TA Sector Research

Malaysian Economy - Exploring the Tourism Sector

Publish date: Tue, 25 Jun 2024, 10:45 AM

Malaysia Targets 27.3mn of Tourist Arrivals in 2024

  • Since we reopened our international borders back in April 2022, we have seen a promising recovery for the tourism industry, bringing tourist arrivals and receipts close to the figures before the pandemic. Last year, more than 20mn foreign tourists came to Malaysia, with more than RM71bn in tourism receipts. That surpassed the targeted 19.1mn tourist arrivals and doubled than 10.1mn arrivals recorded in 2022. Prior to the Covid-pandemic era, Malaysia recorded over 26mn tourist arrivals, generating more than RM85bn in tourism revenue, making it one of the top tourist destinations in Southeast Asia.
  • This year, the government have set a target of welcoming 27.3mn international tourist arrivals, with tourism receipts of RM102.7bn. For the first three months of this year, we have recorded 5.8mn of tourist arrivals, 32.5% higher than the first quarter of 2023.
  • The top five countries for tourist arrivals in Malaysia during the first quarter of 2024 were Singapore (2.02mn), Indonesia (0.85mn), China (0.758mn), Thailand (0.406mn), and Brunei (0.285mn). However, in terms of growth, China and India registered robust increases of 325.9% and 92.3% YoY, respectively. It was mainly driven by Malaysia's efforts to offer visa exemptions for Chinese and Indian nationals, allowing them to stay for up to 30 days without a visa from December 2023 to December 2024.
  • Nevertheless, the 5.8mn of arrivals in 1Q24 may not be as rosy as we thought. It is still down by 13.2% as compared to the first quarter of 2019 (pre-pandemic level). Furthermore, it is lower than the 6.82mn quarterly arrivals needed to achieve the full year target.
  • It is also 8.3% lower than the first quarter average that we used to receive. Pre-pandemic (2010 – 2019), Malaysia's average tourist arrivals were 6.34mn in the first quarter, 6.25mn in the second quarter, 6.56mn in the third quarter, and 6.63mn in the fourth quarter.
  • Even if we manage to meet the average targets for the remaining quarters, the total of 25.3mn tourists for this year will still fall short of this year’s target of 27.3mn.

