Malaysia is one of the most-visited countries in South East Asia, but its inbound arrivals have been largely stagnant for a decade. Despite recording strong growth from China in the pre-pandemic years, other key markets were slowing.
Over the past year, the nation’s robust domestic travel sector has attempted to step up, but stop-start lockdown restrictions have hampered its overall impact. Borders have remained shut since mid-March 2020.
Moreover, the three airlines Malaysia Airlines, AirAsia and Malindo, are confronting financial troubles and the KL-Singapore high-speed railway has been cancelled.
To escape the rut, Malaysia has published a broad-ranging 10-year National Tourism Plan that aims to breathe new life into inbound travel once the borders reopen.
This week, Gary and Hannah discuss the myriad challenges facing travel and tourism across Malaysia, and the solutions and strategies being proposed to stimulate the sector right up until 2030.
Hello, it’s Wednesday 27th of January 2021. I’m Hannah Pearson from Pear Anderson. On this week’s show, we’re talking all things travel and tourism in Malaysia.
Yep, we’re ready to dive into Malaysia’s newly published tourism strategy for the next decade. So let’s get started. This is the Southeast Asia Travel Show.
Hello, wherever you are in the world and thanks for listening in. So although we’re currently under a movement control order (MCO) here in Malaysia again, with no inbound outbound or domestic travel permitted, we’re still looking ahead. Undoubtedly, Malaysia faces some huge challenges ahead to revive its tourism sector.
It really does, and at the end of 2020 the Ministry of Tourism, Arts and Culture published a national tourism strategy for the next decade, right through to 2030.
Now Hannah and I have poured through its 44 pages to analyse what we might expect from Malaysia in the coming years. But first, as we always do, Hannah, let’s take a look back. Let’s have a look at some of the statistics as they were before the pandemic struck.
Yeah, let’s do that. So we were last having a look at the stats, I think, back on our last Malaysia episode which was the 26th of June last year. So a good seven months ago and now, so I’m sure you’ve all forgotten what we said.
If we look at 2010 arrivals to 2019 arrivals I mean, in 2010 in total there about 24.6 million arrivals. 2019 26.1 million, so it’s not a big increase, and I think some years it was bigger than that, some years lower than that.
But the main message is that Malaysia is not a market which has been rapidly increasing, I think since 2010, and when you look at the top inbound markets, roughly they haven’t changed. But what has changed is the order. So in 2010 Singapore was #1, followed by Indonesia, #2, Thailand #3 and China #4. By 2019 that had changed to Singapore still #1. Indonesia #2, but China had actually moved up to #3 and Thailand #4.
The other interesting thing here is actually the percentage share has really been changing. So Singapore has actually dropped since 2010. So 2010, there were about 13 million Singaporeans who visited Malaysia. By the time we get to 2019, there is only about 10.1 million, so it’s almost dropped by three million visitors, which is pretty huge.
And if you are looking at China, it’s increased its share. So in 2010 there about 1.1 million Chinese travellers. By 2019, there were 11.9 million, so that’s really increased. And even if you look at 2020 (Malaysia hasn’t released its full year results yet, but it’s going up to September). The top four are still the same countries: Singapore then Indonesia, then China, then Thailand. So for Malaysia it really seems like the neighboring countries are the key. So Singapore’s got a border. Indonesia’s got the border Thailand’s got the border. And Brunei comes in normally, around #5, and is pretty stable. So again that border, even the Philippines falls into the top 10. So when Malaysia are looking at reopening, actually reopening to their neighbors would give them the real bulk of their inbound arrivals, without having to necessarily open up to long haul market.
Yeah. Sngapore is curious, isn’t it? Because as we know, Malaysia does record cross border movements over the Causeway, which Singapore doesn’t in the other direct.
And so the numbers are very, very high, always, each year for Singapore visitors into Malaysia, because you know, a lot of people come several times a year. I’m guessing, I don’t know Hannah, but that may be the difference between 2010 and 2019: people are making a less number of trips each year, but that’s the only thing I can think of, because, you know, Malaysia is a very, very important destination for Singaporeans. They have family here and homes here, and travel here as well. Obviously the cost differential really works in their favor because the currency exchange means that Malaysia is a very cheap destination for Singaporeans travel to.
