Light at the end of the tunnel for Malaysian tourism

This article first appeared in The Edge Financial Daily, on November 21, 2018.
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KUALA LUMPUR: It is no secret Malaysiam tourism has had it tough over the past four years. The twin tragedies of MH370 and MH17 in 2014 saw tourists from China, an important tourist market for Malaysia, shying away from our shores.

While the country worked hard to restore Chinese tourist confidence, there has been no let-up in competition from neighbouring countries in the region.

Tourism councils are also under immense pressure today to become more efficient as high deficits at the federal government level have resulted in public funds getting squeezed even further.

Against this backdrop, however, various emerging signs suggest that the local tourism market may be seeing a glimpse of a light at the end of the tunnel.

According to Tourism, Arts and Culture ministry secretary-general Datuk Rashidi Hasbullah, Malaysia is on track to meet its target of 26.4 million tourist arrivals and RM84.9 billion tourism receipts for this year, albeit at a much lower rate than originally anticipated.

In September, the ministry revised the tourist arrival target for 2018 down to the current 26.4 million from an earlier forecast of 33.1 million. The country has missed its full-year tourist arrival target for five straight years since 2013.

“Yes, the [MH370 and MH17] tragedies did affect our tourist arrivals. Our arrivals from China in particular dropped a lot. But we continued to persist with our marketing efforts after it (criticism) subsided and I believe the Chinese traffic has since improved,” Rashidi told The Edge Financial Daily in an interview.

He noted that tourist arrivals from China grew 35% year-on-year for January to August this year. This was higher than the 14.9% growth recorded for 2013 before the tragedies happened.

Based on the latest available data for 2018, total arrivals amounted to 17.29 million for the first eight months, a 0.3% decline from 17.34 million recorded a year ago.

“I’m not too worried. I’m very sure we will meet the full-year target, especially as the numbers tend to peak in December in view of the holiday season. We will make it,” he said.

Asked what the optimism is premised on, Rashidi said he believes Malaysia is still a preferred destination internationally.


Malaysian tourism unaffected by 1MDB scandal

Rashidi believes that the 1Malaysia Development Bhd (1MDB) financial scandal, which has put Malaysia on international headlines, does not affect the country’s reputation as a tourist destination.

“Incidences such as that [1MDB scandal] do not affect tourism arrivals at all. When people want to travel, they don’t necessarily pay much attention to political aspects. On the contrary, business and medical tourism have actually increased,” he said.

“When I attend international business meetings, people tell me that they like Malaysia very much because we have a variety of product offerings. They like the climate and they say our food is great,” he said.

Encouraged by these, Rashidi said he hopes increased arrivals from countries such as China, India and the Middle East would eventually help to make up for declining arrivals from Singapore, which had previously made up more than half of total international tourist numbers. Singapore now accounts for about 40% of tourist arrivals.

“Singaporean tourist numbers have been declining mainly due to congestion at the Johor–Singapore Causeway, so they are choosing other destinations such as Batam and Bintan in Indonesia, or other neighbouring countries like Thailand.

“We are doing our level best to come up with a solution to this, but at the same time we must also focus on other markets where we can get a higher yield from a longer stay,” he said.

Singaporean tourists’ average length of stay in Malaysia is a night or two during the weekends or school holidays as opposed to six days for other international tourists.

Rashidi was of the view that the proposed third bridge between Singapore and Johor, should it happen, will help ease congestion. “We welcome this initiative as it would be easier for Malaysians and Singaporeans to travel.”

This would also help to promote the Asean region as a single destination, which is another way to help boost tourism arrivals, he added.

“This means tourists come to our region as a single destination but visit multiple countries in one go. For example, they would travel to Thailand, then Malaysia and/or Singapore. We will need to focus more on providing good travel packages for them,” he said.


Budget for tourism small compared with regional counterparts

In Budget 2019, the government announced that it will allocate RM100 million in matching grants to the private sector for running promotional and marketing campaigns overseas to increase the number of visitors to the country.

While the terms of the allocation given by the finance ministry are still being fine-tuned, Rashidi said the amount the federal government is giving out to promote Malaysian tourism next year is far less compared with what other countries in the region receive, leaving Malaysia with less promotions to entice tourists.

“Yes, it would affect our promotional activities but we have to make do with what we have. We have to be more creative. Hopefully, we will get support from the private sector,” he said, adding that the ministry will continue to focus its efforts on promoting ecotourism in the country.

As to whether additional charges such as the departure levy proposed by the government for all departing air travellers next year, or the passenger service charge hike which took place early this year, will impact tourist arrivals, Rashidi said people will travel either way.

“We welcome the departure tax. I do think it will encourage local tourism and make a difference. People will travel more within the country. You see Malaysia has a lot to offer that maybe [even the locals have not realised],” said Rashidi.

Starting from June 1, 2019, air passengers travelling to Asean countries will have to pay RM20 and RM40 to countries beyond Asean.

“RM40 is about US$10 and RM20 is just US$5. That’s little to foreigners and as such, they probably do not mind [paying]. By having this levy, perhaps the finance ministry will consider sharing the revenue with the tourism ministry to improve tourism infrastructure in the country.

“In fact, many countries that have introduced this [departure levy which] did not see an impact on their tourist numbers. You name it, Thailand, Indonesia, Japan, South Korea or Europe, they have also introduced many taxes but people continue to visit the countries,” he said.

On the weaker ringgit, Rashidi said it had given domestic tourism a good boost.

“It is good. Why? Because our hotel rates and product offerings become cheaper as we sell in ringgit. So, we can actually attract more tourists to come to Malaysia because the ringgit has depreciated. We can market Malaysia as a reasonable destination,” he said. Year to date, the ringgit has fallen by 4% to close at 4.1875 to the US dollar on Monday.

According to Finance Minister Lim Guan Eng in his Budget 2019 speech, the tourism industry is a key contributor to the country’s services sector, constituting 14.9% of gross domestic product or RM201.4 billion in 2017. The tourism, arts and culture ministry has set a target to achieve 30 million foreign tourists contributing RM100 billion by 2020.