Halal Tourism - Post-Covid Revival

Tourism has been one of the industries that have been most negatively impacted by the Covid-19 pandemic. Many countries closed their borders in an attempt to mitigate the spread of the infections, effectively shutting off international tourism while even within countries, lockdowns have prevented people from moving too far from their doorsteps.

Malaysia is not excluded from the trend with Malaysia experiencing a significant downturn in 2020 due to the continuous lockdown and closure of both domestic and international borders to curb the spread of Covid-19. The movement control order introduced throughout most of 2020 and in 2021 has impacted the revenue of many travel companies.

Historically, tourism is a very resilient industry. There have always been sharp drops following past disease outbreaks such as SARS, H1N1, and MERS-CoV. But after about six to 12 months, we saw travel activities picking up again.?

In stark contrast to “what goes up must come down”, things, fortunately, bounced back up in 2021 with total export revenues from tourism (including passenger transport receipts) rising by 4% in real terms from 2020 to an estimated US$713 billion in 2021 (although still 61% below 2019 levels). International tourism receipts also rose by 4% in real terms to US$602 billion compared to 2020. Through that time, 18 million jobs were recovered, recording a 6.7% increase compared to the uncertain times in 2020. Following a decrease of 84.6% in 2020, international visitor spending also rose by 96.9% in 2021.?

Unlike the promising numbers seen in the global tourism revivals, the prolonged lockdown in Malaysia meant the country could only have its first taste of real tourism from 16 September 2021 onwards through the Langkawi travel bubble. The doors to tourism then flung open wider in October 2021 when the country’s vaccination rate among adults reached close to 90%. The liberated atmosphere towards 4Q 2021 hence became the breakthrough that most Malaysians were yearning for as lockdown fatigue set in even if the cozy surrounds of a home is more attractive than the sterile offices.?

As mentioned above in the UNWTO World Tourism Barometer, the recovering momentum of 182% increase year-on-year from January to March 2022 was made more significant when a majority of the extra 76 million international arrivals were recorded in March alone - about 47 million in all, indicating the pent up demand for travel throughout those two pandemics stricken years.?

The same report when on to share that Europe welcomed “almost four times as many international arrivals (+280%) as in Q1 of 2021, with results driven by strong intra-regional demand” whereas, in the Americas, arrivals were more than doubled (+117%). In the Middle East and Africa, growth in the same period was +132% and +96% respectively while in Asia and the Pacific, the increase was 64% over that of 2021.

By subregion, the Caribbean and Southern Mediterranean Europe continue to show the fastest rates of recovery. In both, arrivals recovered to nearly 75% of 2019 levels, with some destinations reaching or exceeding pre-pandemic levels.

The immensity of the growth must however be viewed empirically for a fair deduction, especially if we compared them to 2019’s data. So despite the steep escalation in arrivals across the different geographical locations, they remained 61% below 2019’s performance, suggesting a gradual recovery might be a more sensible forecast for the market, more so when travel restrictions were still enforced in different places around the world.

The Muslim travel market was no exception. The industry was heavily hit, with related industries being the worse hit. The halal food sector in particular, as halal restaurants had banked on millions of tourists, including those from Muslim countries suffered great losses during the 2 years pandemic.?

Looking into the Umrah and Hajj segment, the industry was drastically affected as the government drastically closed the border, with related industries such as hotels, restaurants, souvenirs, etc seeing a massive decline in revenue and had to shut down during the 2 years.?

According to the State of the Islamic Economy Report, Muslim spending on tourism increased from US$58 billion to US$102 billion in 2021 and is expected to grow by 50.0% in 2022 to US$154 billion and reach US$189 billion in 2025 at a 4-year CAGR of 16.5%

When would travel return to the pre-pandemic level? The International Air Transport Association (IATA) expects overall traveler numbers to reach 4.0 billion in 2024 (counting multi-sector connecting trips as one passenger), exceeding pre-COVID-19 levels (103% of the 2019 total). We won't know for certain, but what we can expect is that Muslim travel would be a key driver of this growth.

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*Faeez is an entrepreneur, board member, advisor as well as mentor specializing in Islamic Finance and investments, corporate structure, and digital transformation. Faeez was named 30 under 30 by Forbes magazine in 2016, 40 Under 40 by Prestige, Top 10 Young Entrepreneur Rising by Top 10, People To Watch 2016 by TTG as well as the Most Innovative Young Leaders Award 2016 by UCSI.?