Tourism Steps Up


Economic News

22 Jul 2010
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Malaysia is looking to fast-growing markets to accelerate the pace of its tourism sector's development, which remains a key government priority.

Amiruddin Abu, the director of advertising division at Tourism Malaysia, the state tourism authority, recently told the media that tourism arrivals were expected to rise again this year, despite worsening economic conditions in Western markets. He also asserted that tourism promotion would continue to be stepped up despite a general scaling back of government spending commitments, which has seen other projects put on hold.

Amiruddin said that Tourism Malaysia would "strategise and prioritise...[its]...activities to hit the target of 22.5m foreign visitors this year" - up from 17.55m in 2006. He ruled out cancelling any of the activities and events planned throuhout the year, which have played a key role in taking the organisation's message to fast-growing markets in Asia and the Middle East.

This strategy is expected to offset any drops in tourist numbers from Europe and North America, which are currently feeling the bite of the credit crunch and economic slowdown. With many households in the West reeling in their spending, long-haul destinations such as Malaysia may seem too costly.

According to World Tourism and Travel Council (WTTC) forecasts, the Malaysian tourism industry will be worth around $10bn, or 4.8% of Gross Domestic Product (GDP) in 2008, providing 523,000 jobs directly. The organisation expects this number to rise to $19.5bn in nominal terms by 2018. Moreover, the WTTC highlights the "economic impact" - that is the direct and indirect economic benefit gleaned from tourism across all sectors. It estimates that the total economic impact of tourism on the Malaysian economy this year will be $26.5bn, or 13.2% of total GDP, and up to $58.7bn in 2018. The WTTC also suggests that some 1.257m jobs are provided directly and indirectly by the tourism industry.

According to a report by market research company RNCOS published in June, "Singapore, Thailand and Indonesia are important sources of visitors for Malaysia. Beyond ASEAN [the Association of Southeast Asian Nations], tourist arrivals from China and India will remain an important influence throughout the forecast period (2008-2012)."

In terms of countries of origin, Singapore continues to lead. In the first nine months of 2007, some 7.78m visited from Singapore, 1.34m from Indonesia and 1.16m from Thailand. While pursuing efforts to boost arrivals from these traditional markets, Malaysia is now looking further afield.

India is showing substantial growth as a market. According to recently released government figures, between January and May 2008, some 234,200 Indians visited Malaysia, an increase of more than 25% on the same period of 2007, and it seems likely that the authorities' target of 500,000 Indian tourists in 2008 will be met. To this end, the government is working to encourage airlines and tour operators to offer more diverse itineraries. This entails offering Indian tourists trips to places such as the archipelago of Langkawi in the northwest, Penang in Peninsula Malaysia, and Sabah and Sarawak on the island of Borneo. The strategy also lies in targeting India's increasingly affluent medium-sized cities.

Another market attracting a lot of interest is China. Some 40.9m Chinese made trips abroad last year, a number expected to rise to 100m by 2020. Malaysia is one of the most popular destinations for Chinese tourists, with 690,000 visiting the country last year and some 418,300 in the first five months of 2008. Last year, Chinese visitors spent $513m in Malaysia, and according to RNCOS "the majority of Chinese tend to weigh their spending towards consumer purchases as opposed to luxury hotel accommodation," meaning that their economic impact is directly spread outside the tourism sector.

There is of course growing competition for attracting Chinese tourists, with the US and Taiwan becoming increasingly popular destinations. But Wan Zawawi Mohamed, Tourism Malaysia's international promotion director for North and East Asia, believes that Malaysia's diversity, and the rapidly growing number of Chinese who take holidays abroad, will ensure that the tourism market will continue to reap the benefits of "the very big Chinese tourism pie".

Another market that Malaysia is tapping into is the Middle East, where salaries and interest in tourism have been growing quickly. Given Malaysia's Islamic culture and traditions, it seems a natural destination for visitors from the Arab world, particularly more conservative tourists who might be put off by the perception of overt hedonism (and lack of halal food) in other Asian countries.

One issue that Malaysia's tourism sector will have to face up to is the future of its health tourism sector. The country attracted 110,000 visitors specifically for medical treatment in 2006, and it has long been a favoured destination for Gulf residents and Chinese seeking affordable elective surgery with short waiting times. However, with these countries rapidly building up their own health systems - Abu Dhabi being a particular example - Malaysia will have to increase its competitiveness and find new markets for the health tourism sector to continue to flourish.

A thornier problem is high hotel occupancy rates during peak holiday season- good news for hoteliers, but a potential stumbling block as visitor numbers grow. Moreover, hotels report difficulties in hiring and retaining staff, particularly given higher wages available in Thailand, Singapore and parts of China. Finding a solution to these issues will be a priority over the coming years.

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