Tourism bound for a pleasant journey

THE inbound tourism sector in Malaysia is not yet back to where it was before the Covid-19 pandemic, but there are some positive signs.

The buzz stems from two main factors – Visit Malaysia Year 2026 (VM 26) and Malaysia’s role as chair of Asean this year.

An obvious beneficiary from any boost in tourism is the local consumer sector, which has been dragged down by prolonged boycott activities and weak consumer sentiment.

The Bursa Malaysia consumer products and services index had been on an upward trajectory since late 2023, before seeing a decline of 10.5% to date in January 2025 after peaking in May 2024. On the other hand, the FBM KLCI has seen gains of 9.1% in the past year. iFAST Capital research analyst Kevin Khaw Khai Sheng says the consumer and aviation sectors are direct beneficiaries of the tourism theme.

“The consumer sector’s under-performance this year is in part due to the weaker results of Genting Bhd and Genting Malaysia. Other companies like QL Resources Bhd and 99 Speed Mart Retail Holdings Bhd are actually showing decent growth.

“Increased consumption activities will benefit the consumer sector, with the anticipated uptick in tourism next year, underpinned by government-supported measures,” he tells StarBiz 7.

However, Khaw has a neutral view on the tourism sector with the market not expecting a huge rebound.

Gaming stocks may also ride on a likely upswing in foreign visitors. This follows a subdued performance throughout 2024 with share prices of gaming counters declining by 17%.

UOB Kay Hian Research expects the gaming sector’s share prices to recover gradually, albeit at a modest momentum, in the first half of 2025.

Tradeview Capital CEO and founder Ng Zhu Hann favours retail real estate investment trusts (REITs) for tourism-related investment ideas.

“Some REITs like Sunway-REIT, IGB-REIT and Pavilion-REIT, will benefit from higher tourist footfall in the malls,” he says.

Ng adds that consumer stocks like Focus Point Holdings Bhd, Carlsberg Brewery Malaysia Bhd and Heineken Malaysia Bhd are well-positioned to gain from an increase in tourist numbers.

“The outlook of consumer discretionary names like Berjaya Food Bhd, however, which have been subjected to boycotts, remains challenging as their domestic consumer base far outweighs contributions from foreign tourists,” he says.

Any additional positives in the tourism sector could come from government supportive measures or a potential rebound in Chinese spending, which Khaw identifies as the “dark horses” for the space.

“Looking at the previous Golden Week holiday, while Chinese spending is still lacklustre, it has improved slightly from two years ago. We are still waiting for more catalysts.

“Chinese consumers have lofty savings, but they are not spending much now after losing confidence as a result of structural issues in China,” he says.

As of August 2024, Chinese tourist arrivals reached 2.3 million, below the five million target, a goal that is unchanged in 2025.

Even so, Maybank Investment Bank Research remains optimistic that the target can be achieved this year, marking a 60% increase from 2019. The research outfit also projects that Chinese tourism expenditure in Malaysia could double to more than RM30bil in 2025 vis-à-vis 2019.

Putrajaya has allocated RM550mil in Budget 2025 (up from RM350mil) to boost tourism, with RM110mil earmarked for enhancing tourism areas, fostering ecotourism collaborations and supporting Unesco heritage nominations.

Although this is the highest- ever investment in the sector, Malaysian Association of Tour and Travel Agents (Matta) president Nigel Wong says it is not enough.

“Matta had requested RM1bil. Nonetheless, half a billion is still a positive outcome,” he tells StarBiz 7.

According to Wong, targeted marketing is key to effectively utilising these funds.

“We can’t put all our eggs in one basket. Focusing too much on a single market is not a wise move. Today’s travellers are very specific about what they want, so we must drill down and focus on distinct market segments,” he says.

Funds should also be made more accessible to industry players for overseas contracting, partnerships and other tourism efforts.

Malaysia must work hard to become a more business-friendly destination with business travel returning in force.

“We may not be able to compete with Asean powerhouses like Singapore, but there is definitely a lot of potential to host business events,” Wong says.

For 2024, the country targets to receive 27.3 million international tourist arrivals with RM102.7bil in tourism receipts. However, it seems that these targets may not be met.

For the first 10 months of 2024, international tourist arrivals reached only 20.6 million. This also falls short of the 26.1 million recorded in 2019.

Inflation, currency fluctuations, intense regional competition and a slow Chinese economy have been the persistent headwinds.

In fact, Malaysia had been missing foreign tourist arrival targets even before the pandemic, from 2017 to 2019.

This has not stopped Tourism Malaysia from setting higher targets of 31.4 million and 35.6 million for 2025 and 2026, respectively.

“Airlines still face challenges to field sufficient planes and routes to accommodate demand. Going into 2025 and 2026, we are still looking at potential disruptions in the aviation-related supply chains.

“That said, the goal for VM 26 is achievable given the renewed interest for travel from China. Moreover, India is an up and coming market.

“If the government continues to offer incentives by extending the visa-free travel period for Indian tourists for instance, we will have a very high chance of securing a larger share of this market,” Wong says.

In December 2023, the government announced a 30-day visa-free entry for travellers from China and India. This is set to remain in effect until the end of 2026.

“Countries like Japan and China also implement the same strategy, so there is no doubt about its effectiveness. However, it must be a long-term programme to draw more tourists,” Wong says.

Undeniably, the competition for tourist volumes and revenue from neighbouring giants like Thailand, Indonesia and Singapore is tough, but Malaysia is not without its own merits.

“We are a product-rich tourism market. The key is to make sure that tourists know these products are available.

“Additionally, a more aggressive push is needed to promote Malaysia, particularly to short-haul and mid-haul markets. There are a lot of untapped opportunities in intra-Asean travel,” Wong notes.