PETALING JAYA: TA Research expects the tourism sector to remain a key economic support pillar in 2026, but warns that rising geopolitical risks, particularly the escalation of tensions in the Middle East, could make the government’s target of 47 million international arrivals increasingly difficult to achieve.
In its thematic report, the research house said the external shock comes at a sensitive time as Malaysia pushes ahead with Visit Malaysia 2026 (VM2026), which aims to generate RM329bil in tourism receipts.
While the campaign is backed by stronger connectivity, digital promotion and infrastructure upgrades, TA Research believes downside risks from disrupted flight routes, higher airfares, inflation and weaker travel sentiment may cap growth.
“Although government reports indicate that overall trade flows remain largely intact, the tourism sector is experiencing discernible headwinds.
“Travel advisories against non-essential travel to seven Middle Eastern countries –Iran, Iraq, Jordan, Kuwait, Qatar, Bahrain, and the United Arab Emirates (UAE) – have heightened uncertainty,” it said.
It noted that although visitors from Middle Eastern countries such as Saudi Arabia, Iran, Iraq, the UAE and Qatar account for only around 0.4% of Malaysia’s arrivals, or about 162,000 visitors, the broader concern lies in indirect spillovers because Middle Eastern hubs remain critical transit routes for Europe and other long-haul markets.
Flight disruptions and rerouting could, therefore, affect higher-spending travellers beyond the Gulf region.
TA Research estimated that under a downside scenario, Malaysia may receive only 44 million to 45 million international visitors in 2026, implying a shortfall of two to three million arrivals from the official target.
In a more adverse global environment, arrivals could ease further to 42 million to 43 million.
That said, regional demand remains a strong buffer. Singapore continued to anchor Malaysia’s tourism recovery, contributing 21.08 million arrivals in 2025, followed by China at 4.66 million, Indonesia at 4.27 million, Thailand at 2.5 million and India at 1.57 million.
TA Research said short-haul and regional markets are likely to remain the main drivers of tourism momentum because of proximity and stronger transport links.
Similarly, an analyst told StarBiz that geopolitical tensions in the Middle East, particularly the US-Iran conflict, could redirect some long-haul tourists away from the region toward safer destinations in Asean, including Malaysia.
“This could provide an additional tailwind for regional tourism flows but higher jet fuel prices could cause fares to escalate and could crimp travel demand,” he said.
TA Research highlighted Malaysia’s tourism sector has already exceeded pre-pandemic levels, with 42.2 million foreign visitor arrivals in 2025, up 11.2% year-on-year and 20.4% above 2019 levels.
Of this total, 26.6 million were overnight tourists, supporting stronger spending across accommodation, retail, food and transport. Visitor receipts for 2025 are projected at RM270bil.
It added that domestic visitor numbers hit a record 260 million in 2024, while 216 million trips were already recorded in the first nine months of 2025, keeping Malaysia on track for its 280 million domestic visitor target this year.
The research house expects tourism-related gross value added to continue expanding, with tourism contributing around 15.9% to gross domestic product under a slower-growth scenario, compared with a potential 16.2% under stronger conditions.
It sees consumer, property, healthcare, hospitality and real estate investment trust (REIT) stocks benefitting most from tourism-linked spending.
It highlighted Sunway-REIT, Capitaland Malaysia Trust
and IOI Properties Group Bhd as beneficiaries of stronger hotel and mall traffic, while consumer names such as Fraser & Neave Holdings Bhd and Farm Fresh Bhd could gain from higher retail and beverage demand.