I mean, I would say that probably of all those things you just quoted there, the Chinese figure is probably the most important because that has grown that has grown quite significantly over the period. But if you look at MATTA’s figures for this decade as well, travel and tourism accounted for 14.1% directly and indirectly to Malaysia’s GDP in 2015. By 2019 that was 15.9%, so that’s a 1.8% increase. It’s not huge, but the actual monetary figures have increased during that period. It’s been a difficult time for Malaysian tourism. We know that there’s been a lot of issues over the last five or six years. We had those two aircraft tragedies as well, which came in the middle of the decade.
So it’s been a difficult period, but we’re going to talk in the next few moments about this strategy now to try and completely renovate the whole idea of what tourism is into the country, so now let’s look forward.
Yeah, exactly so. Should we talk about where we are in terms of lockdown and things right now?
Well, lock down is where we are, isn’t it? Malaysia initially had a surge of cases right at the start of 2019, I think back in February last year. In March, we had a seven week very strictly managed lockdown, managed to bring the curve right down, by June last year. The daily numbers were really manageable, weren’t they? We managed to have the country re open most things. Domestic tourism again came back into the fold. And then we’ve had the late year surge from September onwards. We still had domestic tourism over Christmas and New Year, which was very strong. There were lots of flights, lots of hotel bookings, lots of self drive trips across the Peninsula during that time. But by the beginning of January the numbers were getting a little bit out of control. The health care system was certainly struggling, and so we went back into lockdown.
So this is Malaysia’s movement control order MCO 2.0. They’re calling it that in a catchy way, but the lockdown is not quite as strict as the March one last year. A few more kinds of shops are open, at least. There seems to be fewer police roadblocks then there were the first time. The current [lockdown] is meant to last until the 4th of February and the government even extended it originally from mid-January, when it was first imposed. It was just on, I think, 6 states and a couple of the Federal Territories. They then expanded that to the whole country except Sarawak, and they’re saying 4th of February as the finish date. But, as we’re we sat here, 4th of February is what, next week? Cases are still up, maybe 3500 a day. I don’t see them releasing this MCO anytime soon and they’ve even been talking about making it even stricter, haven’t they?
Yeah, there have been articles in both the local media and the Singaporean media that the health ministry in particular wants to completely lock down the economy. They did not quite say for how long, but the upshot of where we are right now is that for travel and tourism, the borders have been locked since 18th of March last year. So that’s ten months we haven’t had any inbound or outbound travel. For that period of time, as I mentioned a minute ago, we have had these peaks and troughs of domestic travel. But currently there is there is no domestic travel permitted and we don’t quite know when that will reboot again.
So for the industry itself, it’s been an incredibly difficult time and it’s very, very difficult to plan when you don’t know when domestic travel is going to recommence, so that’s really hitting the airlines, which we will come to in a minute.
One of the country’s probably most famous hotels up in Penang, the Hotel Equatorial, which I think is the biggest hotel in Penang, announced this week that it will actually close. It’s a business and MICE hotel, but it’s a very famous and quite a symbolic hotel. And to see that closing is quite a psychological blow for the industry, I think.
Yeah, I mean and in terms of financial assistance, it is really not what the industry has been asking the government to give it. So last week, the government released a new economic stimulus package, PERMAI. And there was very, very little in there for the tourism industry. There were some handouts for some tourism guides. There was a 10% electricity bill cut for tourism businesses. And that was about it. So needless to say, MATTA, who are the Malaysian Association of Tour and Travel Agents, have been calling for more help. The Malaysian Association of Hotels too. Pretty much anyone you can think of.
Tourism associations have been urging the government to change this but it’s quite interesting, because the government had released a tourism fund, 1 billion Ringgit, for soft loans, but it’s not had any take up really. As of the latest stats that were released was from middle of December, only 49.9 million Ringgit out of that, 1 billion Ringgit has actually been claimed by just 245 SMEs. And it’s for the same reason you mentioned, Gary - tourism businesses just don’t want to take out loans when they don’t know what the future is going to be, when there’s no road map in front of them. How can they make a decision and take out a loan when they don’t know how long they could be hanging on for? 6 months, 12 months, 18 months until borders reopen?
