This article first appeared in The Edge Malaysia Weekly on March 1, 2021 - March 7, 2021
A travel agent for the past 40 years at a small travel agency in Kuala Lumpur, Sophia used to sell six to eight flight tickets a day. Now, she sells an average of one every three months.
Since the first Movement Control Order (MCO) imposed on March 18 last year, she has mostly been working from home. A typical workday is confined to entertaining calls from travellers awaiting their refund for cancelled flights or enquiring about the status of vouchers that were given in lieu of a cash refund. Occasionally, she helps travellers trying to get home on rescue flights and students bumped off flights.
Other travel agents tell of a similar narrative and the severe cash flow problems they are experiencing as business owners have to continue paying rent, wages and Employees Provident Fund and Sosco contributions. Those unable to survive have folded.
In the five months to Oct 31 last year, a total of 95 tourism agencies and operators of tourism activities went bust. Over the same period, 109 hotels and short-term accommodation providers ceased operations.
Now, any hope of a recovery appears to hang on the country’s Covid-19 vaccination programme, which has just commenced. Domestic tourism, while crucial to ensuring the industry’s recovery, can only do so much to plug the shortfalls suffered from the loss of foreign tourist dollars. Malaysia needs a healthy stream of inbound and outbound travellers to benefit the entire hospitality chain — from airlines and travel agents to accommodation providers and tourist guides to places of interest.
Tourism players expect the outlook to remain gloomy unless the industry receives some urgent help to kick-start things and regret the seeming lack of a concerted effort.
“Advance planning and/or announcement of those plans for the reopening of domestic and international tourism is absent. No one knows about any plans that the government is proposing. If there are any (preparations), none is being shared with the tourism industry,” Tunku Datuk Seri Iskandar Tunku Abdullah, group president of Mitra Travels, tells The Edge.
“Industry proposals and ideas have been received by the government but these have largely been ignored. And what the government has planned is not discussed with industry leaders. Industry associations receive only what the government releases to the media,” adds Tunku Iskandar, who is a past president of the Malaysian Association of Tour and Travel Agents (Matta), a former chairman of the Pacific Asia Travel Association (Pata) and who has been in the travel business for 50 years.
“What’s obviously not seen is the closing of inbound tour operators and travel agents. Many have closed, but because they are not really visible [like] as hotels and resorts, the government seems to be oblivious to such happenings.”
(See accompanying story on “Government in talks to form travel bubbles with China, Langkawi-Indonesia.)
Also in the doldrums is the hotel industry. The Malaysian Association of Hotels CEO Yap Lip Seng says that for every two weeks of the Movement Control Order (MCO), the industry loses RM300 million. This means that since MCO 2.0 started on Jan 13, the industry has already lost at least RM1.6 billion. And this is on top of the losses in 2020, which are estimated to stand at RM6.53 billion.
He points to the lack of initiatives to implement practical standard operating procedures (SOPs) to allow safe interstate travel amid the pandemic. He stresses that there is an immediate need for the government to consider imposing screening at state borders to allow the crossing of low-risk travellers and, in the near future, vaccinated travellers for a more efficient and effective way of controlling the spread of the virus while allowing the tourism and hotel industries to gain from domestic tourism.
“The government has repeatedly sacrificed tourism and hotels by consistently imposing a blanket ban on travel whenever there is a spike in Covid-19 cases, although the industry has long proved to have complied with operational SOPs and even introduced its own additional SOPs to ensure the safety of travellers and guests,” says Yap, adding that a forward blueprint on the reopening of borders and SOPs is also badly needed.
Professor Datuk Seri Dr Victor Wee of Taylor’s University — an economist who has spent 10 years with the Ministry of Tourism, Arts and Culture and its marketing arm Tourism Malaysia — says that for the tourism business to rebound after the pandemic, it is important to rebuild confidence in travel. “The measures are wide-ranging and many of them fall within the scope of government actions.”
He stresses that government intervention is crucial to preventing the closure of tourism businesses and creating conditions for tourism growth. “As a result of travel restrictions and border closures, tourism businesses have had to cut costs and draw down on savings during this period when business income has practically evaporated,” he says.
“Travel businesses operate on small margins. When a wide range of timely information is available on the internet and online travel agencies and booking sites offer competitive rates, any abnormal profit would have been competed away.
“The pandemic presents a real challenge to the staying power of these companies to remain in business. Many profitable and well-run businesses have come under severe pressure during the pandemic.”
Wee says industry players should be supported — whether through soft loans or government-guaranteed loans with flexible repayment terms, tax relief on corporate tax and property tax or business tax relief — so that they can remain in business and be prepared for a rebound. Tourism businesses would rather not depend on government subsidies if the right conditions could be created for the return of tourists and business growth, he adds.
