Cleared for take-off: Malaysia set for tourism boom

Malaysia has traditionally been a popular destination for tourists in the Asia-Pacific region and this has been reflected in the country's relatively high volume of inbound tourists. The number of international visitors to the country steadily increased from 22.1 million in 2008 to 25 million in 2012. The five main countries from which Malaysia's inbound tourist arrivals originate are Brunei, China, Indonesia, Singapore and Thailand.

Malaysia enjoys a strong position in the global tourism sector and was ranked the ninth-most-visited country in the world in 2011 by the United Nations World Tourism Organisation (UNWTO). The growth in Malaysian tourism was driven by continuous government initiatives aimed at promoting tourism in the country and increasing investments in infrastructure development.

The Malaysian Government is committed to further developing the country's tourism in collaboration with private companies and has set the target of '2020:36:168' This states that, by 2020, Malaysia expects to record 36 million tourist arrivals and MYR168 billion in tourist receipts. Based on this goal, the government expects the tourism sector to grow to three times its current size and contribute a weekly tourist expenditure of MYR3 billion to the country's GDP in 2020.

Malaysia's domestic tourism volume is expected to increase at a compound annual growth rate (CAGR) of 7.54% over the forecast period, which will mainly be driven by Malaysia's government initiatives, rising disposable income levels and infrastructure improvements. Exotic tourist destinations in remote parts of Malaysia are expected to be promoted by travel agents and government agencies to encourage more domestic tourism.

Medical and outbound tourism

Malaysia has emerged as one of the fastest-growing destinations for medical tourism in Asia. The country's medical services cater to Asian travellers, and the rising demand for medical tourism in the country is mainly due to Malaysia's affordable healthcare services and the rising cost of healthcare in developed countries.

The level of outbound tourism is increasing steadily in Malaysia, due to the country's economic growth and rising disposable income. The emergence of low-cost carriers (LCCs), increased airline seat capacity and attractive holiday deals have also supported the development of outbound travel by offering affordable journeys to popular destinations. A new LCC terminal, KLIA2, at the Kuala Lumpur International Airport (KLIA), is expected to open in June 2013. KLIA2 will be the largest low-cost terminal in South-East Asia, servicing 45 million passengers a year.

Malaysian aviation market dynamics changed significantly when the country's two major airlines, state-controlled MAS and the LCC AirAsia Group, announced an alliance in mid-2011. The national carrier MAS and its unit, Firefly, will focus on premium travel, while AirAsia and its long-haul affiliate AirAsia X will focus on providing low-cost travel. In Malaysia, AirAsia Group, AirAsia X and the MAS group control 80% of the total airline seat capacity.

A host of new hotels are expected to open in Malaysia over the forecast period. In 2012, Grand Hyatt debuted in the country with the Grand Hyatt Kuala Lumpur. The Majestic Hotel Kuala Lumpur by YTL Corporation reopened in December 2012 following a MYR250 million refurbishment. Other major hotels due to open in 2013-14 include the St Regis and W Hotel. The states of Penang and Langkawi will also be the focus of increased hotel construction over the forecast period. Qatar Holding LLC and Jerantas are collaborating to open the first Harrods Hotel in Malaysia.

Malaysia tourism boom reflected in increased airline capacity

The number of seats available on airlines increased from 67 million in 2008 to 86.8 million in 2012, rising at a CAGR of 6.67% during the review period. The number of seats sold also increased from 48.3 million in 2008 to 68.1 million in 2012, at a CAGR of 8.99%. Timetric expects growth to continue over the forecast period, albeit at a slower rate, as the number of seats available and seats sold increases at a CAGR of 3.56% and 4.55%, respectively. The aviation market is expected to be driven by capacity increases made by AirAsia and Malaysia Airlines, while the construction of a new 2.6-million-square-ft terminal for low-cost airlines at KLIA is also expected to drive growth in traffic.

The number of seats sold by low-cost airlines held the largest share of the total seats sold in 2012 at 36.4 million, while full-service airlines accounted for 25.9 million seats sold in the same year. Low-cost airlines grew at a double-digit CAGR of 16.93% during the review period; much higher than the 3% CAGR recorded by full service airlines. The number of seats sold by low-cost airlines is expected to increase at a CAGR of 6.37% over the forecast period, while the number of seats sold by full service airlines is expected to increase at a CAGR of 2.32%. Leisure customers accounted for the highest share of the number of seats sold for low-cost and full-service airlines in 2012, and are expected to remain the main driver of growth in 2017.

The airline market's load factor, a measure of its capacity utilisation rate, increased from 70.9% in 2008 to 77.5% in 2012, and is expected to increase to 81% by 2017. Low-cost carriers posted a higher load factor of 80.3% compared with the 74.3% load factor of full-service carriers in 2012.

Total airline revenue increased from MYR20.3 billion ($6.1 billion) in 2008 to MYR21.7 billion ($7.1 billion) in 2012, rising at a CAGR of 1.69% during the review period. Revenue-generating passenger kilometres also rose from 95.8 billion in 2008 to 117.5 billion in 2012, at a CAGR of 5.25%. Total revenue is set to increase at a CAGR of 5.83% over the forecast period, while revenue-generating passenger kilometres are expected to rise at a CAGR of 4.69%.