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Utter Economics

A Diverse Country Attracts a Diversity of Tourists

With the country’s many offerings, it comes as no surprise that tourism is Malaysia’s second largest foreign exchange earner.

Something for everyone – this is what Malaysia can offer to tourists. With a veritable smorgasbord of events, natural wonders, cultures, bargain shopping venues and mouth-watering food choices, it is no wonder Malaysia is such a hot favourite among foreign tourists.

A slew of accolades is a testament to its charms. In 2015 alone, Malaysia was voted Best Golf Destination in Asia (for the second year in a row), Best International Destination Food and Drink 2014, second most popular shopping city in the world for Muslim tourists, one of the top 10 Best Travel Destinations for 2016 by Lonely Planet,[1] and fourth most affordable global city by Trip Advisor.[2]

True to the tagline “Malaysia, Truly Asia” one can find the many flavours of Asia in the country’s cultural diversity. Tourists do seem to have bought the tagline – in 2015 alone, close to 26 million visited our shores, which works out to about 70,000 tourists per day. Indeed, Malaysia is one of Asia’s most popular destinations; in 2014 Malaysia was ranked 14th in the world for tourist arrivals, and fourth in Asia, behind China, Hong Kong and Thailand.[3]

Despite an impressive 25.7 million tourists, the 2015 total was 6.3% lower than the previous year. Authorities had initially targeted 28 million, but numbers fell short due to a host of calamities – the unfortunate crash of the two Malaysia Airlines planes, the haze and floods, and the kidnappings and earthquake in Sabah, among others. The high base effect of 2014 was also attributed to it being a Visit Malaysia Year, where tourism numbers saw an exceptional boost from promotional activities.

A dissection of the 2015 figures reveals that Singaporeans are the top-ranked visitors with 13 million or 51% of the total – numbers no doubt inflated by the many former Malaysians living and working there, and the close proximity to the island state. Second was another near neighbour, Indonesia, with close to three million (10%), and third was China with 1.6 million (6.2%) visitors. Other top visitors came from Thailand and Brunei, with a 5% share each (1.2 million).

Nine of the countries in the top 10 are Malaysia’s Asean or Asian neighbours. Australia was the sole non-Asian country in the list, in eighth, with less than half a million visitors for a two per cent share. South Korea made its maiden appearance on the list in 2015, replacing the UK.

Another market in which Malaysia has sold itself well is the Muslim tourism segment. In 2015 Malaysia was voted the number one destination ahead of Muslim-majority countries such as Turkey, UAE, Saudi Arabia, Qatar and Indonesia.[4] As for shopping for Muslim travellers, Malaysia was ranked second, behind Dubai.

The Islamic Tourism Centre (ITC) reported that in 2015, 5.9 million Muslim visitors made their way to Malaysia, compared to 5.7 million in 2014 – almost a quarter of the country’s total inbound tourists! It is easy to see why Malaysia is such an appealing destination for Muslim holidaymakers. The country provides an array of attractions, genuine halal food, a large Muslim population and culture, first class hotels, bargain shopping and bountiful prayer rooms.

The ITC reports that Indonesians make up the largest group of Muslim visitors, with 2.8 million tourists, followed by Brunei with 1.2 million. On their own, both Indonesia and Brunei are also among Malaysia’s top 10 largest tourists arrivals. Rounding off the top five Muslim markets are Bangladesh, Saudi Arabia and Pakistan.

Among Muslim visitors, those from the Middle East are the biggest spenders. Saudi Arabian tourists’ average per capita spending is almost four times the average. Middle Eastern tourists also stayed in the country longer than the average. Those from Saudi Arabia spent 10.5 days in Malaysia compared to the average of 5.5 days – almost twice the length of days. Recognising their superior purchasing power, the government has gone to great lengths to make them feel welcome by embarking on road shows, promotional packages, waiving visas, introducing road signage and literature in Arabic, and other such measures.

From 2013 to 2015, tourist arrivals peaked in 2014 with 27.4 million, and thereafter declined to 25.7 million. 2015 turned out to be relatively underwhelming, as figures were below the projected 28 million arrivals and RM80bil in receipts. This trend was also reflected in total tourist receipts, which peaked at RM72bil in 2014 and declined to RM69bil the following year. Other numbers were disappointing as well, such as the average length of stay per tourist, which dropped from 6.6 to 5.5 days.

However, despite the decline in arrivals, tourism receipts for 2015 only declined by 4%, as the average total spending per tourist went up by 2.4% – meaning that the average tourist was spending more during their stay. This trend was evident in the last three years, where average spending per tourist has been creeping up, no doubt driven by the falling ringgit. The three biggest spenders were Saudi Arabians (RM9,459.20), followed by New Zealanders (RM4,213) and Australians (RM4,133.50). The message is clear – visitors from farther afield tend to stay longer and spend more.

