Malaysia has long traded on its alluring mix of nature, tropical beaches, vibrant culture and modern cities to bring in tourists from the region and further afield; the multicultural country’s attractions summed up in its long-running “Malaysia, Truly Asia” advertising campaign. But as Malaysia’s neighbours refine their offerings, the country is facing increased competition for visitors and their all-important spending, even as it sets itself ambitious targets for the future.

The government has identified tourism as a key growth area under its plan to transform Malaysia into a high-income nation by 2020. The sector is turning to new markets – China, India and the Middle East – and diversifying its products. The “new” Malaysia offers an increasing variety of options – from intimate boutique hotels to rustic jungle retreats, adventure theme parks to international sports events.

Tourist Numnbers 

Malaysia’s tourism industry has enjoyed an average growth rate of 12% a year since 2004, according to the Performance Management and Delivery Unit (PEMANDU), the agency coordinating the government’s economic reform efforts.

In 2014 the country received a record number of visitors, and tourism industry was the sixth-largest contributor the Malaysian economy with total receipts rising to RM72bn ($17.8bn).

However, in 2015 arrivals fell to 25.7m, less than the target of 29.4m visitors. While the decline in the value of the ringgit (around a fifth over the year) made Malaysia an attractively priced destination, slower demand from India and China (due to a slowing economy and the lingering impact from the disappearance of flight MH370), the smoke haze that blanketed the country in August and September, and the restructuring of Malaysia Airlines (MAS), which cut routes and seat capacity, contributed to the slowdown.

While Malaysia has only 0.2-0.3% of the global tourism market, a fact which provides some insulation from a slowdown in the world economy, officials says it is far more exposed to the effects of a slowdown in China and South-east Asia. Around 85% of the country’s tourists come from the region, according to the Malaysia Tourism Promotion Board (MTPB, more popularly known as Tourism Malaysia, TM).

Tourist receipts dropped to RM69.1bn ($17.1bn) in line with the fall in arrivals in 2015. Average daily spending was RM397.60 ($98.42) in 2014. The average length of stay, which has been declining over the past few years, edged down to 6.6 nights in 2014. The figures for 2015 were expected to be released in mid-2016. For 2016, the government is targeting 30.5m arrivals and receipts of RM103bn ($25.5bn).

Most visitors to Malaysia continue to come through Singapore. The Singapore Changi-Kuala Lumpur International Airport (KLIA) link is the third-biggest international route in the world, according to the Centre for Aviation. There are also numerous flights between Singapore and other cities in both Peninsular Malaysia and Eastern Malaysia. There are also two border crossings at the Causeway in Johor Bahru and the Second Link at Iskandar. Beyond its ASEAN neighbours, China is Malaysia’s biggest source of visitors.

Malaysia was ranked 25th in the World Economic Forum’s (WEF’s) Travel and Tourism Competitiveness Index Ranking in 2015. Singapore came in at 11th position while Thailand was ranked 35th. Malaysia scored highly for price competitiveness (sixth) and business environment (10th), and lowest in terms of environmental sustainability (119th).


According to the UN World Tourism Organisation, one in 11 of the world’s workers are employed in tourism. The global industry has grown faster than GDP since 1995, impervious to geopolitical tensions, terrorism, health scares or sluggish economies.

“If one country is hit by instability, others will receive more tourists,” the WEF said in its introduction to the 2015 Travel and Tourism Competitiveness Index. “Globally, the trend for growth seems unstoppable.”

In Malaysia, tourism and travel’s contribution to GDP amounted to RM161bn ($39.9bn), some 14.9% of GDP, in 2014, according to the World Tourism and Travel Council. That contribution was expected to rise by 5.3% in 2015 and over 4.5% a year to RM262.2bn ($64.9bn) by 2025. The importance of tourism to Malaysia’s economy is evident in the Economic Transformation Plan (ETP), which was launched in 2011. Tourism was named as a national key economic area (NKEA), with development grouped around five areas: affordable luxury, nature adventure, family fun, events, and entertainment and business tourism.

Key Areas

“We cannot use the same old ways of promotion,” said Hamzah Rahmat, president of the Malaysian Association of Tour and Travel Agents (MATTA). “We have to move with the times. We have to show the world the other side of Malaysia; the fun and modern side, the vibrant side.”

To achieve its 2020 goal, the government has identified 12 key enablers – known as entry point projects (EPPs) – in areas including hotel improvements, shopping, eco-resorts, spa industry development and golf. For each of the EPPs, it has identified a number of “champions” to drive the projects forward. By 2020, PEMANDU expects the sector to have created an additional 497,000 jobs, bringing the total number of people employed in the industry to 2.34m.

