SNAPSHOT

Tourism & Hospitality

OVERVIEW High arrivals, low yields ...........................110 ANALYSIS OF INVESTMENT OPPORTUNITIES WITH PARTNERS Ambitious goals for the tourism industry.............................................................113 TOP 10 TOURISM AND HOSPITALITY COMPANIES ..................................................115 RATING BY INSIDE INVESTOR A place to visit and invest ........................116

Tourism Malaysia

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INSIDE MALAYSIA JULY

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OVERVIEW

TOURISM & HOSPITALITY

Malaysias warm weather, eco-diversity and retail landscape help entice 24.5 million tourist arrivals, who gross about RM59 billion. This makes Malaysia the ninth most travelled destination in the world, but only the 13th highest expenditure by visitors.

A multi-ethnic country blessed with lush rainforests and stunning species of wildlife, Malaysia has a natural advantage for reeling in tourists. Add to the mixture a fascination with shopping centers and experience in halal services, and you start to see the reason for the appeal. Malaysia saw 24.6 million tourist arrivals in 2010, making it the ninth most visited country in the world, the three biggest markets for tourists being China, India as well as the GCC. The industry added RM36.9 billion to gross national income (GNI) in 2009, making it the fifth largest industry in the country after oil, gas and energy, financial services, wholesale and retail and palm oil. Tourism is also the third largest source of income from foreign exchange. Though Malaysias tourism industry is growing at a rate of 12 per cent per annum (2004-2009), placing it beside select few other countries that have maintained double-digit growth, such as Egypt, China and South Africa, the majority of this activity is buoyed by arrivals, not
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Inside MALAYSIA JULY 2012

Tourism Malaysia

High arrivals, low yields

Since tourism became a significant source of income for Malaysia, the country has launched a number of initiatives to boost the sector.

expenditure yields. The country raked in RM30 billion in 2004 and RM53 billion in 2009, a period that saw a growth of 12 per cent per annum, ranking it 13th worldwide in global tourist receipts, which add up to an average of RM1 billion per week. However, these yields only accounted for 25 per cent of growth in the industry, while arrivals made up 75 per cent. This unbalanced pattern of growth can best be explained by Malaysias lack of attraction towards high-yield, mediumhaul markets due to low flight frequency, the tendency for low-haul tourists to complete high-frequency trips, and use of the country as a transit point. In 2009, only 15 per cent of tourist arrivals in Malaysia accounted for the medium-haul portion of the market much lower than the 43 per cent in Singapore and 36 per cent in Thailand while 78 per cent came from the short-haul market and 7 per cent from long-haul. The solution currently in play is to boost frequencies between Malaysia and those cities where there

Tourism Malaysia

OVERVIEW

TOURISM & HOSPITALITY

is a connectivity gap, such as Beijing, Delhi, Melbourne, Mumbai, Osaka, Seoul, Shanghai, Sydney, Taipei and Tokyo. Local airlines are due to increase capacities and Malaysia Airports Holding Berhad (MAHB) has begun to make concerted efforts to attract foreign airlines to increase flights to Malaysia or set up operations. Since medium-haul market adds an extra 53 per cent yield compared to short-haul tourists, and is a segment which is forecast to grow by eight per cent between 2010 and 2020, the tourism industry stands to gain the most from greater connectivity to medium-haul tourists. A significant contributor to the economy, the tourism industry employs an estimated 14 per cent of the workforce. Unfortunately, however, the industry faces increasing strain from regional markets abroad, such as Singapore, Hong Kong and Macau, where higher incomes draw in Malaysian workers, especially in the hospitality segment. Skills are also drained from the industry due to relatively lower pay: the average income for a Malaysian working in hostels in restaurants averages out at RM1,084 per month, compared to RM2,114 in financial services and RM2,621 in oil and gas, as noted in the Economic Transformation Programme (ETP), Malaysias economic outline to achieve high-income status by 2020. Shopping is already a large contributor to tourism receipts in Singapore (35 per cent) and Hong Kong (57 per cent) and makes up 28 per cent of the market in Malaysia. This relatively lower proportion of the market share is largely due to highly fragmented, stand-alone concentrations of retail areas that have poor connectivity and collaboration between each other. For example, Bukit Bintang in Kuala Lumpur is disconnected from Kuala Lumpur Convention Center (KLCC) due to inadequate pedestrian walkways, which in turn leads to a lack of appeal and vitality. Additional pedestrian walkways and public transportation has been proposed to amend these problems. Pedestrian walkways to be built will connect KLCC to Pavilions Raja Chulan bridge, Pavilion across Jalan Bukit Bintang to Fahrenheit 88 shopping center, Fahrenheit 88 to Lot 10 shopping center, Sungei Wang Plaza to Berjaya Times Squares Imbi bridge, and from Sungei Wang Plaza to Jalan Bukit Bintang-Jalan Pudu intersection. It is hoped that once these areas are linked up that a fashion distinct with enough vibrancy to attract festivals will be created. Outside of KL, additional shopping centers are being developed in Johor Bahru, Sepang and Penang. Iskandar Malaysia, a large-scale property development project in Johor Bahru, will be composed of residential buildings and other private projects such as religious buildings as well as retail. After completion in 2013, it will be open to cater to tourists and day visitors from Singapore and Indonesia. The Sepang project is positioned to attract transit passengers from Kuala Lumpur International Airport (KLIA) and the Low Cost Carrier Terminal (LCCT); in Penang, there is a large volume of Indonesian tourists that can be captured as they make their way up to neighbouring Thailand. Cruise line travel is a globally growing segment, one in which half of passengers are high-yield tourists. In Southeast Asia, Singapore is currently leading in the industry because of lacking cruise will be vamped up in Langkawi and Penang by developing premium shopping centers and promoting the development of appealing tourism concepts, such as entertainment zones, cable car services and golf courses. Penang is also slated to develop two new convention centers to attract MICE tourists. When compared to regional peers Singapore and Thailand, Malaysia has precious few five-star hotels. Of Malaysias hotel industry, five per cent are in the five-star mix, while 13 per cent are represented in this category in Singapore and 14 per cent in Thailand. Investment tax allowances will be extended to include four- and five-star hotels with foreign ownership in order to attract more funds to upgrade and refurbish hotel assets. In addition, starting from 2013, four- and five-star hotels will have to charge a minimum room rate. It is hoped that this will encourage hoteliers to work to match service levels with pricing. Hopping on the bandwagon after regional leader Singapore debuted its Marina Bay Sands and Resorts World Sentosa, Malaysia has plotted out developmental plans in the integrated resorts (IR) segment. After the opening of Resorts World Sentosa in February 2010, tourism arrivals doubled, which includes a 46 per cent increase from Malaysian tourists, as noted in the ETP. The family-related travel industry in the region largely caters to the burgeoning middle-class populations of India, China and the Middle East, regions that make up the vast majority of Malaysias tourists. As these central strata of society move up the economic ladder, they will continue to contribute more to global tourism, now only representing 13 per cent of global departures yet 48 per cent of the global population. The Malaysia Tourism Transformation Plan has been set up to push the goal to achieve 36 million tourists by 2020, from 24.6 million in 2010, and generate up to RM150 billion in annual revenue, from RM56.5 billion in 2010, which indicates that the plan is eyeing a higher average spending of the individual tourist in the future.
Inside MALAYSIA JULY 2012

Investment tax allowances will be extended by the Malaysian government to include four- and fivestar hotels with foreign ownership in order to attract more funds to upgrade and refurbish hotel assets.
terminal infrastructure elsewhere. According to the Business Times, a local business newspaper, tourism logistics

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