In the last decade, tourism has emerged as a vital component of the national economy. Ten years ago, 16 million foreigners visited Malaysia, contributing RM32bil to the coffers. By 2015, tourist numbers increased by 62%, while receipts doubled to RM69.1bil. Total tourist receipts for 2014 were RM72bil, making tourism the second largest foreign exchange earner for Malaysia after manufactured goods. [5]

Tourism is also an important indirect contributor to the economy,[6] as measured by the Gross Value Added of Tourism Industries (GVATI). In 2014 GVATI contributed 13.7% of Malaysia’s GDP (2013: 13.4%) or RM151.7bil.[7] Retail trade or shopping continues to be the number one driver by a distance, with a more than a 40% share, followed by food and beverage (15.4%), and accommodation (13.5%). Sporting events, cultural events and passenger transport are also important contributors, with a 5% share each.

It is little wonder shopping figures so prominently. In 2014 KL was voted the fourth best shopping paradise in the world by cable news network CNN. Three of the world’s 10 largest malls are in KL – including 1 Utama Shopping Centre, the world's fourth-largest mall with more than 650 shops. Malaysia’s top shopping magnets are Bukit Bintang (42.7%), George Town (17.0%), Kota Kinabalu (14.1%), Petaling Street (12.3%) and Johor Bahru (11.7%). Top items purchased are, in order of preference, clothes, followed by handicraft, shoes, cosmetics and chocolates.

Clan Jetties in George Town – a popular spot for tourists.

The tourism industry is also crucial to the job market. In 2014 almost one in five working Malaysians (13.5 million) were employed in the tourism sector. F&B was the top pick with a 33.6% share, followed by retail trade with 28.8%.

Regardless, the government is aiming to tap the potential of the tourism industry further. The 2015 National Transformation Programme Annual Report states that the government is eyeing 36 million inbound tourists and a whopping RM168bil in receipts by 2020.

To achieve this number, eight clusters of major shopping destinations have been identified for high-impact development, namely Klang Valley, Penang, Johor, Malacca, Kota Kinabalu, Labuan, Kuching and Miri, and Langkawi. Moreover, the two main weaknesses in our tourism numbers need to be addressed: over-concentration (70%) on two groups – Singaporean and Asean visitors – as well as persuading tourists to spend more and stay longer.

The over-concentration is only natural, given that Singapore is our nearest geographical and cultural neighbour, and that Malaysia benefits from intra-Asean tourism. By comparison, Thailand has a more diverse mix of tourists overall, with the largest group of visitors being from China (27%). Their allure is so universal that they

are able to attract tourists from the far-flung corners of the globe: among its top 10 tourist arrivals are three Western countries, including Russia, compared to only one for Malaysia.

Thailand’s winning combination of sea, sun and sights has reaped the rewards of its labour. In 2015 it received 30 million tourists who spent RM166bil, ranking ninth highest in the world for total tourist arrivals and sixth highest for receipts. That means that the average tourist in Thailand spent RM5,533 per trip[8], double Malaysia’s RM2,687.

What Malaysia needs are tourists who spend more time and money while they are vacationing in Malaysia. Our strategy can be two-pronged – one for Asian neighbours, and another for tourists from outside Asia. To entice them to stay longer, more novel and exclusive targeted attractions, entertainment and events can be created.

The Muslim market, particularly the Middle Eastern tourists, should also be expanded, as they tend to be big spenders. Elsewhere, one can target the world’s top spenders such as Germany, Australia, US, Canada, France, UK, Italy, Russia, Brazil and China. These high rollers can be lured by increasing the number of 5- and 6-star hotels; creating more shopping opportunities, such as the opening of value-for-money luxury goods outlets; and further developing the ecotourism sector, as well as increasing the number of heritage and cultural events.

  • [1]“National Transformation Programme Annual Report (Putrajaya: Pemandu, 2015).
  • [2]““TripAdvisor Tripindex,” TheSundaily, July 26, 2016.
  • [3]“Ranked by the World Tourism Organisation (UNWTO). 2015 numbers not available.
  • [4]“As ranked by Global Muslim Travellers Index by MasterCard-CrescentRating.
  • [5]“Tourism Malaysia, accessed November 19, 2016, http://www.tourism.gov.my.
  • [6]“Direct contribution sectors such as hotels, airlines, airports, travel agents and leisure and recreation services that deal directly with tourists. Examples of indirect spending are the purchase of new aircraft, construction of new hotels, government spending on tourism marketing and promotion, aviation, administration, security services, resort area security services, resort area sanitation services, etc. This also includes domestic purchases of goods and services by sectors dealing directly with tourists, such as food and cleaning services by hotels, fuel and catering services by airlines, and IT services by travel agents.
  • [7]“Based on the latest available numbers.
  • [8]“Financial Times, accessed November 19, 2016, https://www.ft.com.
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