Expect RM102.7bn of Tourism Receipts

  • We were guided by the Malaysia Tourism Promotion Board during our recent visit to their office in Putrajaya that we should focus more on the tourist receipts than arrivals. They emphasised the importance of prioritising the analysis and enhancement of tourist receipts over other metrics. This focus stems from the belief that tourist receipts, which represent the total expenditures made by visitors, are a critical indicator of the economic impact of tourism. By concentrating on this figure, we can better understand the financial contributions of tourism to the local economy, identify key areas for investment, and develop targeted strategies to increase revenue. The Board's advice underscores the need to align our efforts with broader economic goals, ensuring that tourism not only grows in volume but also in its capacity to generate significant financial benefits for Malaysia.
  • In summary, the revenue generated by the tourism industry in Malaysia comes from a variety of sources, including:
    • Shopping (33.9% share in 2023): Tourists spend money on souvenirs, clothing, electronics, and other items.
    • Accommodation (18.8% share): Tourists spend money on hotel rooms, resorts, and homestays.
    • Food and beverage (14.9% share): Tourists spend money on dining out, local street food, and beverages.
    • Transportation (12.6% share): Tourists spend money on airfare (local), car rentals, taxis, and other forms of transportation.
    • Others: Tourist spend on medical, organized tour, sport, and entertainment
  • To support this objective, Malaysia has introduced a variety of attractive packages designed to encourage tourists to extend their stay in the country. This initiative is part of a main strategic effort to address the significant reduction in the average length of stay (ALOS) since pre-pandemic levels. In 2023, the ALOS was 4.5 nights, an improvement from 2022's 3.8 nights but still far below the 7.4 nights recorded in 2019. The rationale is that by increasing the duration of visitors' stays, the potential for higher tourist receipts also rises. Some of these enticing packages include the Sarawak Coffee Bean Trails Experience, where tourists can visit coffee farms and enjoy the unique blend of local Borneo beans, including Liberica and Robusta varieties. Another popular offering is the Durian Tourism package, which allows visitors to indulge in the unique experience of sampling Malaysia's famous durians.
  • These packages are crafted to provide enriching and memorable experiences, thereby encouraging tourists to spend more time and money exploring Malaysia's diverse attractions. By focusing on these extended-stay packages, the Malaysia Tourism Promotion Board aims to boost the overall financial contribution of tourism to the local economy, ensuring that the sector not only grows in visitor numbers but also in its economic benefits.
  • 2024 forecast trajectory by Tourism Malaysia showed that Saudi Arabian tourists have the highest per capita expenditure at RM11,250, with only 90,000 tourists visiting during this period. This trend is consistent with previous years, as tourists from South Asia have typically dominated this segment. For instance, in 2019, countries such as the United Arab Emirates, Oman, Kuwait, and Iran recorded per capita spending above RM8,000. Additionally, tourists from the UK spent RM6,722 per capita during the first quarter. China, the US, and South Korea followed, with per capita expenditures of RM6,296, RM5,931, and RM5,894, respectively. On the other hand, Singapore, despite having the highest number of arrivals in Malaysia, registered the lowest per capita expenditure on the list at RM2,365 for the first quarter.
  • That being said, there is ample room for Malaysia to maximize benefits from selected countries to achieve optimal traffic and revenue. For instance, while 50.2% of Singaporeans chose Malaysia as their destination, the share of receipts (compared to the global average) is relatively low at 19.53%. Therefore, Tourism Malaysia must focus on efforts to extend the length of stay by tourists. This involves implementing market prioritisation and strategic marketing plans to secure a larger share of the tourism pie. According to Tourism Malaysia, their first priority markets are China, India, Vietnam, and Australia.
  • Tourism Malaysia projects an increase in hotel supply this year to 5,228 units with 340,300 available rooms, up from 5,204 hotels and 333,780 rooms in 2023. Both hotels and rooms are expected to continue increasing beyond this year, targeting 5,241 hotels (343,569 rooms) by 2026 and 5,246 hotels (348,789 rooms) by 2029. These projections are based on registered plans with the ministry.