Yeah, and I think we’ve also seen in in the past few months as well. A lot of have gone into hibernation, haven’t they? Some of the small tour agents travel agents are basically just shut up shop for the foreseeable future because there simply is no business for them to tout. But they still have their costs, you know, they still have their overheads this year at the moment. The year is looking to be just as difficult and probably more structurally difficult than last year was.
Yeah, I mean we’re at this point now, where I think a lot of companies, we’ve said this before, are in hibernation. They were kind of waiting until the year end to see what’s happening. And then of course this hit them in Malaysia, so it is not at all a positive start. And if you’re a tourism business right now, you’ve got to be thinking - do I even bother? Should I just shut down?
Yeah, and if you look at the bigger brands, particularly airlines. It’s been a very, very difficult situation, so Malaysia Airlines, the national carrier as we know, is attempting a turn around, but it’s going very, very quiet. We don’t know too much, too many details. There were rumors, what, last autumn, that it may actually close down and reconfigure itself under its low-cost carrier, Firefly. So basically, start up a new business, but probably rename that business to become the national carrier again. So there are three airline groups here, Malindo Airlines, which is a joint venture with Indonesia’s Lion Air that’s gone very quiet, that’s had to shed quite a lot of staff. And then, of course, the highest profile airline is AirAsia.
Tony Fernandes has been doing the media rounds this week. It’s the virtual Davos forum this week, so he’s been tapping up US media, in particular. And he’s been talking about the fact that domestic really is only where it’s at for his airline right now. He’s hoping that by the end of the year, they’ll be able to fly most of their international routes. But you get kind of the feeling that he’s saying that, but without any real expectation I think. But for the future of Southeast Asia, getting domestic back is absolutely crucial.
Yeah, I mean in just before this, this second lockdown. They were doing pretty well. They were expanding new routes and they had launched routes from Kota Kinabalu to Terengganu. They were trying to find innovative ways I think of tapping different domestic travel markets, in quite an interesting way. But like you say, right now I mean, Tony Fernandes, I think he said early December, they’re hoping to be back in profit by the end of this year, but it just seems pretty ambitious at the minute.
Yeah, and he also reiterated this week that they are trying to raise more funds. I think he said 2.5 billion ringgit is what they need. I mean, like we said this before - let’s hope they get it because it’s so crucial to the whole infrastructure. Not just the airline and the travel infrastructure but the whole business infrastructure in Malaysia. It really ,really relies on the low-cost carriers and Air Asia is a flag carrier in that sense.
It is, I mean, if you look at AirAsia X, that’s their long haul. It’s in a critical condition really, it’s undergoing debt restructuring. It’s faced quite a bit of opposition to this restructuring too, and that’s a key one to try and exist as well, because that’s one of the key competitors really to Malaysia Airlines for long haul routes. And it’s one certainly that a lot of FITs outbound and inbound from Southeast Asia use to go to countries like Japan and to Korea and to Australia, which are all key inbound markets for Malaysia, as well as key outbound travel markets from here too.
Yeah, absolutely so from the skies, tool and travel and one of the intriguing stories over the past four.
I don’t know how many years this has been dragging on, but it finally came to a sort of denouement more recently, the KL - Singapore High Speed railway. So tell us more about that.
Yeah, so I checked back, and this was actually agreed upon in 2013, so this is a story that is 8 years old now, and this concept of having a high-speed rail link between KL and Singapore. It was confirmed and then it was cancelled, and then it was confirmed again. And basically, the Singaporean government and Malaysian government had agreed to try and negotiate out the terms until the end of last year and it all fell apart. I think Malaysia wanted a change to the routing, for the route to stop in Johor Baru, so just by the border to Singapore, as opposed to going all the way to Singapore.
It was dead in the water, I think the minute the government decided to do that.
You’re right, it’s been, for a railway, very stop -start. Although those high-speed railway projects tend to be like that in Southeast Asia, but this one in particular. I think the problem with this when we were talking about this is we’re seeing this integrated infrastructure as Southeast Asia to China in terms of high-speed railways.