Hospitality training has also been intensified in a complementary programme led by the Malaysian Centre for Tourism and Hospitality Education (MyCenTHE), under the ETP’s education reforms.

There are now 11 private and public institutions collaborating with MyCenTHE covering areas such as hotel management and culinary arts. The agency is also working closely with the hotel and leisure industry to provide not only work placements, but also work-based learning, to students. The number of students enrolled in hospitality and tourism programmes was 23,972 at the end of 2014, according to PEMANDU, compared with a target of 20,000.

In 2015 TalentCorp Malaysia’s structured internship programme was extended to those studying diplomas, which should encourage further industry participation by qualifying hotels for double tax deductions. Established in 2011, TalentCorp develops initiatives to build up skilled labour to meet the needs of the country’s economic transformation.

While many of the EPPs are now described as operational by PEMANDU, projects to improve the quality and range of hotels, as well as biodiversity-related plans remain a work in progress.

Enhancing Eco Appeal

The 11th Malaysia Plan (11MP) for 2016-20, released in May 2015, reiterated government support for tourism, with an explicit focus on ecotourism, and acknowledged that much work needed to be done. “Cultural heritage and natural resources, which are highly appealing to the more sophisticated markets are not optimally utilised, hindering the development of a sustainable and vibrant tourism industry,” the report said. Officials say Malaysia intends to target “high-density” countries such as Singapore, Hong Kong and Japan, as well as “high-spending” tourists with nature tourism.

Recognising the intrinsic value of Malaysia’s biodiversity and the beauty of sites such as the Royal Belum Rainforest, Danum Valley and Mulu National Park, Tourism Malaysia has stressed that development will be sustainable and, most likely, executed in a partnership between state agencies and private companies. The country is looking for, “reputable investors who are competent in the conservation and preservation of nature and wildlife,” read a statement issued by Tourism Malaysia to OBG.

More Work To Be Done

Under the 11MP, the services sector, including tourism, is expected to grow 6.9% a year and account for 56.5% of GDP by 2020. It further recognises that more work needed to be done to improve online and mobile marketing, and raise health and hygiene standards.

In the 2016 budget the government announced that e-visas would be introduced by mid-2016 for seven countries, namely China, India, Myanmar, Nepal, Sri Lanka, the US and Canada, and set aside RM1.2bn ($297m) in funds for tourism development.

Further supporting ecotourism initiatives in Eastern Malaysia, the goods and services tax on rural air services – flights connecting more remote parts of interior Sarawak and Sabah – was removed. The government also announced that RM80m ($19.8m) would be provided to establish three tourism academies in Kota Kinabalu, Sandakan (on Sabah’s east coast) and Serian, Sarawak to focus on training and improve service standards in the industry.

Masidi Manjun, Sabah’s tourism, culture and environment minister, told the Borneo Post that the move was designed to “encourage tourists to not only pay attention to big cities but also rural areas. This will directly benefit the cities and small towns, especially those in the homestay business”.

Malaysia has also been developing event tourism, having proved itself as a host of major international meetings such as ASEAN, as well as top sporting competitions. A government-backed agency, Malaysia Major Events, was set up in 2011 to coordinate the logistics, and bid for major global events.

Research shows that tourists who come for sport – either to compete or watch – do not just come for the event, and usually take about a week afterwards to explore the host nation.

Amending Policy 

Recent policy initiatives have also focused on attracting more Chinese visitors to Malaysia. China is the largest market in terms of international tourist expenditure and is growing at a double-digit rate, according to the World Tourism Organisation. Malaysia has gone beyond an e-visa to offer a visa waiver to Chinese tourists – an initiative that was introduced in March and will last until the end of 2016. Ahmad Zahid Hamidi, deputy prime minister and minister of home affairs, told local press that visa waivers were important because of the stiff competition for Chinese tourists, particularly from neighbouring Thailand and Indonesia. Malaysia has also appointed a new tourism ambassador specifically for the Chinese market, Shila Amzah, a singer who is popular on the mainland.

The travel industry has long been pushing for e-visas. “People are not concerned so much about the fees,” Nelson Lee, managing director of the Nino Group of Companies, a long-established Malaysian travel operator, told OBG. “It’s about convenience. E-visas makes it 100% convenient, especially for businesspeople and those with higher incomes to make an instant decision.”

The visa free programme for Chinese tourists will run until December 31, 2016. Subsequently Chinese tourists will still be able to obtain e-visas.

