Mass tourism is barely forty years old. I can still remember family discussions back in the seventies about how a British traveller was only allowed to take a maximum of £50 out of the country which meant few people could travel. With a father based in Malta and Gibraltar, as well as Hong Kong and Singapore, I was lucky enough to see more of the world than many.
Anyway, a few years ago we were hired by Malaysia’s tourism ministry to carty out what was at the time, and probably still is today, the most comprehensive brand audit ever done for a country’s tourism board. You can get a copy of a case study on the project by sending me your email address.
Due to client confidentiality rules, I can’t disclose all of our more than 300 recommendations but I can say that one of the recommendations was for a comprehensive overhaul of the incentives offered to the private sector to encourage more investment in the stagnant tourism sector.
During the brand audit discussions with visitors who had visited Malaysia, an often repeated comment was that they loved the country but didn’t think there was enough here to make them come back again. Yet to build a successful destination brand, you need that repeat visitation. This requires ongoing investment in products.
One of the problems in Malaysia is that property development is essentially risk free because of the sell then build model used here. What this means is that projects are often sold before work on them begins. Compare that to an investment in a hotel than has no guarantee of success and even if it is successful, can take 10 – 15 years before the developer sees a return on investment.
To my knowledge there have been few changes made to major tourism related policies because outside of Kuala Lumpur, there has been very little investment in the tourism sector. In fact, one frustrated operator complained recently that there are more 5 star hotels in Hua Hin Thailand than there are in the whole of Malaysia, excluding Kuala Lumpur.
This has to change and it has to change soon before this opportunity is lost. Because the next 10 years are expected to see a travel and tourism boom.
Which is why South East Asian countries are investing heavily in their tourism products. After years of rising room rates and high occupancy, Australian investors and developers are increasing hotel development from Perth to Sydney and Hobart and up to Melbourne and Brisbane.
Australia’s hotel supply is growing 2.5 times faster than its long term average rate and 12,000 rooms will be added to the inventory by 2020. Tourism related investments are now close to A$30 billion, up from $17 billion in 2014.
Tourism investment is a priority for Indonesia as the government aims to attract 20 million visitors by 2019 and is revamping it’s tourism incentive programme to encourage investment.
According to the Saudi Gazette, the King of Saudi Arabia will spend 12 days in the country from March 1st as part of his Asian tour, and tourism development will be high on the agenda as the country targets over US$25 billion investment from Saudi.
Confident of positive long-term growth prospects for Thailand’s tourism industry, institutional investors from Hong Kong and Singapore accounted for around 45% of the total transaction volume in the country.
In Malaysia, according to Pemandu, the organisation set up to oversee the government’s transformation programme, RM24.5 billion (US$6 billion) of private investment was made in the tourism sector in Malaysia in 2015, making it the second highest private investment contributor, despite an alarming fall of 6% in arrivals in that year.
During the King of Saudi Arabia’s tour of Asia, he will also spend 3 days in Malaysia but the country’s ailing O&G industry appears to be the main topic on the agenda. Other figures for investment in tourism in Malaysia are hard to come by. However, outside of the capital, anecdotal evidence suggests investment is minimal.
Malaysia also suffers from a weak international image as well as a lack of buy in from stakeholders such as taxi drivers, travel and tour operators, hoteliers and retailers.
This needs to change otherwise Malaysia may miss out on the increased arrivals into the region as evidenced by the image above that shows the fastest growing flight routes around the world.
According to this chart, outside of India and China, the fastest growing routes will be to SE Asia. If Malaysia wants a bigger piece of this dynamic industry, it needs to make some significant policy changes to encourage more investment in the tourism sector.