So China is building railways into Myanmar, into Laos. Hopefully that’s going to connect up with Thailand, but the issue of Singapore and KL, is it’s almost like it was like an island, really, it’s not connected to Thailand. You’d have to build another railway from KL right up to the Malaysia-Thailand border, which is a fair way. But it’s also the cost, I mean the cost of building the Singapore-KL High Speed railway for the usage, which was always questionable, but it I think it just became a white elephant that probably neither side could really afford, but I think Malaysia in particular had to back out on cost terms.
Obviously there are pros and cons when it came to the tourism side, but one of the potential cons and you know something actually that MATTA have actually praised the government for canceling it, was that fear that by linking up Malaysia and Singapore, KLIA the airport here, and the ports here, might just become feeders really to Singapore, and that travellers would prefer to travel out from Singapore, so airlines may well have preferred operating out of Singapore instead of KL, so a shift away from Malaysia towards Singapore, which I guess is valid.
Yeah, I think that’s that was a realistic concern for sure, but it’s also a shame. I mean, it would have been great to take the train, wouldn’t it? It wouldn’t have been built for a few years. It would have taken time to actually construct, but it would have made the journey feasible for business travelers or even leisure travelers, I think.
Definitely. So the other railway link that they’ve got is the East Coast Railway and that seems to still be ongoing, right?
Yeah, it’s another one of those projects which has been renegotiated reformatted. It’s part of China’s Belt and Road infrastructure buildout program across Southeast Asia, but this is a solid idea. You know, this actually goes from Port Klang on the West coast of Malaysia, which is the largest port and it will wind its way right up the East Coast of Malaysia, right up almost to the Thai border and the idea with this is really to reboot some of those East Coast areas which haven’t really benefited from economic development over recent years. It was a really solid idea, but again, it’s just been subject to so many delays at the at the moment it looks like it’s going ahead in phases.
We seem to have agreed a routing for it, but I mean it really would be a great idea for domestic tourism I think, and also when international tourism comes back. Once this is actually built, it will open up gateways to the destinations that are a little bit more difficult to get to.
Definitely - a lot of these are a few hours, 3-5 hours’ drive away across on the East Coast, so anything that can speed that up will make the process a lot easier for tourists to reach there and spread that economic gain throughout the country too.
Yeah, so that’s where we are right now. That’s some of the challenges that Malaysia is facing. And as we mentioned at the beginning of the show, and we’re going to have a look at the tourism plan, which is a decade long tourism plan from 2023 to 2030. It’s got load of ideas. It’s 44-pages long. What do we make of it?
Yeah, I mean for me I think, the one thing that sticks out for me is why do such a long-term plan right now? I mean 10 years, especially from last year, and with this year, everything is completely in flux. There is no clear direction, no idea when things are going to open. So to start this kind of strategic plan when you’ve got no idea who your key inbound markets might be and what the best way to reach them is… I don’t know - that it seems a little bit strange timing.
I would agree with that I think, but the only mitigating explanation, is this was probably two years in the planning. They probably took two years to put this together and it was going to get put out in 2020 whatever. Obviously, 2020 just changed absolutely everything in the tourism landscape, but I suspect that this document was nearly finished there. It doesn’t really make much mention of COVID-19, does it? It’s a longer term facing document, almost as if as if the pandemic had never happened. And in some sense, I can kind of understand ,that you know, this is a way to kind of rethink tourism in the country.
And again we were discussing this beforehand, and one of the interesting things about this particular document is it does actually discuss the mistakes that the country is made in the past, perhaps it’s got a little bit complacent in some of the way that it’s promoted and developed tourism. So that’s quite a good starting point. I thought at times it does really a little bit like a a management consultancy document. There’s a lot of buzzwords, there’s a lot of buzzphrases in there, but there are also some pretty good ideas, I think.
Yeah, I think you’re right. One of the things I did like about this was it was kind of admitting its previous mistakes. So is that this is the time to break out of the comfort zone, which I guess everybody has been forced to do this year, last year, whether we wanted to or not, but some of these past mistakes were things like working with a silo mentality, a lack of innovation, a low service quality, poor destination management, and an over reliance on traditional marketing. So I really appreciate that acknowledgement of: this is where we can improve.
