unnamed (1)A strong showing by Malaysia?s tourism industry in the first three months of the year may be offset by an expected drop-off in arrivals from China. But officials and travel bodies remain confident that any cooling in sentiment from the mainland will ease by the latter part of the year, giving the sector a lift in the final quarter.

The tourism industry posted arrivals up 10% year-on-year for the first quarter of the year, with just over 7m visitors, up from 6.5m for the same period in 2013, according to data issued by the Immigration Department of Malaysia in mid-June.

Fellow ASEAN members continued to provide the bulk of Malaysia?s inbound visitors, contributing 72% of the total ? 5.1m arrivals ? with Vietnam, Thailand, Cambodia, the Philippines and Singapore all showing double-digit increases for the quarter. Indonesia, the second-largest source of tourists, delivered 676,000 passengers that represented a 7.3% increase.

Malaysia will need to maintain this rate of growth if it is to reach the aim of 36m annual arrivals set by the government for 2020, more than 10m up on the 25.7m arrivals recorded last year. The government is also looking to greatly expand tourism revenue, targeting earnings of $52bn annually by the end of the decade, more than two and a half times the 2013 total of $20.3bn.

Headwinds cooling Chinese interest

Despite the good performance, the real proof of the resilience of the tourism sector will come with the release of the second quarter figures, with a number of factors set to have a negative impact on performance.

The disappearance of Malaysia Airlines Flight 370 on a flight from Kuala Lumpur to Beijing in March, with 239 passengers and crew ? many of the former being Chinese nationals ? combined with the kidnapping of a number of Chinese nationals in Sabah recently, has hurt Malaysia?s standing as a tourism destination in the eyes of many potential travellers from China. Some estimates put the drop in arrivals from mainland China at around 40% since the incidents, putting at risk the industry?s target of hosting 2m Chinese tourists this year compared with 1.4m arrivals in 2013.

Tourism and Culture Minister Datuk Seri Nazri Aziz told Parliament in June that a total of 76 flights to Kota Kinabalu, the capital of Sabah, from China were cancelled recently in response to three kidnapping cases on the east coast of the Malaysian state in three months.

Another factor that could impact Chinese visitor numbers is the simmering tension between Beijing and a number of countries in the region, including Malaysia, relating to territorial disputes in the South China Sea and elsewhere. These tensions have seen at times violent anti-Chinese protests in Vietnam and while sentiment in Malaysia is not as heated, some Chinese tourists may look further when planning their holidays, away from any states in which their government is at odds.

Promotional push

Malaysia is now moving to shore up its Chinese market, having curtailed promotional activity in the wake of the Flight 370 disaster. Tourism authorities are again starting to increase advertising activities and attend trade fairs.

Speaking in Hong Kong in early June, Azizan Noordin, the deputy director-general of promotions for Tourism Malaysia, said he remained confident Chinese arrivals would hit 2m this year, representing a 15% increase year-on-year. Echoing these comments, the Malaysia-Chinese Tourism Association, a group representing Malaysian Chinese travel agents, predicts that arrivals from China are likely to rebound in the third quarter and into the last three months of the year while officials are confident year-end targets will be met.

But it remains unclear how deeply the loss of Flight 370 and the kidnappings in Sabah impact Chinese sentiment in the second quarter and beyond.

In for the long haul

Visitor numbers from China may well fall short of expectations for 2014, but this gap may be bridged by holidaymakers from other countries seeking an alternative to troubled Thailand.

Malaysia?s tourism appeal is spreading further with visitors from countries such as Australia a target. Though only representing a fraction of the overall total, long-haul visitors from countries in Europe or North America added significantly to Malaysia?s arrival numbers, with 500,000 landing in the first three months of the year, according to the Immigration Department. While only 8% of all arrivals, these long-haul markets represent an area of strong growth potential, one that has been given increased support by improved flight connections to Europe in particular.

Another more distant market that both the government and operators are working to expand is in the Middle East and other predominantly Muslim markets. Muslim visitors to Malaysia were estimated to account for a fifth of the total last year. This amounted to 5.2m according to the Islamic Tourism Center, an almost four-fold increase on the 2000 figure. By building on its credentials as a Muslim-friendly destination, Malaysia should be able to further broaden its tourism base.

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