Domestic Tourism Survey

  • Tourist data from Tourism Malaysia typically refers to the arrivals and expenditures of international visitors. The data primarily focus on the revenue generated from foreign tourists, rather than domestic spending by Malaysian residents traveling within the country.
  • To learn more about domestic visitors, we will explore the methodology used by the Department of Statistics Malaysia in the Domestic Tourism Survey (DTS). The DTS is conducted through face-to-face interviews with respondents. During the survey, trained interviewers visit households in selected dwellings to collect information on domestic tourism, including details about the social and demographic profiles of all household members.
  • Details showed that the performance of domestic tourism in Malaysia saw a significant rise in 2023, with notable increases in the number of domestic visitors, trips, and tourism expenditure after several years of challenges due to the COVID-19 crisis. In 2023, a total of 213.7mn domestic visitors were recorded, marking a 24.6% increase compared to the previous year (2022: 160.1mn). Meanwhile, domestic tourism expenditure rose by 32.5% in 2023 (2022: 248.1%). A total of RM84.9bn was spent on domestic tourism in 2023 compared to RM64.1bn recorded in the previous year.
  • While international tourism has long been a significant contributor to Malaysia's economy, we believe that it is now time to also pivot towards domestic tourism as a robust alternative to sustain and grow the nation's economic landscape. This shift can bring numerous benefits, including increased revenue, enhancement of Small and Medium Enterprises (SMEs), and job creation across various sectors.
  • Domestic tourism also has the intangible benefit of fostering national unity and cultural appreciation. As Malaysians travel within their own country, they gain a deeper understanding and appreciation of the diverse cultures, traditions, and natural landscapes that Malaysia has to offer. This cultural exchange can strengthen national identity and unity, promoting social cohesion. Moreover, it provides an educational aspect, particularly for younger generations, by exposing them to the rich history and heritage of their homeland.
  • Focusing on domestic tourism also allows for the promotion of sustainable tourism practices. By encouraging locals to explore less-visited areas, Malaysia can alleviate the pressure on popular tourist spots, reducing the environmental impact and promoting balanced regional development. This approach not only preserves the natural and cultural heritage but also ensures that the benefits of tourism are distributed more evenly across the country.
  • Several initiatives have been undertaken or proposed by the government, such as the launch of the Cuti-Cuti Malaysia Madani Civil Servants 2024 exhibition in Putrajaya. Additionally, there is a proposal to establish one-stop centers in every town, where travelers can find the best buys and food offerings conveniently under one roof, with ample parking and toilet facilities provided.
  • Meanwhile, Dr. Sri Ganesh Michiel, the secretary-general of the Malaysian Tourism Federation (MTF), suggested that the government should consider promoting local budget hotels as part of economic low-range tour packages for domestic travelers, while reserving high-end packages, including four or five-star hotels, for international tourists. Drawing inspiration from Thailand's successful tourism sector, where budget hotels are heavily promoted, Dr. Michiel highlighted that these budget accommodations often offer designs and amenities similar to those of five-star hotels but at more affordable rates.
  • Considering the previous initiative, the government once implemented a relief package offering up to RM1,000 for expenses related to traveling within Malaysia. This strategic move aimed to invigorate the local travel and tourism sector, providing a muchneeded boost amidst challenging times. Originally set to expire, the relief was extended until 31 December 2022, demonstrating its perceived effectiveness in supporting the industry during its recovery phase.
  • Given the ongoing challenges faced by the travel and tourism sector due to factors such as the fluctuating pandemic situation and economic uncertainties, the reintroduction of such a relief package warrants thoughtful consideration. Reinstating this initiative could serve as a lifeline for businesses within the industry, encouraging domestic travel and stimulating economic activity nationwide. Additionally, it could bolster consumer confidence and reignite interest in exploring the diverse attractions Malaysia has to offer.
  • In light of these potential benefits and the continued need for support within the travel and tourism sector, the question arises: Should the government consider reintroducing the relief package to further stimulate local travel and tourism?

Sector Impact

Aviation                                                                                                                                              Tan Kam Meng

  • As the Malaysian Ringgit is still hovering above RM4.70/USD, travelling overseas for holiday may not be so fun anymore as far as purchasing power is concerned. Importantly, we believe the “revenge travel” post Covid-reopening would likely normalise as the desire to travel would have been satisfied by numerous trips over the past two years. A quick random check among colleagues revealed that all of them have travelled more than 3 times since reopening in Apr-22.
  • Having said that, we expect the inbound tourism to remain robust on the back of the weak ringgit, relaxation of visa requirement and increase in flight capacity. According to Capital A, the company is expected to increase its operational aircraft to 204 by 4Q24 from 167 in 1Q24. In addition, given our in-house Ringgit forecast of RM4.65/USD, tourism activity would likely remain flourishing in 2024. In our forecast, we expect MAHB’s passenger movements to surpass the pre-pandemic level (105.3mn) to reach 118mn this year before inching higher to 121.5mn next year.

