The outbreak of Severe Acute Respiratory Syndrome (SARS) and the Iraq war were the twin issues that wreaked havoc in world travel and tourism. The Malaysian tourism industry was particulary hard hit in the 2nd quarter. StarBIz spoke to a panel of five, comprising representatives from the government and private sector, to review the damage and lessons to be learnt. The panellists were the director-general of the Malaysia Toursim Promotion Board Datuk Abdullah Jonid, Malaysian Association of Tour and Travel Agents (MATTA) president Tunku Datuk Seri Iskandar, Malaysian Association of Hotel Owners (MAHO) president Tan Boon Lee, Malaysia Retailers Association deputy president Rashid Adam and Malaysian Food and Beverage Executives Association president Samsarujee Omar. StarBiz was represented by general manager (advertising and business development) Datuk Linda Ngiam, senior editor (corporate) David Chow and deputy news editor (business) Hafidz Mahpar. The first part of discussions appears below.
STAR: To what extent has your sector suffered from the twin evils of the war in Iraq and the outbreak of SARS recently?
Tan: For the hotels, the SARS outbreak was more drastic for us than the war in Iraq. On the whole, most of our members suffered more than 50% drop in occupancy. We were doing pretty well after the Formula 1 in March with around 65% to 70% occupancy. In April, we went down to a low of 30% to 35% and then, of course, food and beverage (F&B) also came down.
Rashid: We are also affected like the hoteliers, with the drop in sales ranging from 10% to 50%. Generally, the retailers were not badly affected by the Iraq war - sales dropped only about 5%. This was because almost 95% of our goods were supplied by local manufacturers. But the SARS epidemic really affected the retailers because we rely on people to come and do their shopping.
On a normal day, people would come out with their family, but when SARS started, the number of customers reduced drastically. They did not come out with their whole family to avoid exposure to the public and the purchase per customer declined, which translated into reduced turnover, especially in April.
The Malaysia Retailers Association requested the government, through the Ministry of Domestic Trade and Consumer Affairs (MDTCA), to allow retailers to have discount sales so as to encourage spending before the next Mega Sales scheduled in August. And in May, the MDTCA allowed retailers to do sales and special promotions to get people to come and do their shopping. So with that good news and customers starting to come in May and June, our turnover showed an upward trend compared to April.
Iskandar: The Iraq war had very little impact (for tour and travel agents) because we factored it in back in October and November, as we knew there would be a war or some major thing happening in the Middle East this time. So that was discounted and taken care of, but by the end of May, inbound travel for April and May especially was down between 65% and 70% depending which market the members were involved in.
Outbound was almost the same – it was down some 60% to 70%. Even domestic travel was down about 30%. All this was very worrying. In April and May, tourists from China, Hong Kong and Taiwan, one of the top three markets for inbound to Malaysia, went down to practically zero. The first week of May was a long holiday in China and of course we got practically nothing out of that. As for outbound to destinations like Hong Kong, China and Taiwan, they were no longer among the top five destinations. Even that came down to zero, so you can imagine the impact on those agents who were more focused on these markets and destinations.
Samsarujee: Food and beverage (F&B) outlets were not badly impacted by the Iraq war. But when SARS started, we were in quite a bad shape. Some of the hotels in Johor suffered as much as a 50% drop in F&B business. But lately, the customers have started coming back. The most badly affected were the hotels geared towards foreigners or counting on seminars involving foreigners.
Some of the seminars were postponed to next year, while others just held theirs elsewhere. All that affected the income of the wait staff, as they depend on the service charges. Their salaries are low, as they earn only a few hundred ringgit a month. The hotels are only asking their management staff to take leave but not the waiters or waitresses. They have already started doing so, even though things have started to pick up.
As for the island resorts like Tioman, people from Kuala Lumpur are going to these places. Berjaya Air from KL is full but Berjaya Air from Singapore has only eight passengers on my last flight. Then I went to the Salang Bay area and there were virtually no foreigners at all. But the second time I went there, they said things were picking up.
