Tourism players must rethink their approach

PIVOT – that is the only way the local hospitality industry can survive in the wake of a slew of cancellations and low occupancy in the last two months or so.

The Malaysian tourism and hospitality industry faces short-term headwinds from geopolitical tensions – the Iran-related conflict disrupting long-haul flights and causing cancellations – leading to sluggish international bookings and lower occupancy in some segments.

Occupancy rates at Kuala Lumpur hotels are down to about 50% since the Middle East crisis began which has already impacted the industry.

But the school holidays which starts today coupled with an overlap of several public holidays, including Hari Raya Haji (May 27), Wesak Day (May 31), and the King’s Birthday (June 1), gives the industry a tentative foothold to build momentum.

Sources indicate that the Tourism, Arts and Culture Ministry has proposed to the National Economic Action Council (MTEN) – which met this week – to subsidise bundling packages for hotels, to the tune of RM80-100 depending on the type of hotels.

This means if you stay three nights or more, one night is free.

This is the carrot they hope will lure tourists.

But even if MTEN does not endorse this proposal, the onus is on the hospitality industry to pivot to special rates or bundling packages to attract tourists.

And with the upcoming long weekend and school holidays, the importance of domestic tourism should not be underestimated.

Families who normally would plan an overseas trip, are moving towards local destinations – Langkawi, Penang, Sabah and Sarawak.

Hotels and tourism players should capitalise on this. Exclusive offers, be it room discounts, F&B vouchers and guided tours, will be attractive to families who have decided not to travel abroad.

The Department of Statistics says that the hospitality and tourism industry directly contributes approximately 15.1% to Malaysia’s Gross Domestic Product (GDP).

Generating RM291.9bil in a recent full year, the sector acts as a vital pillar of the national economy, driving massive employment and foreign exchange earnings.

The sector is also a massive job creator, employing over 2.4 to 3.5 million Malaysians across hotels, restaurants, and transport.

The government cannot afford this vital sector to languish.

In the past we have given tax breaks for those who travel domestically. If you stay at a hotel or use local airlines you would get a RM1,000 tax rebate.

We should consider this relief for personal income tax for the 2026 assessment year.

For now, Visit Malaysia 2026 (VM2026) remains on track with ambitious targets of roughly 35-47 million international arrivals and RM147bil-RM329bil in receipts, supported by strong 1Q 2026 arrivals (over 10.6 million, up 5.4% year on year) and a resilient focus on regional/Asian markets.

While the conflict has caused disruptions to flight routes and travel corridors that transit through the Gulf, Malaysia’s tourism does not rely heavily on the Middle Eastern or European markets alone.

The majority of arrivals are driven by travellers from the Asean region, China, and India, which helps cushion the impact of losses from long-haul markets.

Domestic tourism remains the backbone of the industry. Robust domestic traveller volumes continue to drive hotel bookings and support local economies, sustaining the sector even when international travel patterns shift.

But although domestic tourism acts as a strong buffer while international recovery continues, short-term actions can stabilise occupancy and pivot to domestic/regional markets.

Lest we forget, the hospitality industry as a whole was decimated during the pandemic period. But we learnt from post-Covid-19 recovery tactics.

The Malaysian Association of Hotels and Tourism Malaysia should quickly initiate these proven pivots.

For starters, launch targeted “travel within Malaysia” campaigns with discounted mid-week/family packages, bundled with local attractions, F&B, and experiences.

Collaborate with Tourism Malaysia for joint promotions, vouchers, rebates or tax relief (eg, the proposed RM1,000 tourism tax relief).

Travel and inbound associations such as the Malaysian Association of Tour and Travel Agents are proven partners with airlines for joint fares and this, coupled with attractive room rates will be a win-win for the industry.

Hotels should offer dynamic pricing, last-minute deals, and group/corporate incentives to fill rooms. Convert some inventory for longer-stay or hybrid work-leisure packages.

And this cannot be emphasised enough. We need to improve infrastructure and service quality. Both the Tourism and Transport Ministries should address issues like airport efficiency, transport, signage, and check-in flexibility.

Domestic tourism has repeatedly proven its value as a stabiliser especially during our post-Covid-19 recovery, while regional strength and VM2026 momentum provide tailwinds.

By acting collaboratively and nimbly – focusing on value, accessibility, and unique Malaysian offerings – the industry can not only weather current dips but exceed targets through higher domestic/regional volumes and improved yield from quality experiences.

Success hinges on speed of execution and strong public-private coordination.