Construction                                                                                                                                        Raymond Ng

  • With a stronger influx of tourists anticipated this year, this will indirectly stimulate the construction activities as the existing facilities at customs and airports will require refurbishment and upgrades to accommodate the increased flow. Notably, the KLIA aerotrain replacement project, awarded to the IJM-led consortium, is slated for completion by January next year and is expected to commence operations in 1QCY25. Complementing this, we foresee an escalating demand for local infrastructure to enhance the transit route map. This includes a more comprehensive public transport expansion and improved customs check-in facilities. As a result, we anticipate an increased incentive to expedite the finalisation of the Johor Automated Rapid Transit (ART) project and upgrade the KL-SG border customs facility. All in, we believe IJM (Buy, TP: RM2.78), SUNCON (Buy, TP: RM4.46), and GADANG (Hold, TP: RM0.42) could be potential beneficiaries of this spillover effect.

Consumer                                                                                                                                                Liew Yi Jiet

  • On the back of a weak ringgit, Malaysia saw the highest numbers of Singaporeans arrivals. According to the expenditure breakdown provided by Tourism Malaysia, tourists spent the most on the shopping. As of 9MFY24, sales in Central and Southern region contributed 52% (Flattish YoY) and 15% (+3%-pts YoY) of total revenue, respectively. We believe the arrivals of Singaporean could be one of the boosters for the Southern region topline. We have a Buy recommendation on PADINI (TP: RM4.70) driven by its resilient sales and sustain gross margin of 35% to 37% in FY24.
  • Similarly, the revenue of Aeon in Southern region saw an increase in 1.3%-pts YoY to 18.4% in FY23 after the Malaysian government announced the reopening of borders on 1st April 2022. Consequently, FY23’s Southern region revenue fully reflected the impact of Singaporean’s arrivals and spending power. Looking ahead, Aeon’s Southern region performance remained strong in 1QFY24, resulting in a 1.1%-pts YoY increase to 18.6% of its total revenue. Remain Buy on AEON (TP: RM1.68) due to its i) improved average basket size to RM63 and ii) strong occupancy rate of 94% from refurbishment of malls and store floor revamp.
  • The higher tourist arrivals would also boost Focus Point (Buy, TP: RM1.11) sales of its eye care centres and food outlets. The group has 20 outlets in Johor that will benefit from Singaporean travelers besides outlets in KLCC, Genting Premium Outlets and Design Village in Penang that are prone to be tourist hot spots.
  • Meanwhile, the volume of beer consumption was not disclosed in Malaysia. However, we expect the global consolidated beer volume of Heineken (Heineken N.V.) and Carlsberg (Carlsberg A/S) to increase in CY24, supported by the booming tourism activities due to the full reopening of global borders and sentiment surrounding Euro Cup 2024. In Malaysia, we anticipate that breweries would react positively, similar with the historical trend. Thus, we expect sales to improve with the increase in tourist arrivals and out-of-home beer consumption, driven by the reopening of bars and restaurants (refer to thematic report of Consumer Sector-Brewery in 9 May 2024). Overall, we have a Buy recommendation on Heineken (TP: RM28.60) and Carlsberg (TP: RM22.90).

Healthcare                                                                                                                                           Tan Kong Jin

  • As for health tourism, healthcare traveler revenue of RM2.2bn in 2023 surpassed 2019’s prepandemic revenue of RM1.7bn, reflecting Malaysia’s growing reputation as a premier destination for medical tourism. Indonesia remains the highest contributor of health tourist to Malaysia, with a percentage of between 70-80%.
  • For 2024, the Malaysian Healthcare Travel Council (MHTC) targets to generate RM2.4bn (vs. RM2.2bn in 2023) in revenue from the health tourism sector this year, contributing an economic spillover of about RM9.6bn to the other industries. We believe this will be achieve via: i) higher revenue intensity per patient due to healthcare inflation, ii) gaining market share from Singapore, iii) private hospitals active participation in Healthcare Expo especially in Indonesia and iv) visa-free entry decision given to China and India tourist.
  • For private hospitals under our coverage, we believe that IHH and KPJ’s status as the top choice for Indonesian medical tourist will continue given Malaysia’s close proximity, language, cuisine and specialized services and patient-centric approach. For instance, we expect KPJ’s healthcare tourism revenue to increase by 68% YoY to RM324mn in FY24 (see figure 2). Having said that, we have Hold recommendation on IHH (TP: RM6.65) and KPJ (TP: RM2.03) as we believe share price has reflected the commendable earnings growth in 2024.