Setting Standards 

As part of its attempt to improve its tourism industry, Malaysia has been focusing on drawing up guidelines and standards across all aspects of the travel business. Enforced and implemented largely by the Ministry of Tourism and Culture, such guidelines are being introduced for services from hotels to vehicles, tour guides and spa therapists across the country.

All tourist accommodation requires a licence, with TM available to provide advice and assistance to foreign investors needing guidance. Tour operators looking for their first licence must attend and complete the ministry’s Travel and Tours Management Course while those needing to renew their licence must attend the Travel and Tours Enhancement Course.

The Malaysia Tourism Quality Assurance programme was introduced in 2015 to help raise standards throughout the industry and provide quality reassurance to visitors, whether staying in a hotel, visiting a theme park or trekking through the jungle. Its criteria cover a large range of areas from answering a phone within three rings to ensuring toilets are clean and well maintained.

Tax Incentives 

To ensure that Malaysia has sufficient hotels of an international-standard, the government has extended investor-friendly initiatives for accommodation, particularly in developing four- and five-star hotels across the country. The application period for pioneer status and tax incentives has been extended to the end of 2016.

The Tourism Development Infrastructure Fund, which was introduced on January 1, 2014, for instance, aims to provide financing for new and existing projects or provide for up to 40% of land acquisition or the total costs of the project, whichever is lower. The loans have a maximum tenure of 20 years, and applicant companies must have a minimum paid-up capital of RM5m ($1.2m) and be 51% Malaysian-owned. More stringent guidelines are also being developed and introduced for niche products, as well.

Having long positioned itself as a Muslim-friendly holiday destination (the global Muslim travel market is estimated to reach RM647.6bn, $160.3bn, by 2020), Malaysia in 2015 introduced the Muslim-friendly hospitality services standards, devised by the International Institute for Halal Research and Training and the International Islamic University Malaysia, and drafted in consultation with the major tourism bodies, to establish measurable standards in relation to accommodation, holiday packages and tour guides.

More formal guidelines for homestays are under consideration in an attempt to improve the quality of services and allow homestay operators to raise their prices and earn more income. Currently, anyone wishing to operate a homestay must be licensed by the Ministry of Tourism and Culture. To secure the licence (and be allowed to display the Malaysia homestay experience logo on their premises), owners must meet certain conditions including a high level of security, safety and cleanliness.

Spa development is part of the country’s strategy to attract more premium travellers to Malaysia, so ratings have been introduced in this area too, with only those receiving four or five stars eligible to participate in the ministry’s promotional campaigns. Seven centres of excellence have also been approved by the government to lead the spa therapist training programme, which includes a work placement at an accredited spa in Malaysia (see analysis).

Regulations, licensing and training schemes are key pillars of government efforts to support the industry, and improve perceptions. All spas need licences to operate and, in Penang, for example, can only be attached to a hotel or a shopping mall.

Airlines, Airports & Connectivity

As home to AirAsia, the region’s biggest low-cost carrier, and the world’s only purpose-built low-cost carrier terminal, KLIA2, Malaysia is among the best positioned of ASEAN’s 10 member states to benefit from the introduction of the group’s open-skies policy.

Budget travel is the fastest-growing segment on the regional aviation market and has attract new players to Malaysia, increasing competition, reducing fares and allowing more of the growing middle class in Malaysia, and South-east Asia, to travel. It has also opened connections far beyond the region’s capital cities. In many ways, Malaysia’s tourism strategy – focused on the Asian region – aligns closely with the ambitions of its airlines and its airport operator.

ASEAN BY AIR: TM is confident the ASEAN market will grow further in 2016, as it extends marketing efforts into second- and third-tier cities. Greater cooperation between operators in Indonesia, Malaysia and Singapore to promote multi-country holidays, should also be encouraged, according to MATTA’s Hamzah, who believes ASEAN is the “way forward”.

MAS, the national carrier, is in the midst of a restructuring, which will result in a leaner, Asia-focused airline. AirAsia, which already has more than 140 routes across South-east Asia, is increasing frequencies and destinations. It offers travellers two ASEAN passes, giving them the option to buy low base fares as credit to redeem against flights over periods of either 30 days, or two months.

Recently the country’s tourism officials have stepped up their online and social media marketing efforts, with accounts on Facebook, Twitter and Instagram as well as a new Smart-I app that gives the user access to a range of tourism deals in Malaysia.

In addition, Malaysia also launched GoASEAN, a 24-hour travel channel showcasing the best of the region, in 2015. Visas for ASEAN visitors to Malaysia were abolished in 2002.

Long Haul 

With MAS focusing on its short- to medium-haul routes, the airline and TM have sought new partnerships to ensure connectivity with Europe (MAS currently only flies to London) and beyond.