For F&B business, as long as the hotels focus on local business, their business is only slightly affected. But if they depend on foreigners, it is more difficult.
Star: Datuk Abdullah, what is your view in terms of the plunge in tourist arrivals?
Abdullah: First of all, let me compliment The Star for its initiative in having this roundtable discussion, from which we will hopefully get a much better, all-rounded view on the effects of SARS on the entire tourism industry.
There has been too much talk on SARS although Malaysia is not a SARS affected country as classified by the WHO (World Health Organisation).
Thus we have projected an image that we were part and parcel of the SARS affected countries. Such misconception has resulted in many of the holiday travellers having second thoughts in their holiday plans not only to this part of the world but also to countries like Malaysia.
It is so sad, because we could have capitalised on the opportunity that we are not a SARS affected country by telling the whole world that we are still safe to be visited by them. Now, what we have to do is to reposition Malaysia again as the safe destination for world travellers.
SARS no doubt has affected most countries in this part of the world, including Malaysia. Hong Kong, in particular, is suffering, and so are Thailand and Singapore. By the same token, other countries in the region are also affected.
In fact, when we talk about tourism per se, the industry has been through many setbacks over the past few years.
Before I came onto the scene, the industry had to go through a number of setbacks - the haze, Coxsackie, cholera and so on - to the extent that by 1998, we saw a drastic decline in tourist arrivals to 5.55 million as against the highest in 1995, when Malaysia recorded arrivals of 7.46 million.
But after that, since 1999, because of the aggressive promotional drive undertaken by the government, we were able to generate greater interest of travellers to the country. In 1999, we recorded a 48% increase in arrivals to 7.93 million tourists. Then it went on to 10.2 million in 2000, 12.77 million in 2001 and this was despite Sept 11.
Last year, we managed to record a 4% modest growth despite various negative publicity on terrorism, culminating in the unfortunate incident of the Bali bombing.
SARS came in after all these. And we were just enjoying a growth trend in January and February of 2003, with arrivals touching over 1 million per month.
We were on target, at the very least, to achieve or sustain the momentum that we were able to achieve in 2002.
But suddenly, we were confronted with SARS immediately after the invasion of Iraq. The invasion of Iraq had very little impact on the tourism industry as a whole.
It may have affected travellers from the long haul market from coming to Malaysia, but that notwithstanding, the number is quite negligible.
But the blow from SARS has been swift and to a certain degree, quite cruel. In March, we saw a drastic decline in arrivals by 35.6%, and then in April, we experienced a further decline by 58.6%.
In other words, in April we only received 457,926 tourist arrivals in the country, as against 1.1 million in April last year.
From January to April, on record the total number of arrivals to Malaysia was only 3.33 million as against 4.18 million in January to April 2002. This means we were down by one million tourists by end-April.
If you take into consideration an average visitor spending of about RM2,000 per visit, then we are talking about a loss of RM2bil in tourism receipts up to April.
For May, based on the preliminary figures, we were still down by 53.2%. We used to receive 1.14 million tourists in May 2002. This year May the total number of arrivals was about 539,000 tourists, which is not really that encouraging.
But then if you compare the April and May figures, we see a positive growth pattern. In April, we received 457,926 tourists and in May, the number had gone up to 539,000, which means to say that people are slowly coming back to Malaysia.
Hopefully, this trend will continue until the end of the year because what we hope to achieve is to get back the figures we have been able to achieve for 2002.
Star: Actually what you raised is very interesting. It is true that although we are not a SARS infected country, we are being sort of lumped together with all the other SARS infected countries such as Singapore, China and Hong Kong. Tourists, especially those from the Gulf States, have not returned in any great numbers. Last year, for example, there was a huge influx of tourists from the Middle East. Is the Malaysia Tourism Promotion Board going to do something about this?
Abdullah: You're posing me the same question as MTEN (National Economic Action Council). MTEN has asked me what would be the kind of strategy, the kind of action plan that we have in terms of stimulating the interest of Middle Eastern travellers to Malaysia.
