, said Mohamad Taib Ibrahim, the deputy director of Tourism Malaysia's international marketing division.

"We need to be ready when the market rebounds at some point," Mohamad Taib said in an interview on April 13 with state news agency Bernama. "Malaysia's visibility in the Middle East market remains strong and we'd like to maintain that momentum."

It is not just the Tourism Ministry that is backing the drive to expand Malaysia's Middle Eastern client base. On April 12, the transport minister, Datuk Seri Ong Tee Keat, said Malaysia needed to open new flight routes to destinations in the Middle East in order to tap into the 300m people in the region.

With flight availability being a factor that determined tourist arrivals, Ong said his ministry was always looking to explore new air routes and obtain landing rights for local carriers to attract and encourage more people to come to Malaysia.

"The Middle East has many countries. And we need to expand landing rights and create new routes for full-service or low-cost flights," he said.

Though there may be an overall fall in the numbers of tourists planning a holiday in the Asian region, the local industry could benefit from those that do come preferring Malaysia over other destinations.

Thailand, one of Malaysia's main regional tourism rivals, is seeing arrival numbers dwindle due to ongoing political unrest. The closure of Bangkok's two main airports late last year by antigovernment protestors and a resurgence of demonstrations in mid-April could prompt a wave of cancellations, with Malaysia looking a much safer alternative.

According to a World Bank report issued on April 7, Malaysia's economy is expected to contract by 1% in 2009, before rebounding the following year. If the tourism sector can maintain its better than expected performances throughout the rest of the year, Malaysia could indeed avoid a hard landing.

Covid-19 Economic Impact Assessments

Stay updated on how some of the world’s most promising markets are being affected by the Covid-19 pandemic, and what actions governments and private businesses are taking to mitigate challenges and ensure their long-term growth story continues.

Register now and also receive a complimentary 2-month licence to the OBG Research Terminal.

Register Here×

Product successfully added to shopping cart

Read Next:

In Malaysia

Malaysia: Economic outlook bright despite election uncertainty

While a fiercely fought general election could send ripples through Malaysia’s economy in the next few months, the country otherwise looks set for another year of solid growth on the back of...


Emerging markets lead uptake of cryptocurrency despite bear market

Despite global financial headwinds and significant declines in the value of cryptocurrencies this year, emerging markets are adopting the technology at a rapid pace.