A code-share agreement with Emirates, the world’s largest international airline, with connections to some 150 destinations across 80 countries, commenced in February 2016 and is expected to continue for at least 10 years. Emirates has also increased its frequencies out of Kuala Lumpur (KL) and resumed using its Airbus A380 in January 2016.

To further improve European connectivity, TM agreed a partnership with Abu Dhabi-based Etihad Airways in June 2015 in an effort to boost inbound tourism to Malaysia by leveraging the airline’s global passenger network. The two will join forces to coordinate a range of marketing activities targeting Malaysia’s leading inbound visitor markets – the UK, US, Europe and the Middle East region.

Then in March 2016, TM agreed a deal with Singapore to boost the number of European arrivals into Malaysia, particularly in Sabah. Nazri Aziz, Malaysia’s minister of tourism and culture, told press in February 2016 that officials were expecting arrivals into the state to reach 8m in 2016. Major carriers, including British Airways and All Nippon Airways, have also resumed or increased their flights to KL.

Malaysia Airports Holdings, which runs the country’s airports, has also been upgrading its facilities to increase capacity for passengers and flights. As well as AirAsia, Lion Air, Tiger Airways, Cebu Pacific and Jetstar Asia all offer services from KLIA2, which has its own dedicated runway and air traffic control to reduce congestion. Terminals at Kota Kinabalu, Penang and Langkawi have also been upgraded and flights are now available from these airports direct to China, to make the most of the market’s potential.

Shopping Destination

Shopping remains a crucial part of Malaysia’s tourism story, with the government offsetting the April 2015 introduction of the goods and services tax with a tourist refund policy. The decline in the ringgit’s value also makes the country a good-value shopping destination. KL was the third-most-visited city in the Asia-Pacific region in 2015, according to the MasterCard Global Destination Cities Index. Some 1.23m visitors to KL came from (or through) Singapore, spending $1.29bn, according to the index. Overnight international visitor to the city rose 5.6% between 2014 and 2015, the second-fastest rate in the region, to $12m.

Some 17m sq feet of retail space is expected to open in Klang Valley – KL and its surroundings – by 2019, according to local press reports. According to property management company Khong & Jaafar, KL already has an average 7.5 sq feet of retail space per person, higher than Bangkok and Singapore.

As well as its main shopping centres, Malaysia is developing outlet malls. The first – Johor Premium Outlets – opened in December 2011. The second, Mitsui Outlet Park, commenced operations near KLIA and KLIA2 in July 2015 and brought in 400,000 shoppers a month by the end of December. The mall is a joint venture between Japan’s Mitsui Fudosan and Malaysia Airports Holdings, which is looking to develop its landbank into theme parks, business areas and cargo complexes to make KLIA a destination in itself.

A Room For The Night

Average hotel occupancy rates across Malaysia fell slightly to 69.01% in 2015, compared with 69.7% in 2014, according to the Malaysian Association of Hotels (MAH). The average room rate for the year was RM178.03 ($44.07) a night. The state of Kedah, which includes the resort island of Langkawi, reported the highest average room rate in the country at RM423.28 ($104.78), while the cheapest room rate was in the central state of Pahang at RM84.13 ($20.83).

In Penang, Khoo Boo Lim, chairman of MAH Penang, told local press that the occupancy rate fell to 54.23% in 2015, compared with 66.36% in 2014, mirroring a decline in air passengers. New hotels also opened on the island, particularly in and around the heritage area. The association is expecting occupancy to increase to 60% in 2016.

Capital Stay 

With its goal of attracting 36m tourists by 2020, Malaysia has made the development of high-end hotels a key part of its tourism strategy; recognised as an EPP within the NKEA and in the 11MP. Much of the development so far has taken place around the Bukit Bintang and KL City Centre (KLCC) areas of the capital; the focus of government plans to make the area a premier shopping district. A total of 12 top-tier hotels are due to open in KL over the next six years, according to a December 2015 report from property consultancy Horwarth HTL.

However, some of the projects – including the 130,000 sq-metre mixed-use development next to the Petronas Twin Towers at KLCC, which will include a Four Seasons Hotel and Private Residences – are proceeding more slowly than planned. The developer, Venus Assets, has not announced when the hotel, part of a 65-storey tower, will open.

The W Kuala Lumpur has also been delayed. The 150-room hotel is now due to open in March 2017, rather than January 2016, as originally planned. The Harrods Hotel, planned to connect to the Pavilion Shopping Centre in Bukit Bintang was scrapped in 2015, but construction of the development continues. It is not clear which hotel operator will be recruited to the project. The Harrods Hotel had been due to open in 2018. Nearby, an all-suite Banyan Tree is under construction, while Fairmont is expected to make its debut in the capital in 2017.

