WILL the tragedy surrounding Malaysia Airlines flight MH370 affect tourism and retail? Retail specialists say no.
Says Retail Group Malaysia managing director Tan Hai Hsin: “The incident of the missing plane does not affect retail sales and tourist arrivals. Malaysians may be sad, but they will still go on with their current lifestyle.
“Tourists do not cancel or stop visiting Malaysia because of this air crisis. However, if the current haze continues, it will affect domestic tourists and Singaporeans will avoid the Klang Valley,” says Tan. Singaporeans make up about half of tourist arrivals.
CBRE managing director Allan Soo does not think it will affect the retail sector. “It is a tragedy at the moment and people are a bit jolted.
But in the medium and longer term, it should not affect the retail sector and tourism is growing. Boeing planes and Malaysia Airlines generally have good record.”
However, the haze is pretty bad and will impact tourism and retail, says CBRE executive chairman Chris Boyd. The Malaysia Retail Association also says that the missing plane tragedy has “no material impact at the moment.”
Hence, the dry weather, the haze and now the MH 370 tragedy is just a bumpy start to Visit Malaysia Year 2014.
Soo says the big question is What is the overall sentiment?
“Retailers are approaching the market with caution simply because there is this strong development momentum which has resulted in many more malls coming up. There is concern about the overall impact in the near term. They (retailers) were not doing so well in 2013 and it will be even dimmer in 2014. Against the Goods & Services Tax background, the retail sector will be impacted.”
However, Soo says the better malls and luxury goods brands are doing well.
“Malaysia is on their (luxury brand retailers) radar. In terms of the outlook, you have to look at what the future will be but if you take the short to medium term, 2014 will be tough,” he says.
However, he says retail has - and should always - be viewed with long-term lenses. December 2013 and January 2014 saw retailers enjoying double digit growth. That means a quieter February and March.
Soo says 2015 will be the year of the malls as more malls open. Hopefully, tourist arrivals will grow further.
Chinese travellers rose significantly for the first nine months of last year to 1.4 million from 1.2 million in 2012. Tourist arrivals totalled 18.8 million for the first nine months of 2013 (2012: 1.2 million).
Outlet malls like Johor Premium Outlets will put pressure on the normal typical malls because much of the sales will be captured by there (at outlet malls), Soo says.
“Chinese tourists are the best in the region. You can see that in Johor Premium outlets,” says Soo.
Soo says malls will also enter a two-tier market, like office buildings with little hope for bad malls.
“There will be a flight to quality in both office and retail market. It is not a simple case of just building and building and tenants filing in to fill the space. You have to do something to attract them to come, you have to upgrade and improve on a constant and consistent basis,” says Soo.
He says there is this misconception that architecture is enough but it is not.
“You have to have architecture and tenant mix. There is a need to build an environment, not just a shopping centre. Customers enter the place and is engaged. The experience will be good but that differentiation is difficult to quantify.
“What is the difference between Pavilion and Suria KLCC? It is the look and the feel, higher ceilings among other things. It does not have to be dramatic,” says Soo.