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The impact of COVID-19 on tourism industry in Malaysia

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The impact of COVID-19 on tourism industry in

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Lee-Peng Foo , Mui-Yin Chin , Kim-Leng Tan & Kit-Teng Phuah

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CURRENT ISSUES IN TOURISM
https://doi.org/10.1080/13683500.2020.1777951

The impact of COVID-19 on tourism industry in Malaysia

Lee-Peng Foo , Mui-Yin Chin , Kim-Leng Tan and Kit-Teng Phuah
Faculty of Accountancy, Finance and Business, Tunku Abdul Rahman University College, Kuala Lumpur, Malaysia

ABSTRACT ARTICLE HISTORY

The COVID-19, first reported in December 2019 in China before wider Received 28 April 2020
spread around the world. The pandemic is highly impacting the tourism Accepted 29 May 2020
industry in Malaysia, particularly, the airline and hotel businesses. Apart
KEYWORDS
from that, this study also discusses the stimulus packages offered by the Disease; COVID-19; tourism;
Malaysian government in order to ensure the sustainability of the hotel; airline
tourism industry in Malaysia.

Introduction
In December 2019, China reported an outbreak of a form of pneumonia with unknown causes. The
outbreak had become a public health emergency of international concern. In early January 2020, a
seafood market in Wuhan was identified as the suspected hub of the outbreak by the US Centers
for Disease Control and Prevention (CDC), and since then, the market has remained closed. This
new virus was named temporarily as a novel coronavirus, 2019-nCoV, or COVID-19. In Malaysia,
the first COVID-19 case was confirmed on 25 January 2020, which involved three Chinese citizens,
who had entered Johor Bharu, Malaysia via Singapore on 23 January 2020. From a total population
of 32 million, Malaysia reported 6002 COVID-19 infections cases, with 102 deaths as per end of April.
Subsequently, the seriousness of this virus has led the World Health Organisation (WHO) declared
that the COVID-19 outbreak to be a global health emergency of international concern on 30
January 2020. Table 1 below shows the total number of COVID-19 cases around the world and
Malaysia.
This paper will present a brief overview of the COVID-19 pandemic, discusses the impacts on
Malaysia’s tourism industry and the economic stimulus package.

The impact on tourism industry

The outbreak of COVID-19 has exposed a major risk to Visit Malaysia 2020 (VM2020) campaign as 50%
of Malaysia’s tourists are originate from Singapore and China. The increasing cases of COVID-19 in
both countries has led to the cancellation of many tours, which has already led to a large drop in
the number of tourists to Malaysia.
In order to fully contain the virus, The Prime Minister of Malaysia announced the 4 phases of
Movement Control Order (MCO) as they expected the number of COVID-19 cases would continue
to increase (Prime Minister’s Office, 2020). The prohibitions during the MCO will further contract
Malaysia’s tourism industry and therefore effective policies to assist the industry players are
imperative.

CONTACT Lee-Peng Foo foolp@tarc.edu.my

© 2020 Informa UK Limited, trading as Taylor & Francis Group
2 L.-P. FOO ET AL.

Table 1. COVID-19 cases.

World total Malaysia total
Date reported Cumulative cases Deaths Recovered Cumulative cases Deaths Recovered
31 January 9795 213 187 8 0 0
29 February 75620 2712 39497 25 0 22
31 March 802726 39051 177866 2766 43 537
30 April 3304220 233831 1039058 6002 102 4171
Source: WHO (2020), Ministry of Health (2020).

The impact on airlines

Airline industry players has highlighted that the current travel bans and plummeting demand around
the world have put the loss-making carrier at risk of bankruptcy. All three Malaysia’s major airlines
namely; AirAsia, Malindo Air and Malaysia Airlines have initiated salary cut range from 10% to
100% and unpaid leave depending on the salary range and position.
Nevertheless, the airline industry faced its gravest crisis when the Government of China denied
entry of foreigners, effective from 29 March 2020 until further notice. As per end of today (22
May), foreigners are currently not allowed to enter the country (Republic of China Ministry of
Foreign Affairs, 2020). Besides, the Chinese authorities also imposed stricter rules on foreign airlines,
where foreign airlines are only allowed to offer one flight per week, and such flights cannot be more
than 75% full, in response to the fear of fresh COVID-19 infections being ‘imported’ into China. The
drastic loss of both revenue and profit for all three major Malaysian based airlines which has resulted
in a high risk of bankruptcy has caused the airlines to ask the government of Malaysia to step in to
provide support to the airline industry.

