- With the vaccine rollout, do you think there will be revenge tourism in 2H 2021?
- Which holiday destinations will see the strongest recovery?
- How has the pandemic changed the character of the tourism industry?
- How soon do you think travel bubbles will start?
- Is now the right time to invest in holiday destinations e.g. Genting Highlands, Melaka, Bali or Phuket?
It’s hard to predict because the situation is very uncertain and fluid. Can we reach herd immunity by August when the percentage of those vaccinated is still very low? I am not sure. Are consumers confident enough to travel? This is subject to government operational and regulatory constraints.
Will there be revenge spending alongside revenge tourism? I hope so but will the economy be good enough for people to have enough disposable income to spend? Maybe yes on a personal level, but even then people are afraid to do advanced bookings due to such money being stuck with airlines and hotels as had happened in 2020. As of today, I do not see much forward bookings; at most it’s about 2 weeks of advance bookings.
Furthermore, due to the continuing ban on interstate travel as of early April 2021, most tourism vehicles which are based in Kuala Lumpur, Selangor and Penang, cannot travel interstate.
Corporate travel will lag behind leisure travel. MICE and business travel will take much longer to recover as people now can do online meetings on Zoom and other platforms.
Local destinations that will see the fastest recovery as seen in 2020 during the RMCO would be Langkawi, Penang, Melaka, the East Coast islands and Sabah and Sarawak (though the latter’s recovery is stifled by travel restrictions).
There are over 500 tourism establishments comprising Food & Beverage, theme parks, tour agencies and operators and transportation. Total foreign arrivals have declined by about 83% in 2020 compared to 2019. This translates to billions of ringgit of lost revenue. Domestic tourism itself cannot replace this lost revenue. Moreover, with schools opening up, fewer people will go on holiday.
As a result, the entire tourism landscape in Malaysia has changed. There is a reset back to zero – meaning we have to rethink how to rebuild our shattered industry. We are relooking at what packages are in demand, for example, adventure and ecotourism. Mass tourism and group tours are not doable due to social distancing rules. We must also adapt to consumer behavior, for example, allowing last minute booking flexibility and facilitating digitalization.
As for travel bubbles, we have been talking about it since March 2020, but until today, the ‘bubbles’ have all burst over the past one yea r; none has taken off. In the early days, potential bubbles include Australia and New Zealand; Bali and China, etc. I believe ASEAN should get together to agree on a consistent adoption of framework and adoption of vaccine passport or certification. This has to be a government-to-government effort. At this stage, the private sector can’t do much.
The process of starting travel bubbles won’t be so fast from what I have observed so far. I can’t see the ‘surging of business’ judging from the rate of vaccinations around the world. It’s a positive move forward but it will take much more than that to sustain the tourism market. And if the tourism market is not doing well, this won’t augur well for the property market either.
Yes, to some degree, the latent demand of pent up frustration of being home bound will see revenge tourism, as partially seen last December, where major domestic destinations were inundated, and there was good response to the hotel flexible promotional offers, with some of these yet to be fulfilled when MCO 2.0 was imposed in mid January 2021. Given that the vaccine roll out will take some time, the impact is likely to be in Q4 and 2022 rather than this year.
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Q3 2021 will be a reasonable expectation that current government to government discussions will be finalised and implemented with vaccine passports in place to permit safe travel without too onerous restrictions.
The typical popular places that will experience strong recovery will include Penang, Langkawi, Malacca, and Cameron Highlands. Sea resorts and island destinations will have their niche demand.
When it comes to investing in holiday destinations, yes it’s a good time to do so if the opportunity arises and the pricing is attractive given that it reflects an additional heightened market risk that was previously never factored into past investment decision-making. Otherwise, it may still take some time for the sector to recover, as flights are likely to be quite limited a nd pricey in the early months of the recovery. 2022 will likely see more values as weakened players may exit the market.
Some hotels are up for sale, but buyers are looking for substantial discounts, like over 30% below market value. In the last few years, several hotels have closed down but their prices haven’t fallen substantially enough for buyers. As a result, there are very few transactions in the market. So, no one can tell whether the market is up or down.
