In view of the mooted airline connection between Turkey and Malaysia, I have made a particular study of Malaysian tourism.

2.2 How important are Foreign Tourists to Malaysia.
Earnings from foreign tourists into Malaysia represent only about 5% of Malaysia’s foreign exchange earnings.  Analysis of the recent past, however, indicates that the raw number of tourist arrivals is dropping and so is the earnings from foreign tourism when expressed in $US terms.

It might be said that foreign tourism only represents 5% of Malaysia’s foreign exchange earnings and so this drop is not serious.

Putting it another way, however, starting from such a low base point, Malaysia might expect to see scope for quite a dramatic improvement.

It is even more worrying that, despite the downward devaluation of the Malaysian currency, earnings from foreign tourism have not risen.  When a currency drops, we normally expect to see a rise in tourism activity since it becomes cheaper to travel to that country.  This has not happened in Malaysia, both the raw number of arrivals and the earnings figures are dropping at a time when they should, ceter paribus, be rising.

2.2 How is Malaysia performing relative to other Asian destinations?

2.2.1 1997 Compared to 1996
The number of foreign tourist arrivals into Malaysia dropped 13% from 1996 to 1997.  Only Hong Kong (drop of 11.1%) and Singapore (drop of 1.3%) experienced a drop.  On the other hand China with a rise of 12.6% and the Philippines with a rise of 9.5% head a list of seven other Asian destinations which experienced positive growth in the number of tourist arrivals from 1996 to 1997.

When the figures are expressed in tourism earnings in US$ terms the figures are even worse.  Malaysia, for instance experienced a 16.31% drop.

2.2.21998 Performance
Though the 1998 figures are not complete, we see an even more worrying trend in the 1998 figures compared to 1997.  Again, Malaysia heads the list of under performers with a drop of 27.3%.  The region as a whole is experiencing a sever slump in 1998 with drops of foreign tourist arrivals into various countries as follows: Indonesia a drop of 22.7%, Hong Kong 21.0% drop and Singapore a drop of 17.2%.  Malaysia with its drop of 27.3% heads the list of seven countries experiencing a drop in tourist arrivals as against only three in positive territory (headed by China with a rise of 10.6%).
 

2.3 Malaysia might well say “Wish you were here!” What is happening in Malaysia?

Asia week reports:
“Security concerns. Hound Malaysia . . . Protests by supporters of ousted deputy Prime Minister Anwar Ibrahim . . . have turned violent.
Tourism arrivals have dropped 25%, complains Prime Minister, Mahathir Mohammed, who blames foreign media for playing up the disturbances. Overall, hotel occupancy has fallen by eight percentage points to 55%.  The brand-new 645-room Mandarin Oriental Hotel . . . has held back on a full opening because of weak demand.  In part, that is because fund managers and other foreign investors with fat expense accounts are staying away after Malaysia imposed capital controls in September.
 

2.4 How Should Air-X Respond
Dismal as the tourism picture is for Malaysia, it could be seen as an opportunity coming off such a low base.   It must be only a matter of time for the officials to begin to address the problem.  Perhaps Malaysia will change some of its policies and mount an effective promotion of its tourism destinations.

2.5 Recommendation
It is recommended that Air-X proceed with the opening up of the new route from Istanbul to Kuala Lumpur.  The current slump, while frightening off some operators, represents an opportunity to enter the market now and take advantage of an expected rebound in the near future.