HVS Market Report Malaysia – Finding the Silver Lining – By Eva Shen
The article outlines the performance and outlook of the tourism and hotel industry in Malaysia. Given the strength of the market fundamentals and investment in tourism infrastructure, there’s still potential for future growth.
The Federation of Malaysia, located in Southeast Asia, comprises of Peninsular Malaysia and East Malaysia (on the island of Borneo), separated by the South China Sea. Malaysia covers an area of 329,758 square kilometres with 2,669 kilometres of land boundary and 4,675 kilometres of coastline.
Tourism is the second largest foreign exchange generator in Malaysia after the manufacturing sector, accounting for 5.7% of direct and 14.9% of indirect contribution to the Gross Domestic Product (GDP) in 2014. Total contribution (both direct and indirect) to GDP is expected to grow by 4.5% per annum to Malaysian ringgit (MYR) 262.2 billion by 2025.
Malaysia was ranked the third top travel destination in Asia and the Pacific region, after China and Hong Kong, by the UNWTO World Tourism Ranking for the year 2014. Besides being an active business and meetings, incentives, conferences, and exhibitions (MICE) destination, Malaysia also depends on its diversified cultural/natural heritage sites and entertainment infrastructure to attract a considerable leisure market.
Malaysia’s economy showed a positive growth and posted GDP growth rates averaging 5.7% during 2010-
13. In 2014, it achieved a 6.0% real GDP growth, reaching MYR1,106.6 billion. The GDP growth for 2015 is projected to slow down to 4.7% amidst a difficult environment for the global markets. The ringgit depreciated to a 17-year low against the US dollar. Nonetheless, based on robust economic growth and diversified investments from previous years, the economy fundamentals in the country can be considered sound.
The following events may have significant impacts on the prospects of the market in the short and long run:
• The drop in global crude oil price impacted Malaysia as an exporter of gas and oil products. It is estimated that the petroleum income tax and oil sector accounted for 21.2% of government direct tax revenue, which reflects 12.5% of total federal government revenue in 2014.
• The political uncertainty caused by corruption scandals, such as the case involving Malaysian state fund 1Malaysia Development Berhad (1MDB), which is still under investigation, may lead to civil unrest and potential delays in government projects.
• There is a general slowdown in the major regional economies, such as China, which is the largest trading partner of Malaysia. The moderation seen in these economies would impact the growth rate of Malaysia economy.
• According to the Economic Transformation Program (ETP), which aims to elevate Malaysia to developed-nation status by 2020, the government lists Tourism as one of the National Key Economic Areas for development. In particular, one of the Entry Point Projects targets the improvement of the rate, mix and quality of hotels in Malaysia. This can be achieved by increasing the number of 4-star and 5-star hotels in Malaysia, which is in line with Malaysia’s focus on targeting high-yield tourists.
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Categories: Trends