This article first appeared in The Edge Malaysia Weekly on January 20, 2020 - January 26, 2020
ANJANA and her parents have been planning to visit Malaysia for several years now and the Malaysian government’s announcement of a 15-day visa exemption for Indian nationals last December made them even more eager to book a flight.
Like Anjana, many Indian nationals are happy that the entry process has been simplified to just making an application online. Chinese nationals also enjoy the same exemption.
India and China are significant tourism markets for Malaysia. They are the second and fifth highest foreign exchange contributors respectively. Singapore, Indonesia and Thailand are first, third and fourth respectively (see infographics on Page 58).
Arrivals from India and China in the first six months of Visit Malaysia Year 2020 (VMY2020) — the country’s fifth campaign — look promising. In a recent interview with The Edge, Tourism Malaysia director-general Datuk Musa Yusof pointed out that forward bookings to Malaysia from medium-haul markets — destinations within three to six hours’ flying time — are up 38.4% (South Asia countries) and 32.4% (for North East Asia) from last year.
Bookings from long-haul markets — more than six hours’ flying time away — have also shown positive growth, with Western Europe, Northern Europe and Oceania recording 25.6%, 25.4% and 5.2% respectively. “The overall increase in forward bookings in the first six months is 24.5%,” Musa says.
These encouraging numbers put Malaysia on the right track to achieve its target of 30 million tourists and RM100 billion in receipts for VMY2020.
Foreign nationals only count as tourists if they stay for at least one night; otherwise, they are considered excursionists or day-trippers.
Tourism receipts are currently the third highest contributor to Malaysia’s foreign exchange earnings after manufacturing and commodities. However, the gap between the tourism industry’s contribution and commodities is narrowing. Johor Corp Bhd chief economist Azrul Azwar Ahmad Tajudin says there is a high likelihood that tourism could become the second highest contributor by 2025.
“Despite the pick-up to above RM125 billion in 2017 and 2018, the commodity sector’s contribution to forex earnings appears to be on a declining trend and a far cry from the high of RM151.05 billion in 2014,” he says.
The two components of the commodity sector are mining and agriculture, within which oil and gas and palm oil are the two major contributors for Malaysia. “With oil and gas generally viewed as a sunset industry in the medium to long term, crude oil prices appear unlikely to hover around US$100 per barrel like we used to see not so long ago. As for crude palm oil (CPO), the price volatility has mostly been driven by factors affecting general demand like climate change and the souring bilateral relations between Malaysia and a number of major CPO-importing countries.
“Despite the apparent rally of late, many doubt CPO prices can sustain beyond RM3,000 per tonne for long, not to mention even get close to RM4,500 per tonne. As such, with this kind of price outlook in the medium to long term for the two major exports in the commodity sector, chances are tourism will be able to overtake it as the country’s second highest foreign exchange earner by the mid-2020s,” Azrul tells The Edge.
Data provided by Musa reveals that tourism receipts from 32.87 million tourists will reach RM122.94 billion by 2025.
Azrul says all the VMY editions — in 1990, 1994, 2007 and 2014 — proved to be significant game changers, taking Malaysia’s tourism industry to new heights.
“Except for 2014, tourist arrivals plateaued at around or slightly above 25 million in six of the past seven years (2012-2018) as opposed to the significant growth observed in neighbouring Asean countries. In fact, after 2016, tourist arrival numbers were on a downward trend, contracting 3% in 2017 and 0.4% in 2018 [despite the highest-ever tourism expenditure in history of RM84.14 billion],” Azrul observes.
He acknowledges that there are some concerns about how Malaysia will be able to achieve its VMY2020 goals owing to factors like the impact of a slowing global economy on global household incomes, which could hurt discretionary spending such as travel, stiff competition from Asean countries and ever-rising costs for both tourists and tourism players with the introduction and/or hikes of tourism-related duties, fees and charges such as the tourism tax, passenger service charge, pick-up and drop-off charges at klia2 and departure levy.
