Malaysia Airlines 370: Will it kill tourism in Malaysia?

Chinese and US tourists are showing their disapproval of Malaysia's handling of flight MH370's disappearance by taking their travel plans elsewhere, early surveys suggest. Will this work against Malaysia's emerging tourism economy long term?

2014 was supposed to be “Visit Malaysia Year,” an initiative by the Malaysian tourism board to boost tourism to the Southeast Asian country. The Malaysian Tourism Board had planned events, overseas trips promoting tourism, and even a tagline - “Truly Asia”- for the push, which they hoped would bring a new high of over 28 million visitors to the country in 2014.

But in the weeks following the ongoing mysterious disappearance of Malaysia Airlines flight MH370, the hope of attracting more people to Malaysia is being dashed by the day, which could have repercussions for a country where tourism makes up 12 percent of the GDP. Already there have been reports of numerous cancelled Chinese tours and dips in interest on travel websites from Western countries. Will Malaysia’s tourism industry take a long term hit?

Before Flight 370 disappeared somewhere over the Indian Ocean, Chinese tourists were a major source of income for the Malaysian tourism economy. In 2013, 12 percent of tourists to Malaysia were Chinese, and the revenue from these visitors made up .4 percent of Malaysia’s GDP, according to a research note by Merrill Lynch Bank of America. China’s middle class has enjoyed considerable disposable income growth in recent years, and their tourism rates are predicted to rise dramatically because of it: research group Crédit Lyonnais Securities Asia (CLSA) says China’s outbound tourists will double by 2020, hitting 200 million, and will spend three times as much money.

Recent events could compromise Malaysia's once-promising chances of getting a piece of the action, however.  With over 200 Chinese passengers on the missing Malaysian Airlines flight, and few answers over the past few weeks, Chinese have channeled their frustration through their tourism dollars. Reuters spoke with nearly a dozen Chinese travel agents who say they have had customers avoid planning Malaysia trips or cancelling their Malaysia trips altogether. Over 77 percent of more than 38,400 people responding to a poll on Sina Weibo, the Chinese version of Twitter, said MH370 would influence their decision to travel to Malaysia. That in stark contrast to a few years ago, and to the upward trend many had expected: a 2011 survey of 51 Chinese package-tour firms by researchers at Cornell University found 64 percent of firms expected strong growth in interest in Malaysia over the next five years. 

In response, Malaysian Tourism Minister Nazri Aziz has canceled the “Visit Malaysia 2014” road show events in China until the mystery is solved.

The effect is even reaching the other side of the globe.

Germany-based travel website Trivago found that Malaysia hotel searches from the US dropped 22 percent in the 10 days following the disappearance.

“These results suggest that travelers seem hesitant to head to areas close to where they have been told the flight went missing,” says Trivago spokesperson Katie Merrill in an e-mail. “I will say that this is a common trend we’ve been noticing around political unrest and big incidents such as this one.” She pointed out that Trivago saw similar decline in searches in Thailand since the unrest started in the fall, and there was a 70 percent decline in searches for Lebanon from fall of 2012 to fall of 2013, due to Syria unrest.

But Tom Buncle, managing director of Edinburgh-based international travel destination consultancy firm Yellow Road Ltd., warns that this feeling won’t persist.

“There is sometimes a brief reaction in terms of a drop in bookings, particularly for a particular airline that has been in involved in an incident - out of concern for personal safety - in such circumstances,” he says in an e-mail interview. “However, people's memories tend to be short and, where the destination has a robust brand, a strong visitor appeal, and a sound track record of delivering satisfied visitors, then any such dip is likely to be only temporary and the destination's strengths take over again very quickly in the minds of holiday-makers.”

That being said, the US and China will feel different effects of MH370.

“Where grudges persist at a diplomatic or personal level (e.g. If relatives feel they have been kept in the dark or unfairly treated, this can have a longer-term effect upon those affected and their compatriots),” he adds. “This may be the case in China, but is unlikely to be so in North America or Europe.”

He points to the tsunami in Sri Lanka and IRA bombings in the UK of two major incidents that initially dissuaded travelers. In Sri Lanka, people stayed away with the mistaken belief that the country needed time to recover (though tourist dollars would have actually aided the recovery process). Due to IRA bombings, travel to the United Kingdom dipped in the late 80s and early 90s, but bounced back after the Oklahoma City bombing in 1995.

“There seemed to be an acknowledgement that these things could happen anywhere and a greater sense of perspective kicked in,” Mr. Buncle says. “I think [the Oklahoma city bombing] was a watershed moment, when people began to understand a bit more about the issues and not knee-jerk into mentally blacklisting a destination on the grounds of a single incident.”

In the meantime, Malaysia hasn’t yet given up hope on “Visit Malaysia Year.” The roadshows continued in India, though five Indian nationals were on MH370.

“The show must go on,” says General Dato Mirza Mohammad Taiyab, Malaysia tourism promotion board director, to reporters in India last week. “Business has to be carried out. Airlines need to continue to operate flights. We are very concerned about the incident and the government is looking into the matter with all seriousness.”