This year, tourism in Malaysia was supposed to boom like never before. The worldwide advertising drive for Visit Malaysia 2020 (VM2020) was slated to attract about 30 million tourists with expected revenue of RM100 billion.
“To ensure the success of VM2020 and strengthen the tourism industry in Malaysia, the government has allocated RM1 billion in the Tourism Infrastructure Fund until the end of 2020 to provide financial assistance to existing and new companies involved in tourism-related activities and services,” AllianceDBS Research wrote earlier.
However, the Covid-19 pandemic has put a damper on all of this, affecting more than 3.5 million people who work in the tourism industry.
Loses faced by the tourism industry
The tourism, arts, and culture ministry announced on March 24 that the main tourism industry players were expected to lose RM9 billion from January to March this year.
These include those providing accommodation and transport as well as the sectors of shopping as well as food and beverage, and the organisers of business events.
According to Malaysia’s director of tourism in Indonesia, Roslan Othman, most visitors historically came from Singapore, Indonesia and China. But Malaysia was also becoming increasingly appealing to European tourists.
However, with the pandemic forcing many countries, including Malaysia, to impose entry bans and close their borders, what was once a promising year has now turned into a struggle for many in the tourism industry.
Malaysian Association of Hotels (MAH) CEO Yap Lip Seng told The Edge that for the January to June period, hotels are looking at potential losses of RM3.3 billion from room revenue alone.
During the first phase of the Movement Control Order (MCO) from March 18-31, hotels lost RM510 million in room revenue, and in the second phase, from April 1-14, losses were estimated at RM570 million.
“On average, every 14 days of MCO will cost the hotel industry RM500 million [in losses]. The industry is anticipating a ban on mass gatherings for the next six months and, thereafter, [it would be] dependent on the situation at the time,” said Yap.
A recent job survey of MAH hotel operators revealed “signs of desperation” among employers, Yap said, adding that as at March 20, some 4% of employees had been laid off, 17% put on unpaid leave, and 9% had taken pay cuts.
“With little to no revenue since the MCO, hotels are already cutting operational costs, but it does little to help ease the burden of cash flow, in particular payroll.
“In general, the payroll costs of budget hotels are about 25% of revenue; mid-range hotels, 32%; and high-end hotels, 29%.
“This represents a third of what the hotels are not making, hence, the difficult decision to impose pay cuts and unpaid leave in order to retain jobs instead of terminating or laying off employees,” he said.
Several hotels have closed their doors permanently as they could not cope with zero occupancy during the MCO period. These include:
• Jazz Hotel, Penang
• Kinta Riverfront Hotel and Suites, Ipoh, Perak
• Tower Regency Hotel, Ipoh, Perak
• Ramada Plaza Hotel, Melaka
• G City Club Hotel, Kuala Lumpur
Effects on the aviation industry
Demand in the country’s aviation industry could decline by 39%, involving about 25.49 million passengers, said the International Air Transport Association (IATA).
“Malaysia’s airline industry faces an estimated US$3.32 billion loss in revenue, affecting some 169,700 jobs,” the IATA said.
In the aftermath
Once the travel restrictions are lifted, many Malaysians will want to travel, and spending their money on domestic tourism is a likely choice.
In addition, postponed events are likely to be rescheduled — parents will want to attend their children’s convocations and business travellers are likely to start attending trade events and professional conferences again.
As Malaysians choose to travel within the country, their spending will help the businesses in the travel and tourism sector achieve their income goals.
According to licensed financial planner Kian Ng, tourism industry players must think of new ways to regain their positions and improve their financial situation.