Property and REITs                                                                                                                  Thiam Chiann Wen

  • The latest revisions to the Malaysia My Second Home (MM2H) program demonstrate significant improvements over the 2021 rebranded version. Notably, the updated program has eliminated the offshore income and liquid assets requirements and reduced the fixed deposit requirements with the introduction of the Silver category. Additionally, the age requirement has been lowered, broadening eligibility for younger applicants who were previously excluded.
  • The new MM2H program introduces three categories: Silver, Gold, and Platinum, as well as a special category for Special Economic Zones (SEZ) and Special Financial Zones (SFZ). One key update is the mandatory house purchase requirement for MM2H holders, with minimum purchase values set at RM600,000 for the Silver category, RM1mn for the Gold category, and RM2mn for the Platinum category. In particular, the SEZ-SFZ category stipulates that MM2H holders can only purchase property from the primary market. This condition is expected to positively impact developments like Forest City, a designated SFZ area in Johor, by potentially boosting property sales within the project.
  • In our view, the proposal to ease conditions for the Malaysia My Second Home (MM2H) programme holds the potential to significantly boost foreign real estate investments and potentially address overhang issues in the country. Though details on the revision are limited, reports indicate the government's intent to create more favourable and competitive MM2H terms, aiming to rekindle interest among tourists and foreign investors in Malaysia. We believe this adjustment could attract more foreigners to our shores, positively impacting the real estate market. Moreover, by relaxing the MM2H program, Malaysia can continue to vie for highly skilled foreign individuals, fostering their contributions to the nation's growth through residency and investment. Nevertheless, the stipulation of a 90-day residency may present a challenge for individuals looking to participate in MM2H as long-stay tourist visa holders. This condition may restrict their eligibility for the program. In contrast, Indonesia's Second Home and Cambodia's My Second Home programmes do not impose a minimum annual stay.
  • Potential beneficiaries of these relaxations include developers engaged in upscale projects on Penang Island, such as E&O (Not Rated) and IJM Land, as well as those in the Klang Valley, such as IOIPG (Buy, RM3.00), SPSETIA (Buy, RM1.85), SIMEPROP (Buy, RM1.57), ECOWLD (Not Rated) and Gamuda Land. Similarly, in Genting Highlands, developers like LBS (Not Rated), TROP (Not Rated), and GOB (Not Rated) might see positive impacts. Although the government has yet to officially designate the boundaries of the Special Economic Zones (SEZ), developers with significant land bank exposure in Johor could benefit significantly. These developers include UEMS (Not Rated), SUNWAY, IOIPG, SPSETIA, MAHSING (Buy, TP: RM2.05), SCIENTX (Sell, TP: RM4.30), CRESNDO (Not Rated), ECOWLD (Not Rated), and KSL (Not Rated)
  • For hospitality and retail segment, we anticipate a surge in hotel occupancy rates within the hospitality sector throughout 2024, propelled by increased demand for domestic leisure, corporate functions, and MICE events. On December 2023, the Malaysian government is offering a 30-day visa-free entry to travelers from China and India, which is expected to significantly boost tourism revenue. As of June 2024, Malaysia has agreed to extend its visa exemption for Chinese tourists until the end of 2026, according to a joint statement between the two countries. Additionally, on May 31, Ahmad Zahid Hamidi announced that China had agreed to extend the visa exemption for Malaysian tourists from 15 to 30 days. Leveraging this strategic move, Malaysia's tourism industry is on track to surpass pre-pandemic levels of international arrivals in 2024. This ascent will be chiefly driven by enhanced flight connectivity and the expected influx of visitors from India and China, supported by the diligent marketing and promotional campaigns orchestrated by the local tourism sector. The anticipated influx of foreign tourists will not only revive the hospitality sector but will also catalyze growth across retail, dining, and entertainment industries. That said, the uplift in tourist arrivals promises to invigorate retail performance.
  • The favourable conditions are expected to elevate earnings for IOIPG and SUNWAY, developers with significant exposure to the retail and hospitality segments. The outlook for MREITs under our coverage is equally optimistic. CLMT (Buy, TP: RM0.74) is poised to benefit from a sustained recovery in domestic retail spending and an upside from the continued influx of international visitors, which will enhance the performance of urban malls such as Sungei Wang Plaza and Gurney Plaza. Additionally, we remain confident in SunREIT's (Buy, TP: RM1.88) prospects for 2024, driven by the recovery of the country’s tourism sector. Higher tourist arrivals are expected to boost hotel occupancy rates and support tenant sales and footfall in its prime malls.