Impact on hotel businesses

A total of 170,084 hotel room bookings during the period 11 January 2020 until 16 March 2020 had
been cancelled, which caused a loss of revenue amounting to RM68,190,364. The loss was directly
attributable to the outbreak of COVID-19.
Table 2 above exhibits that Kuala Lumpur was at the top of the list. The cancellation of hotel book-
ings has caused a loss of RM23,021,301 in revenue and followed by Sabah which suffered a loss of
RM11,550,605 in revenue. The state which has been least affected by COVID-19 is Sarawak as the
total room cancellations during the said period was merely 76, with a loss of less than RM23
million. The spate of cancellations in hotel bookings is expected to continue until MCO ended. The
local hotel sector is projected to lose RM3.3billion in revenue by June 2020, as a result of MCO
which has been extended to 12 May 2020.

Table 2. Severity of hotel room cancellations.

Ranking State Room cancellations Losses due to room cancellations (RM)
1 Kuala Lumpur 55,050 23,021,301
2 Sabah 32,392 11,550,605
3 Pulau Pinang 17,753 8,908,000
4 Selangor 22,929 7,212,048
5 Negeri Sembilan 13,534 6,690,500
6 Johor 18,455 5,636,470
7 Kedah 3239 3,291,500
8 Perak 2403 1,022,289
9 Melaka 4074 690,499
10 Pahang 180 144,628
11 Sarawak 76 22,525
Total 170,085 68,190,364
Source: Malaysian Association of Hotel (2020).
 CURRENT ISSUES IN TOURISM 3

Table 3. The impact of the COVID-19 pandemic on hotel industry workers.

Total workers Number of workers Number of workers Number of workers facing
Rank State (sampling size) being laid off facing pay cut unpaid leave
1 Kuala Lumpur 17,826 542 2880 3641
2 Perak 1653 245 91 595
3 Selangor 7981 238 134 1812
4 Pahang 1464 231 0 150
5 Sabah 4934 177 893 1075
6 Negeri 1452 130 0 179
Sembilan
7 Sarawak 3488 92 175 258
8 Langkawi 4314 92 340 902
9 Melaka 1872 85 65 191
10 Penang 5549 84 240 430
11 Johor 3215 72 108 202
12 Terengganu 1298 53 52 101
13 Kelantan 560 0 76 157
14 Kedah 692 0 0 80
Total 54,299 2041 5054 9773
Source: Malaysian Association of Hotel (2020).

In tandem with the statistics of room cancellations, workers in the hotel industry in Kuala Lumpur
have been the worst hit by the pandemic. From a sample size of 17,826 workers, 542 workers, equiv-
alent to 3%, had been laid off. Meanwhile, 3641 (20%) workers had been asked to take unpaid leave
and 2880 (16%) workers had faced pay cuts (Table 3).

Malaysia’s economic stimulus package

The Malaysian government has unveiled a stimulus package to provide some respite for the stake-
holder who are severely affected by the outbreak, especially those in the tourism industry (Table 4).
The tax incentives, restructuring of loans and postponement of repayments to banks, etc. will help
easing the cash flow of Malaysia’s tourism industry players. To curb potential rising unemployment, a
wage-subsidy programme has been introduced and subsidizes RM600 per month for each retained
employee for a maximum of three months. Up to 17 May, the government had approved application
for 128,000 employees (Ministry of Finance, 2020b).
Besides, tourism front-liners have been offered a one-off payment of RM600 and RM500 respect-
ively to offset the significant decline in their daily incomes. The revised stimulus package also
acknowledges the potential loss of employment and underemployment issues by providing

Table 4. Economic stimulus package to boost Malaysian tourism.

Incentives to businesses
. Relaxation of existing guidelines by the Government limiting the use of hotels.
. A 15% discount on monthly electricity bills for tourism related industry.
. Hotels and travel-related companies will be exempted from making payments to the Human Resource Development Fund
(HRDF).
. Double taxes deduction on expenses incurred on approved tourism-related training.
. Up to RM100 million on a matching grant basis to the HRDF to fund an additional 40,000 employees from the tourism and other
affected sectors
. Hotels will be exempted from paying the 6% service tax between March and August 2020.
. Postponement of income tax monthly instalments for income tax allowed for tourism-related companies
. Malaysia Airport Holdings Berhad (MAHB) will provide rebates on rental for premises at airports as well as for landing and
parking charges for aircraft.
. All banks are required to provide financial relief, in the form of an automatic moratorium, comprising the restructuring and
rescheduling of loans for affected businesses for 6 months.
. Employers are allowed to defer, restructure and reschedule employer contributions to the EPF for up to 6 months.
. Wage-subsidy programmes were introduced to assist employers to retain employees.

