This article first appeared in The Edge Malaysia Weekly on March 5, 2018 - March 11, 2018

MALAYSIA has yet again missed its tourist arrival and receipt targets, but the sector continues to be the third highest contributor in terms of foreign exchange receipts after manufacturing and commodities.

Last year, Malaysia welcomed 25.95 million tourists, a 3% decline year on year. The tourists spent a total of RM82.2 billion in the country, up a marginal 0.1% compared with 2016. The arrival figure fell short of its target for the fifth consecutive year (see table).

This year’s target is 33.1 million tourists and RM134 billion in receipts before peaking in 2020. Will the country be able to achieve the goals after missing the targets from 2013 to 2017?

Tourism Malaysia director-general Datuk Seri Mirza Mohammad Taiyab believes the country is on track. “The swing will be upwards and we are confident about it,” Mirza tells The Edge in an interview.

“In this region, everybody has had its upswing. So, it is now our turn to get our share.”

Thailand, for example, welcomed 35.3 million tourists last year, up from 32.6 million in 2016. Singapore’s tourist arrivals hit a record high of 17.4 million, a 6.2% increase y-o-y. As for Indonesia, arrivals grew 21.84% to 12.68 million in the first 11 months of last year.

Mirza’s confidence also stems from positive forward bookings and tourism growth regionally. “Towards the end of 2017, there was a spike in visa applications from India and China. Our earliest indicator is visa applications, followed by [forward] flight bookings. Both are showing an upward trend,” he says.

Moreover, Malaysia has made tremendous progress in terms of visas for tourists from China and India, he adds. “Today, it is very convenient and cost-efficient, and it can be done online. This is a major leap in terms of facilitating travel.”

Tourism Malaysia, as the marketing arm of the Ministry of Tourism and Culture, has been focusing on easing the flow of visitors into the country. This, too, has started to show positive results.

The reversal from the downward trend is welcome, given the tough five years the industry had faced. In 2013, the plan for Malaysia Airlines and AirAsia to work together saw an impact in term of seats offered and seats supplied. The following year, there was the MH370 incident. “The incidents (flight disappearance and crashes) involving MH370, MH17 and [an] AirAsia [plane] in 2014 saw their effects reflected in 2015. The worst part was, there was no closure for [the passengers’ next of kin of] MH370 … the stories kept repeating,” Mirza says.

“We cut back on advertisements from April 2014. We could not have an advertisement with people dancing when there were still people crying at the airport.

“When we were ready to come back and repair [what we had lost], we were hit by Malaysia Airlines trimming its services, particularly the long-haul sector.”

Despite the brighter outlook going forward, he acknowledges that this year will not be without challenges. He says neighbouring countries have a lot of resources and appear to be dominating the media scene. “[Advertisements on] Guam, Vietnam, the Philippines and Indonesia are very prominent in Japan. We are losing out to these substitute countries.

“Many that were once our tourist-generating countries have turned around and become receiving countries. We are losing the airline capacity to our own people going there [and returning] ... especially, in the case of Japan. The number of Malaysians visiting Japan has escalated to the point that it is equal to the number of Japanese coming here.”

Yet, another challenge is the need to enhance accessibility through point-to-point connectivity to Malaysia. As at October 2017, Malaysia had 645,285 seats per week, while Singapore had 813,118 and Thailand, 945,306, from various airlines. “Convincing international airlines to establish routes to Malaysia is not an easy task, but we will have to persuade them ... on the feasibility and profitability of such an investment,” Mirza says.

“We hope Malaysia Airlines will revive many of the points that were popular before it carried out its business rationalisation. It should expand again.”

Coming back to last year’s performance, Mirza reckons that it could have been better, especially in terms of tourists from India, China and Indonesia. “We really have to go back and do more work there, and beyond that, in Australia. Thailand is a low-hanging fruit. This year, we are going to make sure that these places have enough information about everything that has happened in the country so they can respond positively. They have held back for a few years ... we want to trigger their interest to come here more.”

Last year, 67% of Malaysia’s tourist receipts came from short-haul flights (flights below two hours), 19.5% from medium-haul (two to six hours) and 12.8% from long-haul (six hours).

The country saw arrivals from 22 of the 45 top tourist arrival countries decline in 2017 from 2016. The biggest drop in terms of the number of tourists was from Singapore — Malaysia’s top tourist nation — down 6.3% to 12.44 million. The number of tourist arrivals from Indonesia declined 8.3% to 2.79 million.

“Instead of spending two to three hours on the Causeway, they can fly and be on a beach somewhere,” Mirza says of the arrivals from Singapore, adding that the strong currency also provided Singaporeans with a wider choice of holiday destinations.

On the decline from Indonesia, he says, “Indonesia’s economy is very buoyant. They are doing their inbound very well and their campaign is also domestic. They (Indonesians) are travelling more domestically and a lot less overseas.”

Nevertheless, Singapore and Indonesia remain the first and third highest contributor to revenue with the former bringing in RM36.9 billion in receipts and Indonesia, RM8.5 billion. China, while ranked only third in terms of tourist arrivals to the country, added RM9 billion in receipts.

Meanwhile, the per capita spend of the tourists — defined as those who stay at least one night — last year rose 3.2% y-o-y to RM3,166.50. However, the average night per tourist declined 0.2% to 5.7%.

In general, Middle Eastern tourists tend to be the biggest spenders, with Saudi Arabians at the top. However, arrivals from some of these countries have been declining — Saudi Arabia was down 18.8%; Iraq, 17.7%; and the United Arab Emirates, 39.5%. It is worth noting that Emirates flies the Dubai-Kuala Lumpur route three times a day during winter and four times a day during summer, while Etihad serves the Abu Dhabi-Kuala Lumpur route twice a day. This means many of the passengers are only on transit here.

“We realise that we need to refocus on the UAE market with a strong and fresh branding campaign,” Mirza says.

On a positive note, FowardKeys says Middle East arrivals to Malaysia in January rose 13.9%, with those from Saudi Arabia up 34.2% and UAE, 5%. ForwardKeys is a data analysis firm that provides intelligence by predicting future travel patterns.

This year, Tourism Malaysia has been allocated RM300 million to RM190 million for operational expenses and RM110 million for advertising activities. However, the allocation from the Tourist Tax is pending at the Ministry of Finance level. The collection will be used to boost tourism. The tax, which came into effect on Sept 1 last year, requires guests to pay RM10 per room per night and this is applicable to all hotel categories.

On the 2020 target of achieving RM168 billion in receipts, which is double that of last year, Mirza says, “It is a given target and we are supposed to work towards it. The assurance that we have is we have the capacity.” According to him, the average hotel occupancy is hovering at around 60% to 62%. Tourism Malaysia will also be receiving an additional allocation for Visit Malaysia Year 2020 but the amount has yet to be finalised.

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