Can Malaysia achieve its targets? Tourism Malaysia is working hard with the small budget it has been allocated.
Under Budget 2020, the Ministry of Tourism, Arts and Culture has been allocated RM1.109 billion, which includes a special allocation of RM90 million to drive awareness, promotions and programmes for VMY2020. The allocation is for the ministry as well as 13 agencies under it, including the marketing arm, Tourism Malaysia.
Tourism Malaysia’s allocation from the RM1.109 billion is RM330 million, of which RM190 million is for operational purposes and RM140 million for advertising and promotions. This year’s A&P budget is almost half of VMY2007’s RM300 million but higher than VMY2014’s RM70 million. It is also higher than the allocation of RM50 million in 2018 and RM80 million in 2019. The cuts over the past 10 years — by close to 70% — has hampered A&P activities in most markets and affected tourist arrivals. Up to 2018, Malaysia missed its tourist arrival goals for eight straight years.
In 2019, a RM15 million matching grant was introduced to help defer costs related to accommodation, flights and brochures to promote the country. Only RM2 million from the grant — available for those holding promotions overseas on their own, with the state government or with Tourism Malaysia — has been disbursed thus far.
While the promotional budget appears rather small, Malaysia remains ambitious.
Tourism Malaysia will use the budget in a variety of platforms, especially digital marketing and social media, to promote and increase Malaysia’s visibility as a premier destination.
“Although Tourism Malaysia has its own website, people still prefer to visit other tourism-related websites such as TripAdvisor for reviews on destinations. On social media, we are working with bloggers, floggers, tweeter, Instagrammers, key opinion leaders and influencers. However, traditional advertising will remain where relevant,” Musa says, citing the example of Japan, where newspapers are still widely read.
Meanwhile, the bulk of the RM140 million allocated for promotional activities will be used in Asean, as 70% of arrivals come from the region. “In 2020, we are looking at enhancing Asean traffic into Malaysia. These [countries] are low-hanging fruit as it takes less than three hours [for their nationals] to fly here. Once we have the (arrival) numbers, we will also have the receipts,” Musa says.
Accordingly, Tourism Malaysia is in talks with Malaysia-based airlines and their Asean counterparts. It is also working with Malaysia Airports Holdings Bhd on the Joint International Tourism Development Programme to cooperate in the area of international tourism promotion. “We are also looking at promoting Asean as a region and to complement one another ... We are in talks with SIA (Singapore Airlines) to ferry traffic into Malaysia not only from Asean but also from beyond Asean.”
Another major market for Malaysia is the Middle East. Tourists from Saudi Arabia continue to be the highest per capita spenders and they also stay the most number of nights. In the first nine months of 2019, each Saudi Arabian tourist spent RM11,394.40, up 2% from the previous corresponding period. Their average stay increased by 0.4 night to 10.7 nights.
Improving accessibility
One of the biggest challenges faced by Malaysia is the lack of accessibility into the country. With Malaysia Airlines cutting many routes over the years, tapping certain markets has been tough for Tourism Malaysia. To lure big spenders and long-stay tourists, Malaysia needs direct flights from long-haul markets in Europe, the US, the Middle East and Oceania.
For example, Malaysia’s share of Europe flights is only 7.7% or 42,484 seats per month, compared with Singapore, which has 46% or 255,020 seats, and Thailand, which has 46.4% or 256,176 seats. “We are flying to the UK, but we are also collaborating with Singapore Airlines [to ferry tourists] from other parts of Europe, such as the Scandinavian countries,” Musa says.
While several new airlines have started to fly to Malaysia, there has also been an increase in charter flights. In the middle of last year, India’s IndiGo and the United Arab Emirates’ Air Arabia commenced flights into KLIA. On Dec 18 last year, Shenzhen Airlines began to ply the Shenzhen-Penang route.
IndiGo, Musa says, commands over 70% of the Indian market and when it flies to Malaysia, its load factor is a healthy 85%.