For example, two years ago, we were involved in the sale of the Royale Chulan Bukit Bintang Hotel located in Kuala Lumpur for RM197 mil. The Singaporean buyer has already signed the Sale & Purchase Agreement, but if it hasn’t signed, it could be looking at 20% discount today. So, when the purchase was finally concluded in January 2021, the seller agreed to give a 10% sign-off deal.
So, if you can get good bargains, now is the time to acquire but prices generally haven’t fallen that much. Having said that, some condos in Bangkok are now selling at good discounts. In Malaysia, the unsold stocks from existing developers are selling at a fairly good discount, probably in the region of 20-30% discount.
With the vaccine rollout, the tourism comeback will be massive, possibly even doubling the volume during pre-pandemic times. People have been in lockdown for over a year and will come out in droves to spend on food, shopping and holidays. This is provided the vaccine has no major adverse side effects.
As of now, people are not so convinced that the vaccine is 100% safe, so they might prefer to explore low density places outside of the city centres. Melaka comes to mind because it possesses the best of both worlds. It’s a city yet still retains the vibe of a small town, and being the most historic city in Malaysia, is the focal point of many tourist itineraries.
Along with its historical and gastronomic appeal (Melaka nyonya cuisine is unique in the world), Melaka also boasts a n upcoming attraction that recaptures its glorious past in a modern setting. The Sail Melaka, in a nod to local architectural talent, is an award- winning architectural gem, marvelled for its awe-inspiring representation of Melaka and Malaysia.
To be completed in a few months’ time, the first phase of The Sail will house the flagship outlets of several international brands such as IWG, FashionTV Paris and Memorigin. It promises to be a fun and engrossing place to spend time in.
With so many additional attractions, I am sure visitors will want to spend more time in Melaka including experiencing the night scene. Our Air Keroh five- and four-star hotels, Ames Hotel and MetraSquare Hotel, respectively, are poised to accommodate guests in a very upscale environment.
Visitors might even be tempted to come back again and again to experience the different facets of Melaka. Some might even consider buying a residence there either for their own use or for investment. Melaka is one of the best holiday destinations to invest in because it is the second most visited destination in Malaysia for both domestic and foreign tourists.
With international borders still closed, now is the best time to invest in Melaka as demand is not as high and prices are subdued. It will continue to be a bestselling holiday destination due to locals swarming the city especially during weekends and public holidays.
After one year of restricted movement, which feels as though one year of our lifespan has disappeared, it has given rise to unrelenting pent-up demand to go on holidays. Melaka is one of the top beneficiaries of that pent-up demand.
With more people visiting, the property value will go up in tandem with rising demand. The increase in value is further reinforced by Melaka’s value as a historical destination which has already earned it a UNESCO World Heritage Site status, thus cementing its position on the world tourism map.
With its strong links to China through visits by Admiral Cheng Ho in the 1400’s and the resulting hybrid Malay-Chinese or ‘baba nyonya’ culture, Melaka has become a unique destination well known globally.
The Straits of Malacca, which derives its na me from Melaka, is also where all cargo ships must pass through when traversing between the West and East. It’s the busiest shipping lane in the world and Melaka ca n easily reap the benefits of being right in the middle of it.
As a result, with its global renown and strategic location, Melaka ca n even be a satellite city of Kuala Lumpur. With seamless transportation links to KL, it’s conceivable that Melaka will eventually rise up in prominence when it comes to being a business and investment hub.
There is a huge pent-up demand for travel as proven by the last lifting of MCO 1.0 – it caused a boom in travel from August – December 2020 before we went into MCO 2.0 in January 2021. The boom after travel restrictions are lifted would typically last between 3 – 6 months and will then stabilize before increasing again. It won’t decrease unless there is another surge of infections. It is a given the virus will not go away anytime soon.
From that experience, it’s a proven fact the rebound is very fast. If regional travel or travel bubbles are started, I expect the reaction to be very fast, for example, people will start booking the very next day.
Based on the da ta on vaccination rate in Malaysia, it would probably take about 3 – 4 months to reach a significant reduction in cases. This could pave the way for a travel bubble forming as early as June/July, most certainly the 2nd half. Malaysia could normalize very possibly within this year (barring unforeseen circumstances), and not in 2022 as believed by many.