The Competition from the Neighbouring Countries

  • Despite the recovery, Malaysia is seen losing out as compared to our regional peers. Figure 9 below showed Vietnam has already surpassed its pre-pandemic levels and recorded a tremendous growth as compared to last year. The rest - Thailand, Malaysia, Singapore and Indonesia — which welcomed 9.4mn, 5.8mn, and 4.4mn and 3.0mn visitors, respectively, in 1Q24 — saw arrivals that still below the pre-pandemic levels. Indonesia fared worse than Malaysia with a -19.3% decline.
  • Thailand stands out as a major competitor due to its well-established tourism industry. The country is renowned for its vibrant culture, historical sites, and stunning beaches, attracting millions of tourists annually to cities like Bangkok, Phuket, and Chiang Mai. Additionally, Thailand's tourism authority is highly proactive in global marketing campaigns, consistently promoting the country's attractions through various international platforms and travel fairs. This year, to attract tourists and remote workers, the cabinet introduced new visa promotions, including visa-free and visa-on-arrival schemes, extended student stays, and reduced health insurance for retirees. Starting June, the number of countries eligible for visa-free entry to Thailand will increase from 57 to 93, allowing visitors to stay up to 60 days, up from 30 days. Eligible countries include China, India, the US, the UK, Albania, and more. Thailand has set a target of attracting 40mn foreign visitors this year (2023: 28.15mn), about the same rate as the pre-pandemic figure recorded in 2019.
  • Meanwhile, Indonesia offers diverse attractions, from the serene beaches and temples of Bali to the cultural heritage sites in Yogyakarta and the natural wonders of Komodo Island and Raja Ampat. Significant investments in tourism infrastructure, including airports and hotels, have enhanced Indonesia's accessibility and appeal. The Indonesian government wants to welcome 17mn foreign tourists throughout 2024 and has already reached 23.5% of its foreign arrival target. Indonesia is implementing several strategies to boost its tourism sector, focusing on recovery and growth after the COVID-19 pandemic, such as promotion of Bali and beyond, green and sustainable tourism, culinary and cultural tourism, improved connectivity and infrastructure and digital and technological integration.
  • Vietnam has emerged as a rapidly growing tourist destination, known for its rich history, scenic landscapes, and culinary delights. Vietnam's affordability further enhances its appeal, especially for budget-conscious travelers. The country’s rapid development in tourism infrastructure and services positions it as a formidable competitor in the region. On top of that, Vietnam has shown substantial growth year to date, with more tourists visiting the country compared to others in the region. This reflects gains from 2023 (+72%) and a recovery to pre-pandemic levels (3.2%). In 2024, Vietnam tourism aims to welcome 18mn international visitors, 110mn domestic tourists, with total revenues of VND850tn. To note, Vietnam is enhancing its visa policies to make travel more accessible. This includes extending the validity of e-visas from 30 to 90 days and allowing multiple entries. This change is expected to attract more tourists who wish to explore the country over a longer period.
  • Lastly, Singapore competes with its unique blend of modern attractions and rich cultural districts. Landmarks such as Marina Bay Sands, Universal Studios, and Gardens by the Bay, combined with vibrant areas like Chinatown and Little India, create a multifaceted appeal. As a major global air travel hub, Singapore benefits from excellent connectivity, making it an easy and attractive destination for international tourists. Visitor arrivals are forecast to hit 15mn- 16mn, bringing in approximately SGD26bn to SGD27.5bn in tourism receipts in 2024.