On Jan 23, Starlux Airlines will start its Taipei-Penang route while on Feb 2, Turkmenistan Airlines will debut its Ashgabat-Kuala Lumpur flight. On March 31, Juneyao Airlines will ply the Shanghai-Penang route. Gulf Air is also expected to resume services to Malaysia in July, after an eight-year hiatus. It will ply the Bahrain-Kuala Lumpur route.
Several charter flights are expected to make their debut during VMY2020. “We are in discussions to bring in charter flights from six cities in China and four cities in South Korea in 2020. We want to capture the China market in January during Chinese New Year,” Musa says, adding that the Chinese cities include Chengdu, Chong Qing, Wuhan, Nanning and Xian and the South Korean cities include Jeju, Muan and Busan. Deugu Air and Busan Air are expected to bring in South Korean tourists.
The introduction of additional points of entry through the Visa on Arrival (VOA) facility will also help boost tourist numbers. “Previously, there were six points of entry [that had VOA]. In July 2019, we added six entry points.
“Did you know there are 90,000 Chinese expatriates in the oil and gas industry in Brunei but they could not cross into Malaysia?” Musa asks. Previously, they had to fly in but now, they can enter Malaysia by land and sea, thanks to the VOA facilities at Miri Airport, Labuan ferry terminal and Sungai Tujoh immigration complex.
VOA is also available now at Sultan Abdul Aziz Shah Airport in Selangor and Langkawi Airport and Bukit Kayu Hitam Immigration, Customs, Quarantine and Security (ICQS) Complex in Kedah.
How about 2019’s goals?
In September 2018, tourist arrivals and receipts targets for 2018, 2019 and 2020 were revised downwards to more realistic figures. 2019’s goal was 28.1 million tourists and RM92.2 billion in receipts. Yet, we are likely to fall short of the target — that makes for the ninth consecutive year — after the first nine months of the year saw only 20.109 million tourists and RM66.144 billion in receipts.
While Musa agrees that we are likely to miss the target, he is not overly concerned as he expects some growth from 2018, which saw 25.8 million tourist arrivals and RM84.1 billion in receipts. Moreover, there was a likely pick-up in tourist arrivals in November and December.
“Based on internal calculations, we are looking at about 27 million tourist arrivals with RM90 billion expenditure … Although we missed the targets (over the past few years), we are reaching 95% of our target,” he explains.
In the first nine months of 2019, arrivals improved by 3.7% over the previous corresponding period but those from certain markets declined. An example is Iran, which declined 40%. “We didn’t expect the Iranian market to slow down. The load factor was high but we had the impact of the sanctions imposed by the US in November 2018,” Musa says, adding that the volatility of the US dollar against the rial and cancellation of Mahan Air flights from Tehran were contributory factors. In 2018, there were 67,094 tourists from Iran. Iranians used to comprise the most number of applicants for Malaysia My Second Home programme.
Arrivals in September declined 4.8%: the important markets of Singapore, Thailand and Brunei fell 16.3%, 8.3% and 21.2% respectively. Musa attributes the decline to the haze situation.
As for the impact of Singapore and Thailand’s stronger currencies, Azrul says, “In theory, a weak ringgit could be a potent boost for Malaysia’s tourism industry among both foreign [highly favourable forex conversions render holidaying in Malaysia an absolute bargain] and domestic [more prohibitive forex conversions that render domestic tourism more cost-effective and much easier on the pocket] holidaymakers.” Still, there have been instances where the weak ringgit surprisingly failed to translate into higher tourist arrivals and/or tourism receipts.
Musa says Tourism Malaysia is monitoring the growing tensions in the Middle East and the spread of the mysterious SARS-like virus from China. “Oil prices may shoot up and increase the cost of travel. But it could also work in our favour as those who shun the areas may opt to visit our region.”
Azrul opines that although the events are major risk factors, it is too early to assess their potential impact on tourism.
Nevertheless, he believes the addition of new airlines, more charter flights and new points of entry are among the “rerating catalysts” that warrant a more optimistic outlook for the tourism industry, possibly paving the way to achieving the targets set for VMY2020.
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