Source: Ministry of Finance (2020a), Prime Minister’s Office (2020).

4 L.-P. FOO ET AL.

financial assistance of RM600 each month, for a maximum period of six months, for those who are
forced to take unpaid leave. On top of that, unemployed workers, with salaries under RM4000 a
month, have also been allowed to claim from the Employee Insurance System (EIS) under Social
Security Organization (SOCSO).
In light of these incentives, VM2020 is now turning to domestic tourism to offset the fall in inter-
national arrivals. To boost domestic tourism, several measures, such as personal income tax relief up
to RM1000 for domestic tourism and digital vouchers valued up to RM100 per person for domestic
flights, rail travel and hotel accommodation have been offered. However, further information on how
to claim these incentives has not been released yet.

Conclusions
This study provides a brief background regarding the outbreak of the communicable disease, known
as COVID-19, and examines the impact of the mentioned disease on the tourism industry of Malaysia.
Our research has denoted that the outbreak of COVID-19 has hugely and adversely impacted Malay-
sia’s tourism industry, as tourists from around the world are cancelling bookings and delaying travel
plans to Malaysia due to worries about the virus. In addition, the number of tourists has declined due
to the Malaysian government imposing travel restrictions and bans. The economic stimulus package
is expected to assist the tourism industry to sustain throughout this challenging period.

Data availability statement

We confirm that the statistics supporting the findings of this study are available within the manuscript (Appendices). All
the sources and links for the statistics are correctly recorded at the references.

Notes on contributors
Dr Lee-Peng Foo, is a senior lecturer at Faculty of Accountancy, Finance and Business, Tunku Abdul Rahman University
College, Malaysia. She received her PhD from Universiti Putra Malaysia in 2018. Her areas of research are international
economics and health economics.
Dr Mui-Yin Chin, is a senior lecturer at Faculty of Accountancy, Finance and Business, Tunku Abdul Rahman University
College, Malaysia. She holds a PhD in Economics from University of Malaya in 2013. Her areas of research are international
trade and foreign direct investment.
Mr Kim-Leng Tan, is a lecturer at Faculty of Accountancy, Finance and Business, Tunku Abdul Rahman University College,
Malaysia. He is a PhD candidate of Monash University, Malaysia. His core area of research is financial economics. He is
familiar with programming and data analysis.
Dr Kit-Teng Phuah, is a senior lecturer at Faculty of Accountancy, Finance and Business, Tunku Abdul Rahman University
College, Malaysia. She obtained her PhD from Universiti Putra Malaysia in 2015. Her areas of research are food marketing
and consumer behaviour.

ORCID
Lee-Peng Foo http://orcid.org/0000-0002-3258-2004
Mui-Yin Chin http://orcid.org/0000-0002-4491-9858
Kim-Leng Tan http://orcid.org/0000-0001-8183-7133
Kit-Teng Phuah http://orcid.org/0000-0001-6454-6879

References
Malaysian Association of Hotel (MAH). (2020). Tourism comes to a standstill. https://www.hotels.org.my/press/22578-
tourism-comes-to-a-standstill
Ministry of Finance. (2020a). 2020 economic stimulus package “bolstering confidence, stimulating growth & protecting jobs”.
https://www.treasury.gov.my/pdf/pre2020/speech_2020_Economic_Stimulus_Package.pdf
 CURRENT ISSUES IN TOURISM 5

Ministry of Finance. (2020b). 6th Laksana report implementation of the PRIHATIN rakyat economic stimulus package. https://
www.treasury.gov.my/pdf/Laporan-Pelaksanaan-Pakej-Prihatin-Rakyat-Keenam.pdf
Ministry of Health. (2020). Situasi Semasa Pandemik COVID-19 Di Malaysia. http://covid-19.moh.gov.my/.
Prime Minister’s Office. (2020). 2020 economic stimulus package – PRIHATIN. https://www.pmo. gov.my/2020/03/pakej-
rangsangan-ekonomi-prihatin-rakyat-prihatin/
Republic of China Ministry of Foreign Affairs. (2020). Announcement on the temporary suspension of entry by foreign
nationals holding valid Chinese Visas or Residence Permits. https://www.fmprc.gov.cn/mfa_eng/wjbxw/t1761867.shtml
World Health Organisation (WHO). (2020). Coronavirus (COVID-19). https://covid19.who.int/

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