I agree with that and I think you know what we’ve seen over the last five years, particularly across Asia, particularly from China, but also from Southeast Asian countries is that travel expectations have been raised, you know, service quality expectations have definitely been raised, and if you don’t meet those service quality requirements anymore, people just don’t come back, you know.
And then there’s no real recourse to that once you’ve lost them, you’ve lost them completely, and I think it was really was worth looking back at what hasn’t been done, particularly well.
Malaysia is always really focused on its beautiful landscapes, its cultural heritage, which it does really, really well. But there are some elements, particularly in its marketing and its service standards, which did need working and did need upgrading from new era of tourism. And I think that was happening before the pandemic, but that’s going to be certainly super accelerated after.
Yeah, I mean some of the niche sectors which they were talking about focusing on including ecotourism, and they are really positive: “We want Malaysia to be one of the Premier ecotourism destinations in the world” and this is pretty ambitious target, and you’ve got a lot of rivals around you just in Southeast Asia. But it does have this amazing ecology. You’ve got the rainforests, you’ve got everything else, islands, beautiful coasts. It does have that potential.
Yeah, and particularly we discussed that over the last year, Hannah, those are certainly elements that people will be looking for in the future. You know, getting away from urban environments, getting away to islands, getting away into nature, retreating into the rainforests. There are huge opportunities there. Soft adventure as well, great opportunities, but having those products is fine and Malaysia’s always had those. It’s how do you create new products? How do you create new services and how do you market them in new ways and this document really does allude to that, that that’s what needs to be done, but I’m not sure it comes up with too many solutions, but you’ve got to start somewhere.
You do, absolutely, and one of their ideas is creating special tourism investment zones. So this idea of public-private investment and partnerships they were talking about, making it easier for tourism businesses to access loans or to be able to upgrade tours, or infrastructure, funding for that. So that might go some way towards helping create new projects for ecotourism and then promoting them.
Special tourism zones across Southeast Asia have been part of the landscape for the last 20 years. In some countries they work better, and they do tend to work in industrial sectors, probably more than tourism. Indonesia has tried this over the last three or four years when it looked at its 10 new Balis. Indonesia has just such a vast expanse, it has so many islands that it’s probabaly easier to do.
The problem, I think with special tourism investment zones, in a country, the size of what, peninsular Malaysia ( East Malaysia is larger) is you tend to ghetto-ise eyes tourism a little bit. So you basically keep people in one area and you just have concentrated investment there, which means you don’t have much of a joined up national tourism plan, it just gets focused on certain areas. That said, many countries have done this.
Malaysia wouldn’t be the first one to try that, but I just think going forward when you want people to move into secondary and tertiary areas, get more involved in community-based travel and tourism projects, you know really bring tourism back to communities and really see how people can interact with landscapes and localities. If you have these special tourism investment zones, they’re just gonna be resorts.
We’re likely thinking of more Desaru Coast style investments, or this new one that they’re talking about building in Langkawi, which is this 1,000 acres, creating a man-made island, potentially disturbing the ecology there. Which kind of does go kind of contrary to this strategy of positing Malaysia as an ecotourism destination.
Langkawi a is a strange case, really, because it does have immense potential there. A lot of islands, which most people fly into, and spend your time on the main Langkawi Island, which is absolutely beautiful and incredible. Historic geological formations and rainforests as well as the beaches. But it has, I think some 99 islands as well, and it always has had this sense that more could be done there. But the problem is, if you just go in and you just build mega resorts, you are right, you’re going to take away a lot of its value.
Finding a way to actually develop Langkawi in a way that is sustainable and also can really bring value to local communities is going to be pretty, pretty difficult. But if the starting point is a megaresort, there’s no way back from that.
One of the other areas that they’re talking about focusing in terms of niches is Muslim friendly travel, of course, Gary. I think you know that I specialized in Muslim friendly travel, so I was excited to see that there. Malaysia always seems to come out top, actually, when you have these surveys about which country is most Muslim friendly for tourism in the world – it always comes out to be Malaysia. But I think there’s still more that the country can do to really promote themselves.