But before I touch on that issue, let me re-emphasise one point. As I've said earlier, we have overplayed, to a certain extent, the situation and have created a feeling of fear among travellers to come and visit our country.
I'm not blaming those people who are involved in generating this publicity, but what I wish to emphasise here is that the media too, has a role to play.
Hyping issues such as SARS and so on, by putting them right on the front page of our local newspapers does not really help any industry, least of all tourism, because such news items can be picked up by the international media and it can be further publicised to a much greater degree, in most of the tourist-generating markets of the world.
This is happening in the context of the Middle Eastern market. There is fear among most of the travelling public in the Middle Eastern countries to come to Malaysia as a holiday destination due to SARS and a number of other reasons.
Number one, their geographical knowledge of Malaysia vis-a-vis other affected countries is not that high and since we are located in the SARS affected region, therefore we are deemed unsafe to be visited.
We must therefore be sensitive to all this, because at the end of the day, if you're not sensitive, the implications of your action can be far-reaching, can be tremendous not only on tourism but also on investment and trade. SARS to me is like what the Asian financial crisis was in 1997/98.
During the financial crisis, if you had gone to the bank and seen the exchange rate going yo-yo, it would've put fear in you. I was in the bank at that time. I saw our ringgit diminishing by the minute, by the second, and I do not have the kind of wealth that some other people may have. Whatever I had was what I had earned all through my working life and I saw it diminishing, and it created fear in me.
By the same token therefore, SARS also brings fear to the general public. Thus what SARS and the Asian financial crisis have in common was the creation of a crisis of confidence.
Because, why should investors come to Malaysia during the Asian financial crisis? They were not comfortable, the ringgit was going down in value until the Government stepped in and pegged it to the US dollar. That in itself stabilised consumers' confidence. Now we're dealing with the same crisis of confidence. To me, there should be less talk, there should be less publicity (on SARS).
Star: But the thing about it is that people in the Gulf States are not aware.
Abdullah: I would come to that. This is my preamble to the whole thing.
Star: But Datuk, if we didn't publicise SARS in the newspapers, wouldn't the rumours and word of mouth be more damaging? Because word of mouth can be even more powerful than the newspapers.
Abdullah: Okay. What I'm saying is: must you position the news as a front page story? There's no death. You say, two RMN guys died of probable SARS, and in the end, it was not so. What have you created? You have created the feeling that something's really wrong with Malaysia. The next day you said there's no SARS, but the damage had been done. Don't get me wrong. I'm very passionate in my job (Laughter).
Rashid: It's true what Datuk said. Sometimes the headlines were so bold: Two dead from SARS. But when you read the story, it's in Beijing. This was not related to our own country and it made people scared.
Abdullah: So, having said all that, what we do as far as the Middle Eastern market is concerned? During the height of SARS, we suspended all our campaigns in the Middle East because of many factors. Number one, it was not their holiday season yet. The Middle Eastern holiday season begins from the 3rd week of June until mid-September, so we did not want to waste the limited resources that we have by going on a year-to-year kind of campaign.
That's why most of our advertising campaigns, with the exceptions of China, Hong Kong and Taiwan, were suspended until May 1. We resumed our campaign immediately after that to stimulate greater interest of Middle Eastern travellers through our advertising blitz over the print media and various terrestrial and satellite TV networks, including CNBC, Al-Arabia, and so on.
Star: You've started all these?
Abdullah: Yes. We are spending a great deal of money to make sure that the publicity on Malaysia is heightened throughout the Middle Eastern countries.
The next thing we did was to organise a regional meeting of Tourism Malaysia officers, MAS managers, together with our ambassador in Abu Dhabi. This meeting on May 4 was to get exclusive feedback from the MAS managers in all the stations, be they in Jeddah, Beirut, Lebanon, Cairo or United Arab Emirates, in addition to the feedback from our three offices in the Middle East (one in Dubai looking after United Arab Emirates and the Gulf region plus Kuwait, another in Jeddah responsible for Saudi Arabia, and the third in Istanbul, Turkey).