Away from KLCC, KL Sentral, a business centre that has grown up around the city’s new station, has a slew of projects under way, although some of these have been delayed. The 200-room St. Regis is expected to open a few months behind schedule on May 1, 2016.

Overall, around 10,000 new hotel rooms are expected to become available in Malaysia the three years to 2018, 2200 of them in KL, according to HVS, a US-based hospitality consulting firm. In February 2016, The Star reported that KL City Hall had decided to freeze new hotel approvals, citing oversupply. Mayor Mohd Amin Nordin Abdul Aziz told the paper that he was particularly concerned about the proliferation of budget hotels. The city currently has more than 56,000 hotel rooms including those available at serviced apartments and backpacker hostels.

Regional Stays

New properties have opened in Penang, a centre for the technology industry, that also benefits from George Town’s status as a UNESCO World Heritage site and the growth of medical tourism. Hotel occupancy in the state was above the national average, recording the highest annual growth rate of Malaysia’s 13 states in 2009-14.

The resort island of Langkawi is also seeing renewed interest, in line with the government’s focus on high-end tourism. The St. Regis, with 85 suites and villas built on stilts over the sea, opened on the Andaman island in April 2016, and Themed Attractions, Resorts and Hotels (TARH) – established in 2010 by the government investment company Khazanah Nasional – is spearheading the development of luxury hotel properties at Teluk Datai, building on the success of the award-winning Datai Langkawi.

TARH is also leading the development of Desaru Coast in the far south-east of the country, which will have luxury resorts, a water adventure park and a retail and lifestyle complex known as The Riverine. The Westin is likely to be among the first luxury hotels to open by the end of 2017. The RM243m ($60.2m) Desaru Anantara, a joint venture with Thailand’s Minor Hotel Group, will have 123 rooms, including 20 villas. It is expected to open in 2018, with an average room rate of RM1100 ($272.29) per night. A hotel branded under Amanresorts, one of the world’s most exclusive hotel brands, is expected to have 46 suites and 52 villas overlooking the South China Sea.

French hotel group Accor also continues its expansion in Malaysia with the aim of having 25 hotels in operation by 2017. With brands encompassing the luxury to budget segments, Accor is offering affordable hotels in Malaysia’s secondary cities. The Ibis Styles opened in Ipoh – midway between KL and Penang – in early 2015. Ipoh has a new fast rail link to KL, as well as an expanded airport with direct flights to Singapore.

Beyond the big brands, Malaysia has also seen a growing number of independently run boutique hotels, noticeably in Penang, where investors have converted historic buildings into luxury accommodation. Owners are also opening high-end boutique resorts, often inspired by traditional architecture and culture, in more rural locations.

Domestic Tourism

The domestic traveller is also expected to feature more prominently in Malaysia’s tourism campaigns (see analysis). The number of domestic tourists increased from 54.4m in 2013 to 60.7m in 2014, according to TM, with spending totalling RM62.1bn ($15.4bn) that year. Officials expect more Malaysians to take holidays at home, following the steep decline in the value of the ringgit in 2015.

TM has begun working with the industry on new promotions dedicated to local travellers. The “Dekat Je” campaign (loosely translated as “near here”) showcases the best of Malaysian destinations and attractions, many of which remain unknown even among tour companies, according to Lee. Theme parks, particularly Legoland and Hello Kitty Land in Johor; Penang (known for its food, beaches and heritage); and food tours are popular with locals, he added.

As well as the well-established, bi-annual MATTA Fair, which attracted 91,664 visitors in September 2015, fairs are also being held with a specific focus on the domestic market. The Malaysian Inbound Tourism Association held its first domestic fair in January 2016, with a specific focus on the northern state of Kedah. More than 12,500 people attended the three-day event with sales of RM1.6m ($396,056).

The inaugural Cuti-Cuti 1Malaysia Dekat Je Travel Fair was held in February 2016 in Johor Bahru with some 60 industry participants. With 15,000 visitors expected, TM was forecasting sales of domestic tour packages to reach RM1m ($247,535).


Simplified visa rules, and the rollout of e-visas, crucially important Chinese tourists, should help the country to meet its 2016 targets. Initiatives across ASEAN borders and improved connectivity should provide a foundation for growth, encouraging more long-haul visitors to add Malaysia to their regional itineraries, at a time when the decline in the ringgit only adds to the country’s affordability. However, Malaysia cannot rely on being good value forever – it must also deliver on its promises to provide a unique and sustainable tourism experience.