Not just necessarily to these kind of traditional Muslim markets like the Middle East, but thinking about how to appeal to 2nd generation Muslims in Western countries as well, countries like Germany or the UK or the USA and saying hey you can experience a Western lifestyle, but your McDonald’s is halal and your life is going to be very easy here when you’re on holiday, so I think there’s a whole lot more potential that could happen.
Yeah, I would agree with that. I think one of the interesting things is when we look at different niche markets around what I mean, you probably wouldn’t say that Muslims are niche ‘cause it’s so big, same as the Chinese market. But when you’re looking at specific market cohorts, one of the interesting things I think when this comes back is that most people won’t have been on an international flight for at least 12 months, possibly 18 months, maybe even two years. And consumer trends have changed incredibly during that period, and so will expectations of travel. So what are the expectations of Chinese travelers or Muslim travelers or Indian travelers or Middle Eastern travellers? However, you defined that two years ago could well be very, very different in this new era. So I think there’s going to have to be a huge amount of agility and flexibility in actually understanding what still remains the same in terms of priorities and behaviors and what has changed.
Absolutely, and then communicating that to tourism stakeholders. And I think that’s where Tourism Malaysia needs to take the lead, in finding out what’s going on the ground and then preparing tourism stakeholders back in Malaysia for those trends ahead of time.
Yeah, absolutely. So, just before we finish up on these niche sectors, there is one that I wanted to pick up on which is urban tourism, which is quite an interesting point. So it does recognize that Kuala Lumpur is the main gateway, it’s the biggest city by far. And a lot of people spend time in Kuala Lumpur wherever it is that they’re traveling around the country. But then it also adds the secondary cities such as Johor Bahru, Georgetown, Kota Kinabalu, Kuching, that they should be reframed in terms of their own appeal for urban tourists.
I think that’s quite interesting because they’re different size cities, they have very, very different and diverse attractions. They’re not in any way similar to each other, so you’ve got to find a way to promote those. I would have put Ipoh in that list as well, I don’t understand why Ipoh wasn’t there.
I was just about to say that yes, where was Ipoh? I think that would be super interesting because Malaysia isn’t just all nature, there are some really cool cities, there’s some really cool things happening in these cities, in terms of the art scene and everything else, cultural heritage. So absolutely they need to find a way to bring that out.
And I think just quickly just before we finish is one of the interesting elements that overarches this was probably an umbrella idea for the whole strategy is to establish a National Tourism Council. I think that’s a really great idea.
If it was effective, if you can bring tourism players of all kinds into a National Tourism Council where they actually have a voice, they actually have input, and they can actually participate in how this country goes forward in tourism, as in many countries, it is quite state directed. We’ve seen, over the last few months, just how creative some of the tourism business in Malaysia have been over Christmas and New Year. When I was up in Langkawi, I saw a level of creativity in really trying to create new services for domestic travel, which I hadn’t seen before. So there is this move towards making tourism much more niche, much more dynamic, much more fluid and much more bespoke in how you look at different market segments. But that has to come across from the central planning as well.
Yeah, agreed, and I think we discussed this again off the podcast, but the one element that we thought might be missing from this strategy is domestic tourism. Obviously, Tourism Malaysia do a lot of focus on inbound, but I think given the current situation, you’ve gotta be realistic and domestic needs to form a good part of that strategy, at least for the short term.
Yeah, absolutely. Domestic travel should certainly have been in there and you really hope that they will start strategizing for the longer term for domestic travel, not just as this kind of interim period until inbound travel comes back. The other one that is one of my pet niches is self-drive travel. It doesn’t make any reference to self-drive travel, which I think is a mistake ‘cause I think going forward a lot of inbound markets will want to drive. They want to create their own itineraries, have their own freedom to go and see the places that they want to, and I think it was a mistake to leave that one.
Yeah, that’s a great on that one self drive.
So that brings us to the end of this week’s Special Malaysia Edition of this show. We hope you enjoyed the podcast, and don’t forget to send us your thoughts and comments on what we discussed or what we missed out.