This meeting was co-chaired by me and the MAS managing director in the presence of our ambassador. Having got all the necessary feedback, what we have decided and are implementing, are the following:
One, because misconception becomes an issue of great importance to be addressed, we have decided to appoint professional public relations agencies – one in Dubai looking after United Arab Emirates, the Gulf and Kuwait area; another in Jeddah looking after Saudi Arabia; one in Lebanon; and the other one in Turkey. We are using the combined resources of MAS and Tourism Malaysia. We don't want to tackle the issue of SARS and the crisis of confidence through advertising. So our strategy is to tackle the fear of travel to Malaysia through an effective, efficient, professional public relation exercise.
Number two, we decided to send a special team on road shows to most of the countries in the Middle East and this special team includes a representative of the medical profession in Malaysia.
We’ve done three roadshows – one covering Jeddah, Riyadh, Teheran and another covering Abu Dhabi, Dubai, and Sharjah (UAE). Recently, we sent another team to Doha, Bahrain, Oman, Qatar and Kuwait, together with a medical officer from the Association of Private Hospitals of Malaysia, to tell the travel agents, tour operators and the consumers there that Malaysia is a safe place to visit – we’re SARS-free. We have to take this initiative in order to convince these people.
The third thing we’re doing is offering special, attractively priced packages to the travellers from the Middle East, done together with MAS. These packages have been launched under the name Showcase Malaysia.
The fourth thing is to develop a loyalty programme by establishing smart partnerships with selected operators and airlines in the Middle East. We have supported Emirates Holidays, as a good example, in the promotion of their packages to Malaysia. During my last visit to the Middle East (early May), I took the opportunity to meet senior officials from Saudi Airlines, Gulf Air and Emirates Airlines and a few tour operators to establish that brand loyalty programme in the Middle East market.
My minister had a very good meeting on May 27 with seven airlines from Middle Eastern countries. All the airline representatives were duly briefed on the various initiatives undertaken by the government to ensure that SARS is well under control in Malaysia, that we’re well protected from SARS, and at the same time we appealed to them not to suspend but to continue their services to Malaysia.
Most of the airlines were very responsive and have given the undertaking to support our initiatives to draw in more travellers from the Middle East. For example, Saudi Air is prepared to even launch over 100 additional flights into Malaysia depending on the demand.
My minister has just returned from his working visit to Turkey, Syria, Jordan and Lebanon. In 10 days, the minister and his team were on a promotional drive to these countries to convince them on how attractive Malaysia is in order to increase tourist traffic to Malaysia, besides fostering two-way tourism relationships between those countries and Malaysia.
During the last Colours of Malaysia festival in late May, we brought in, as an initiative to convince the world that Malaysia is safe, 1,005 invitees from over 30 countries to not only witness the Colours of Malaysia but also to go on a familiarisation visit throughout the country. None of them was affected by SARS. Fifty-nine of the invitees came from the Middle East, with at least four TV filming crews.
These are the few things we’re doing. In the context of the limited resources that we have, we don’t have the stimulus package the private sector is getting.
Iskandar: We haven’t gotten it yet... (laughter all round)
Abdullah: Perhaps it would also be good for us to take note of the initiatives undertaken by our neighbours. Singapore is spending S$200mil in its new campaign known as Singapore Roars.
It’s going to be an extensive promotional blitz to convince world travellers that Singapore is no more a SARS-affected country. The Thai government has allocated about US$30mil to do an extensive PR exercise and road show to draw in visitors to Thailand, and it has come out with a new campaign, Thailand Smiles Plus.
Hong Kong has also made some initiatives to stimulate interest among world travellers to visit Hong Kong.
Malaysia is doing it by combining the resources of Tourism Malaysia with those of MAS and the private sector.
l Transcribed by LIEW LAI JING