Surviving The Impact of Covid-19: Tourism industry waits to cruise out of the doldrums

This article first appeared in The Edge Malaysia Weekly, on December 28, 2020 - January 10, 2021.
Surviving The Impact of Covid-19: Tourism industry waits to cruise out of the doldrums
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THE number of tourist arrivals and foreign receipts was expected to reach all-time highs this year as part of a strategy put in place a decade ago under the Economic Transformation Programme to make Malaysia a leading tourist destination. It was also designated a Visit Malaysia Year, which would give the numbers a further lift.

Alas, the Covid-19 pandemic brought the entire tourism industry to a grinding halt as the government, along with its counterparts around the world, took measures to contain the spread by closing borders, causing massive job and revenue losses. Many hotels shuttered, while some travel agencies and businesses folded as their funds dried up.

In the first nine months of the year, tourist arrivals to Malaysia contracted by a whopping 78.6% to 4.29 million from 20.1 million in the previous corresponding period. Most of the tourists, or 4.23 million, arrived before the borders were shut on March 18. As a result, tourism receipts — the country’s third-largest revenue contributor — plunged 80.9% to RM12.6 billion from RM66.1 billion in the previous corresponding period.

The number of excursionists or day trippers fell 74.9% to 1.73 million in the January-September period (see Table 1).

Accommodation — the second-highest contribution from foreign tourists after shopping — also suffered. The hotel industry alone is expected to lose as much as RM6.54 billion in revenue this year. Overall average occupancy rate (AOR) this year is estimated to be 27.51%, while the average daily rate (ADR) is projected to be RM196.69 (see Table 2).

Since March, 109 hotels, resorts, motels, home stays and chalets have shut for good. And as at May, job losses were at 12,000, or 6% of the industry’s workforce.

The amusement and theme park industry has not been spared. According to the Malaysian Association of Amusement Theme Parks & Family Attractions (Maatfa), the estimated losses in revenue between March and December add up to RM2.8 billion. Job losses are expected to total 2,543, with 420 workers being let go in December alone. Eighteen Maatfa members have ceased operations permanently since March, with 10 of them in the fourth quarter.

The industry and related economic activities have suffered losses of over RM100 billion in total. The sector is now turning to the domestic market to help it recover. The National Tourism Policy was launched on Dec 23 to help the industry and make Malaysia a preferred tourism destination. Here is what some industry representatives are saying about 2020 and their expectations for 2021 and beyond.

 

Malaysian Association of Hotels

CEO, Yap Lip Seng

Hoteliers had not expected a complete halt in tourism activities even as travel restrictions were imposed in other countries from as early as end-January.

Apart from loss of revenue, Yap estimates that by end-2020, between 10% and 20% of the industry’s workforce would have been retrenched, with Kedah, Perak, Negeri Sembilan, Melaka, Sabah, Kuala Lumpur and Selangor being hit the hardest. Most of the remaining employees are on unpaid leave or have had their pay cut.

But there are signs of recovery in the industry. “We are seeing pent-up demand for the year-end, which may extend into the first quarter of 2021,” Yap says, referring to support from domestic tourists. Next year, the hotel industry anticipates a slow 1Q, a moderate 2Q and a transitional 3Q before the industry sees the return of international arrivals in 4Q.

The industry, he adds, needs to change the way room rates are managed, “and the opportunity to do so should present itself next year when we start to welcome international tourists”. Malaysia’s room rates are said to be the cheapest, and Yap feels that the industry might be able to change that next year and achieve an ADR that is higher than pre-Covid-19 levels, targeting international travellers.

He believes this will be possible because foreign tourists would not be able to compare past prices and the “pent-up demand is expected to be far greater than the urge to compare”.

“This is the opportunity for us to up our rates, to one that is at least comparable with that in neighbouring countries,” he adds. In 2019, ADR in Kuala Lumpur was US$79, while in Bangkok and Singapore, it was US$109 and US$197 respectively.

Post-Covid-19, Yap expects demand for longer stays to increase. But he warns that the industry could lose out as it “will likely be limited by capacity not only because of what it had lost in transition but also due to various SOPs (standard operating procedures) perpetually imposed on travellers”.

“During the pandemic, the industry lost manpower, some hotels closed rooms, some closed departments. Not forgetting, many travel companies closed. Thus, the industry may not be able to cater for an increased demand in future,” he cautions.