We would start with local travelling, then next year, open regional destinations through travel bubbles and continued recovery. By 2H 2022, expect complete recovery for Malaysia.
For overseas holiday destinations, this will be based on how soon the country starts and completes its vaccination programme. For Southeast Asia, Singapore will be the first, followed by Thailand and Vietnam. Malaysia, Cambodia and Indonesia will follow suit a bit later. Most, if not all should be open by late 2022.
In every country, the first destinations to open up to foreign tourists would usually be popular tourist destinations such as Penang, Melaka, Phuket, and Bali. This would be followed by business travel to capital cities like Kuala Lumpur, Bangkok and Singapore. Business travel is the one that is most sustainable and will give more consistent data.
As for vaccination or immunity passport/visa, by mid-year, this would likely be implemented for all those vaccinated in Malaysia.
Is now the right time to buy property in holiday destinations? Definitely! There will be a lot of travel in the 2nd half, so now is the best time to buy when most people can’t travel and prices a re subdued.
As an investor, if I have the opportunity to fly overseas, I would certainly go to Bali, for example, to buy now beca use it is a sure win. Bali has all the infrastructure and its appeal will last another 10-20 years or longer.
But since we ca n’t travel now, we ca n look a t local holiday destinations such as Batu Ferringhi, Melaka and Genting Highlands. Melaka’s destination is very strategic beca use if Singapore opens first, Singaporeans will want to travel by land to Malaysia especially to Johor, Melaka and Genting. Also, Singaporeans a re high income earners (relatively) and tend to spend more.
Yes, there will definitely be revenge tourism in the 2nd half of 2021 with beaches and highlands being target destinations. Tourism players now have to target local travelers. To survive, their business model has to be more collaborative and in the process, the players will be reshuffled.
By Q3, the scenario will improve and we can even see travel bubbles forming between Malaysia and Singapore; and Indonesia and China.
I would suggest investors aim for areas that are popular for weekend and domestic travelers but with the potential to also attract international tourists. Choose a project with a theme or a niche rather than just an accommodation with cheap prices.
People will only start going for holidays when they feel really safe, there could be revenge tourism but most importantly, they must have money to spa re for holidays. A lot of people in the private sector have suffered loss of jobs or reduced or no income. Going for a holiday is not considered essential as compared to providing food on the table for the family. However, those whose jobs and incomes are not affected by the Covid-19 pandemic such as government staff certainly can afford to go for a holiday.
Only when all travel restrictions a re lifted such as the interstate ban, will we see an increase in tourism activities. But people will avoid travelling in groups and going to crowded places of attraction. Premises and places which have undertaken clean and safe certified programmes will be the main targets for visits.
destinations popular for food. Such places include Langkawi, Port Dickson, Pangkor, the east coast states of Kelantan and Terengganu, Melaka and of course Sabah. For food, Penang and Ipoh are perennial favourites. There is now a new destination, Taiping, which has clinched the distinction of being the third most sustainable city in the world at the International Tourismus-Börse (ITB) in Berlin, Germany.
Restaurants and meeting venues will have fewer seating capacity in compliance with social distancing. As a result, hotels will incur additional costs but at the same time will not be able to secure as good a revenue as before due to the reduced capacity.
Hotel room rates have been slashed down so low – up to 50% discount. It will be a tall order for hotels to get the room rates back to the pre-Covid-19 level.
Most worrisome however will be retaining competent and efficient staff. Many hotels have either terminated or put their staff on no-pay leave or salary cuts with fewer working days. This would affect the staff’s competency as they would lose touch with the skills required. Hotels could also be maintaining only essential service staff while some job functions will be outsourced.
As for when travel bubbles will start between Malaysia and other countries, no one can tell for sure. Most countries which a re Malaysia’s tourist markets a re still having high rates of infection and death. Even if we a re free of Covid-19 and wish to reopen our international borders, the other countries which a re not green status yet would not allow their citizens to travel for tourism purpose.
The only hope is when there is global herd immunity achieved after a successful rollout of the Covid-19 vaccinations.