Tourism – A Significant Contributor to the Economy

  • Tourism is a significant contributor to Malaysia's economy, generating foreign exchange earnings, creating job opportunities, and contributing to the country's gross domestic product (GDP). According to the Department of Statistics Malaysia, the contribution of tourism to Malaysia's GDP has been steadily increasing over the years until Covid-19 struct the world. Nonetheless, it has gained back its momentum recently.
  • In 2022, the tourism industry contributed RM251.5bn to Malaysia's GDP, accounting for 14% of the country's total GDP. Based on the post-pandemic performance of the tourism sub-sectors, all industries have recorded growth and the overall performance has recovered by 4.8% above the pre-pandemic levels. Retail trade continued to be the main contributor to the tourism industry, with a share of 54.1%. This was followed by Food & beverage serving services (17.1%) and Country-specific tourism services (12.6%) as per figure 11.
  • The tourism industry also plays a significant role in job creation. The tourism industry employed 3.61mn persons in 2022 and contributed 23.4% to the total employment in Malaysia. The employment in this industry rose to 2.5% as compared to the previous year (2021: 1.8%). The main contributors to employment in the tourism industry were Food & beverage serving services industry (35.1%), Retail trade (33.6%) and Country-specific tourism services (17.9%). These three industries have collectively contributed 86.6% of the total employment in the tourism industry.
  • As per our observation, the correlation between tourist arrivals and various GDP components provides insightful perspectives on how tourism influences the domestic economy. Data from 2011 to 2023 reveals significant correlations:
    • There is a 44.3% correlation between tourist arrivals and services GDP. This indicates a moderate positive relationship, suggesting that increases in tourist numbers are associated with growth in the services sector. As tourism flourishes, the demand for services such as hospitality, transportation, entertainment, and retail increases, driving the services GDP upwards.
    • The correlation between tourist arrivals and construction GDP stands at 51.7%. This is a stronger positive correlation compared to services GDP, highlighting the substantial impact of tourism on the construction sector. Tourism can lead to increased infrastructure development, including the construction of hotels, resorts, airports, and other facilities, thus boosting construction GDP.
    • From 2016 to 2023, the correlation between tourist arrivals and personal spending GDP is 43.8%. This moderate positive correlation signifies that an influx of tourists contributes to higher personal spending within the economy. Tourists' expenditure on goods and services translates into increased revenue for businesses, stimulating overall economic activity.

What Else Can We Do?

  • It is essential for the government and related agencies to intensify tourism promotion efforts to at least return to pre-pandemic levels. Among the initiatives that have been implemented so far include:
    • Enhanced Air Connectivity: Strategic partnerships with airlines are pivotal, including incentives for new services and increased flight frequencies. These partnerships aim to convert transit passengers into tourists and attract more visitors from key markets like China, India, and Europe.
    • From 1 December 2023 to 31 December 31 2024, Malaysia is offering visa exemptions for Chinese and Indian nationals, allowing them to stay for up to 30 days without a visa. This is part of a broader initiative to increase tourist arrivals and generate national income.
    • The government has allocated RM350mn (Budget 2024 allocation) for promotional activities under the Visit Malaysia 2026 campaign, focusing on both domestic and international tourism. This includes support for cultural and artistic events and the development of Muslim-friendly tourism. For comparison, a total of RM250mn has been allocated to promote the tourism sector through the 2023 Budget.
    • There is a growing emphasis on eco-friendly infrastructure and sustainable travel options, catering to a rising number of eco-conscious tourists, including digital nomads and business travelers seeking leisure.
    • The use of AI and data analytics is being prioritized to enhance the tourism experience, optimize operations, and personalize marketing efforts. This technological push aims to keep Malaysia competitive in the global tourism landscape.