 

Malaysian Association of Amusement Theme Park and Family Attractions (Maatfa)

President, Tan Sri Richard Koh

The amusement theme park and family attractions industry was one of the last business segments to be allowed to reopen after the Movement Control Order (MCO) period.

And just as things were normalising, a second round of Conditional MCO (CMCO) was imposed in mid-October in all states except Perlis, Pahang and Kelantan, forcing the operators to shut once more. Some players remained closed for a total of 160 days this year.

Koh says the segment literally hit rock bottom after the second round of state-wide CMCO, causing 10 of its members to shutter permanently in the fourth quarter. Although the industry has been allowed to reopen since Dec 11 at 50% capacity, it does not mean it is out of the woods.

He suggests that, in future, the government should impose MCOs on targeted areas or clusters, allowing visitor numbers to improve and the industry to recover.

If it could turn back the clock, Maatfa says it would have been more involved at the onset of the pandemic. “This could have led to our having a louder voice on the government’s policies on the overall tourism strategy and incentives for the industry,” says Koh.

At the same time, the association would have had the opportunity to actively engage in dialogues with the government to abolish the obsolete Entertainment Tax Act 1953. Koh says the removal of the tax has become crucial to the survival of the industry following the pandemic.

In the meantime, the biggest challenge for the industry is implementing new marketing and sales strategies to increase revenue, manage cost, operate productively and multi-task. The industry is expected to take a “lean and mean management approach” with the aim of improving performance.

Post-pandemic, the industry will operate differently. Apart from the required SOPs and safety and hygiene measures, technology is expected to play a crucial role in theme parks — from ticket purchasing and queuing for rides to ordering meals. “Technology will be more seamlessly integrated into theme park operations. Fewer people will use cash, and ticketing and ride reservations will be digitised,” Koh explains.

Manual counting of people standing in queues will be replaced by automatic counters and reliance on cashiers for food services will be reduced as the use of mobile phones for ordering becomes the norm.

In the longer term, parks will design rides differently to avoid having packed waiting areas. “Parks will have to get creative on how to maintain throughput and guest experience,” says Koh.

 

Malaysia Association of Tour and Travel Agents (Matta)

President, Datuk Tan Kok Liang

The tourism industry remains “unpredictable and fragile” as the pandemic is taking an extremely long time to end, causing most of the association’s agencies to enter hibernation mode while awaiting a return to normal.

The MCO and its multiple variants — CMCO, Recovery MCO, Enhanced MCO and Targeted MCO — are keeping our borders shut and disrupting travel. “The tour and travel agent industry is facing immense cash flow problems with near to zero revenue since March,” Tan laments.

Apart from the 95 tourism agencies and tourism activities operators who have gone bust, others whose income has been affected include experienced independent professionals such as tour consultants and tour guides, he says.

If he could go back in time to January, Tan would have the entire spectrum of the tourism industry value chain pool their resources, talent and ideas to find ways to weather the adverse economic conditions.

“With the pandemic unresolved, coupled with the global recession, there will be weak demand, especially in the leisure travel segment,” he says. He expects things to get worse in 1Q2021 before the industry starts to stabilise.

Travel has become a lifestyle, so being confined at home can be frustrating for many, he says. Matta expects to see pent-up demand for travel in 2Q2021. However, Tan cautions that spending may be curtailed given people’s lower purchasing power and the poor economic conditions.

Matta also hopes that a vaccine will be widely available for travellers and most Malaysians by 1Q2021 and that health and safety protocols, including policies for quarantine measures, will be reviewed.

Tan believes prudent easing of protocols will encourage leisure travel. “At the moment, quarantine policies and PCR testing are major deterrents for leisure travellers,” he says.

The emphasis next year, Tan points out, should be on new business models and for tour and travel agents to diversify their offerings instead of relying on traditional sightseeing tours and mass tourism.

Matta would like to reset tourism and offer more experiential travel and implement changes to travel packages in accordance with travel patterns and business models without compromising on health and safety protocols. Tan acknowledges the need for new tourism strategies to create demand for travel.

The tourism industry can expect to take a fresh approach to destination marketing based on the new travel patterns, with emphasis on digitalisation and product and infrastructure development, he says. “This could be significant to all stakeholders as it can be an opportunity for reflection and reinvention — towards a better and more sustainable tourism future.”

 

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