This article first appeared in The Edge Malaysia Weekly, on Nov 23 – Nov 29, 2015.

With less than six weeks to go before the end of the year, tourism industry players doubt that Malaysia will hit its annual arrivals target of 29.4 million. 

Tourist arrivals for the first half of the year stood at just 43% of the full-year target and businesses in the sector have remained subdued. 

Recent reports do not paint a rosy picture of the second half. 

Kuala Lumpur Tourism Bureau general manager Norazah Yusof said recently that foreign tourist arrivals have slumped 20% year to date and described the situation as “worrying”. Kuala Lumpur is among the destinations in the country with the highest tourist count. The numbers exclude excursionists or day trippers, who are only considered tourists if they stay for one night.

Tourism Malaysia’s director general Datuk Mirza Mohammad Taiyab has the same view.

“No doubt, 2015 has been very challenging for the tourism industry thus far. We are still feeling the effects of the three aviation tragedies that happened last year and the continued threat to our general safety and security situation, which has led to the issuance of travel advisories.

“In addition to all the problems, there has been a general slowdown in terms of tourism movement in the region. Our immediate neighbour, Singapore, is also facing a similar situation,” he tells The Edge via email.

However, neither the Ministry of Tourism and Culture nor its marketing arm, Tourism Malaysia, have any plans to revise this year’s target downwards.

Despite fewer tourists, per capita spend in 1H2015 has increased by 5.7%. “This shows that the demand for the right [high yield] market segment has remained resilient and it keeps growing,” Mirza says, adding that each tourist spent RM2,688.30 or a total of RM33.81 billion in receipts. But this is far from the targeted RM89 billion in tourism receipts for the full year. 

While Minister of Tourism and Culture Datuk Seri Mohamed Nazri Abdul Aziz has repeatedly said that the weaker ringgit is a boon to Malaysia, hotels and tour and travel agents are not celebrating as the impact has yet to be seen. 

“In general, 2015 has been a very difficult year for many in the hotel industry. Year to date, the performance of many hotel operators have been below expectation. For whatever reason, October saw healthy occupancy, but business seems to be slow again in November and December (forward bookings). Overall, many hotels are down compared with last year and at best, at par,” says Mohammad Halim Merican, vice-president of The Malaysian Association of Hotels (MAH).

Asked if hotel operators are seeing a positive impact from the weaker ringgit, he stresses that “more than just a weaker currency is required to attract tourists”. “There is increasing competition in the market too,” says Halim, who is also vice-president of the Malaysian Association of Hotel Owners (MAHO).

Malaysian Association of Tour and Travel Agents (Matta) president Hamzah Rahmat describes inbound travel in 2015 as “volatile”. “Theoretically, a weaker ringgit is supposed to help but we are not seeing the numbers we had expected. It has not yet materialised.”

World Express Tours group president Tunku Iskandar Tunku Abdullah says his agency has not seen any improvement in inbound travel in 2H2015, which is “similar to 1H2015”.

His inbound business is predominantly from Australia and Europe. Year to date, he has seen 15% fewer travellers from Western Europe and 25% to 30% fewer people from Australia.

 “While the ringgit has weakened against the Australian dollar, Australians are feeling the pinch too [as the Aussie has declined against the greenback] and they are not travelling as much.” Similarly, the euro has declined against the US dollar and this has dampened travel sentiments, says Tunku Iskandar.

He raises an interesting point on foreign airlines that fly into Malaysia. They need traffic in and out of the country, but outbound travel has declined because of the weaker ringgit. At the same time, these airlines are selling tickets at the same price as they did before, in ringgit terms. When converted into the currency of the airlines’ home country, for example, the euro, they are earning less. This, he cautions, could lead to capacity or route cuts in Malaysia.

Tourism officials, meanwhile, are sticking with the 2015 target of 29.4 million arrivals but to achieve that, we would need to welcome at least 2.8 million tourists each month. That level has only been achieved once — in December 2013 — when Malaysia recorded 2.807 million tourists. 

Next year, the government has set a target of 30.5 million tourist arrivals and total tourism receipts of RM103 billion. How will this be achieved? 

Mirza says the focus will be on reviewing travel formalities to help boost demand and increase arrivals immediately. “The introduction of e-visa, announced in the recent Budget 2016 speech, will provide a boost for the South Asia and China markets and contribute to this growth,” he says. 

MAS, MAH, Matta, PLUS Malaysia and Express Rail Link, together with state tourism associations and authorities, will pool their resources and activities for greater synergy and economic impact, he adds. 

“We conducted a recovery lab recently with industry players to discuss plans for the short (six months), medium and long term. We received good feedback and support from the industry players. Some quick-win initiatives have been carried out in some major markets to boost arrivals and receipts,” says Mirza. 

Tourism Malaysia is also planning to give more emphasis to social media, online media and digital marketing as it feels that will be a cheaper communication option to reach a wider audience. 

The ministry has been allocated RM1.2 billion under Budget 2016. Mirza says, “More than the actual budget, the actual value in terms of foreign exchange and the rising cost of media is a challenge. It can be overcome by all parties coming together as a team to pool our resources and with the support of our overseas partners.”

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