In the event that tourism activities are not permitted across the board soon, we can expect to see more businesses folding, jobs lost and the loss of the country’s competitiveness as a tourist destination, industry players warn.
Not taking immediate action will push Malaysia back by many years whereas those countries that are still actively planning, marketing and promoting — such as Turkey and the UAE — will be ready to surge ahead when borders reopen, says Tunku Iskandar.
He fears Malaysia may no longer be a top-of-mind destination for foreign tour operators as other countries continue to promote themselves in the international market. “We will have an uphill climb in trying to regain markets when borders reopen, whereas we should continue with a level of presence in the marketplace,” he urges.
Citing the example of the airline industry, Tunku Iskandar says, “Not many people pay attention to the woes of airlines these days. They are left to fend for themselves. AirAsia gives the appearance of being agile in shifting to other businesses, but after laying off so many pilots and cabin crew, it will not be easy to restart.”
Yap concurs. “When the world is ready to travel again, Malaysia will not be ready to receive them. And when we are eventually ready, we would have fallen further behind compared with our neighbouring countries.”
Last week, Tourism, Arts and Culture Minister Datuk Seri Nancy Shukri encouraged the public to support tourism activities in states under the Conditional MCO. But interstate travel, even between CMCO states, is barred. So how much and who does domestic tourism help?
“Domestic tourism has indeed helped to support the industry and soften the severity of the negative impacts of the pandemic. But domestic tourism cannot compensate for the loss of international tourism,” says Wee.
He adds that due to the lockdowns this year, even domestic tourism will be affected. He estimates that domestic visitor arrivals would have to be 195 million to 200 million to be able to bring in receipts equivalent to the amount of international tourism receipts in 2018.
“This will be impossible to achieve,” he points out. In 2018, earnings from foreign tourists amounted to RM84.1 billion, a tad lower than the RM86.1 billion recorded in 2019.
Wee gives the examples of five-star hotels, convention halls, travel agencies, tour bus operators and tourist guides, which domestic tourists have little use for. “Leisure tourism is expected to recover faster than business tourism that is linked to high-value tourists.”
Based on the schedule of the Covid-19 vaccine rollout, frontliners will be inoculated first, followed by the elderly and high-risk groups in April. Vaccination for the remainder of the population will commence in May.
Yap opines that the tourism industry and hotel employees should also be considered for priority vaccination to build the confidence of travellers. In January, Singapore started vaccinating workers in the hotel industry as they are seen as a “critical pillar” of the city state’s economy.
Meanwhile, Tunku Iskandar believes that from 3Q2021 or 4Q2021, there will be tourism to and from neighbouring countries and regional markets beginning with short-haul destinations, and by 1Q2022 or 2Q2022 to long-haul destinations. His caveat, however, is that much of the recovery will depend on the vaccination levels and destination countries achieving 70% to 80% coverage so that travellers have the confidence to travel and airlines can restart flights.
Yap expects to see positive signs of recovery for the domestic market in 1H2022 based on Malaysia’s expectation that 80% of the population will be vaccinated by the first quarter of next year. He projects a recovery for international tourists to only happen in 2H2022.
But to reach levels achieved in 2019, both Tunku Iskandar and Yap believe it will take about four years to get there — similar to the time frame projected by the World Tourism Organization.
Wee estimates that there would have to be effective control and abatement of Covid-19 to reach pre-pandemic levels. “The cost of travel after the pandemic is expected to rise and the cumbersome airport experience will dampen the pent-up demand for travel, which has turned into a lifestyle. Business tourism is not expected to recover to pre-pandemic levels because meetings will increasingly go online to reduce costs and to avoid the onerous procedures connected with air travel,” he says.
“Business class passengers on full-service airlines are important in subsidising the airfare of passengers in the economy class. With the reduction of business travellers, the cost of flight tickets is expected to go up, which will lead to a reduction in air connectivity and the slowing of regional integration within Asean.”
Referring to data released by digital marketing solutions provider for the travel industry Sojern, Wee says forward searches and bookings for flights and hotels will remain weak despite vaccine news and show minimal improvement until November 2021.
“The truth of the matter is that the pandemic will continue to fester unless the vaccine gets to every country. If a major population of the world is not vaccinated, the rich countries will not be protected. The coronavirus will keep mutating and surge across the globe,” he points out.
Wee cautions that countries will not be able to do much on their own. Instead, collaboration at the regional and global level is required to establish mutually acceptable protocols to ensure the safety of travellers as well as destinations.
In an ideal situation, there would be a need for consensus between governments, the World Health Organization and the International Civil Aviation Organization to adopt a single document or app containing passenger data that can be used globally for inbound or outbound travel.
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