Recommendations to Boost Malaysia's Tourism Industry

  • We believe that much work is needed for Malaysia to meet its targets. While achieving these goals may be challenging, success is possible if we strengthen our efforts. To boost Malaysia's tourism industry, we should:
    • Enhance Marketing and Promotion
      • Focus on key markets like China, India, Europe, and ASEAN countries with customised marketing campaigns that highlight Malaysia's unique attractions and cultural diversity.
      • Invest in digital marketing strategies, including social media, online advertising, and influencer partnerships to reach a broader audience, particularly younger travelers and digital nomads.
      • Partner with international travel agencies, airlines, and online travel platforms to promote Malaysia more effectively and create attractive travel packages.
    • Improve Infrastructure and Connectivity
      • Expand and improve air connectivity by increasing flight frequencies, establishing new routes, and collaborating with international airlines to make Malaysia more accessible to global tourists.
      • Enhance transportation infrastructure within the country, including better road networks, public transport systems, and tourist-friendly amenities at key destinations.
      • Encourage the development of a range of accommodation options, from budget-friendly hostels to luxury resorts, to cater to diverse tourist preferences and budgets.
    • Simplify Visa Policies
      • Further liberalise visa policies to make travel to Malaysia easier. Consider extending visa-free entry or e-visa options to more countries, particularly those with high tourism potential.
      • Simplify and streamline the visa application process, reducing bureaucratic hurdles and making it more efficient for tourists to obtain visas.
    • Promote Sustainable and Eco-Friendly Tourism
      • Develop and promote sustainable tourism practices that minimise environmental impact and preserve natural and cultural heritage. This includes eco-friendly infrastructure, responsible tourism guidelines, and conservation projects.
      • Highlight and develop eco-tourism destinations and activities that appeal to environmentally conscious travelers, such as national parks, wildlife sanctuaries, and sustainable resorts.
    • Leverage Technology and Innovation
      • Implement smart tourism initiatives using AI and data analytics to enhance visitor experiences, optimise resource management, and provide personalised services.
      • Develop user-friendly digital platforms and mobile applications that offer comprehensive information on attractions, itineraries, bookings, and travel assistance.
      • Offer virtual tours and online experiences to attract potential tourists and provide them with a preview of what Malaysia has to offer.
    • Enhance Safety and Security
      • Maintain and communicate strict health and safety protocols to reassure tourists of their well-being during their stay. This is particularly important in the post-pandemic context.
      • Strengthen measures to ensure tourist safety by enhancing law enforcement presence in tourist areas and implementing advanced surveillance systems.
    • Support Cultural and Event Tourism
      • Promote Malaysia’s rich cultural heritage by supporting and publicizing cultural festivals, traditional arts, and local crafts, making these a central part of the tourist experience.
      • Attract and host international events, conferences, and exhibitions that can draw visitors from around the world and showcase Malaysia’s capabilities as a global events destination.
      • By implementing these policy recommendations, Malaysia can enhance its tourism industry, making it more competitive and appealing to international travelers. These strategies will help to diversify tourist offerings, improve infrastructure, and ensure sustainable and inclusive growth in the tourism sector.


  • The impact of tourism extends far beyond the borders of Malaysia, resonating across the global stage. Economically, the significance of tourism cannot be overstated. In 2022, it contributed approximately 14% to Malaysia's GDP, although it once surged as high as 15.9% in 2019. This sector serves as a catalyst for job creation, bolstering opportunities across various industries and amplifying the performance of small and medium-sized enterprises (SMEs). Through tourism, Malaysia experiences a surge in additional revenue streams, solidifying its position as a lucrative destination.

Source: TA Research - 25 Jun 2024

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