Tourist Arrivals Remain Flat Despite Weak Ringgit

Much has been talked about how the weaker ringgit will draw more tourists to the country, but the statistics do not seem to reflect this.

The overall tourist arrivals, however, slipped lower by 0.9% year-on-year (y-o-y) to 10.82 million visitors compared with a year ago, according to Tourism Malaysia. One saving grace is that the number of tourists coming from China has gone up by 7.8% in the first five months of the year.

To put things into perspective, the tourist arrivals so far is also lower by 0.61% than the five-year average of tourist arrivals in the first five months of the year. Another data to ponder is that while overall visitors from Asean countries to Malaysia have increased by 0.62% to 8.22 million visitors in January to May, five out of nine Asean countries have seen a decline, including Singapore, Indonesia, the Philippines, Cambodia and Myanmar. Tourist arrivals from Brunei saw the highest growth among Asean countries, which saw an increase of 37.7% to 741,420 tourists.

Tourism was the third largest contributor to the Malaysian economy in 2016 and is expected to remain so for the year. Lacklustre statistics on tourist arrivals may not augur well. Granted, the KL2017 Southeast Asian Games (SEA Games), which recently concluded, was only held in August, the latest official data released by Tourism Malaysia with the cooperation of immigration department only covers until the end of May this year.

Tourism and Culture Minister Datuk Seri Mohamed Nazri Abdul Aziz had reportedly said that 700,000 foreign tourist arrivals were expected in conjunction with the SEA Games. Julia Goh, an economist with UOB Malaysia, told The Edge Financial Daily that the lagging data provided by Tourism Malaysia might not be reflective of the current situation especially with tourist arrivals expected to increase in the second half of this year.

“If you look at the data released by Malaysia Airports [Holdings Bhd] (MAHB) on passenger traffic in the airports, it shows that international passengers have increased,” Goh said.

According to her, the increase in tourist arrivals is expected, especially given the weak ringgit, which is deemed to be attractive at current levels. Goh pointed out that while the ringgit has strengthened further against the US dollar, it has remained relatively flat against most currencies in the region.

At the beginning of the year, tourist arrivals were expected to grow this year with 2017 being Asean@50 Year and as Malaysia played host to the SEA Games and Asean Para Games. The data released by MAHB also saw that passenger traffic in the international sector has grown by 14.8% y-o-y to 28 million for the period of January to July this year, with about 13.8 million to Asean destinations while the remaining 14.2 million to non-Asean destinations.

An analyst who covered the aviation, airport and tourism sectors, concluded that the data could be an indication that more Malaysians are travelling abroad despite the weak ringgit, which in turn helped to lift the passenger traffic in the international sector.

“If you look at some of the hotel operators such as Shangri-La, you could see a drop in occupancy rate in Kuala Lumpur and Penang. We will still need to wait for the official data to gauge how the tourism sector will fare this year,” he said.

Just recently, the Malaysia Marathon Kuala Lumpur 2017, which had targeted to attract at least 5,000 participants from China, was scrapped after the organisers failed to sign up the minimum number of China participants required.

A fund manager, who is positive that the weak ringgit would help to boost the prospects of the aviation, airport and leisure industries, said that the tourism tax is more likely to hurt the budget hotel operators.