Performance of tourism sector with regard to the global crisis - a comparative study between Indonesia, Malaysia and Singapore

Tourism contributes to the growth of economy of a nation through employment, multiplier effect, and foreign exchange earnings and also contributes to positive balance of payments. Therefore, developed and developing countries have incorporated tourism into their long-term economic development planning. However, tourism is vulnerable to crisis events, such as outbreaks, political turmoil and also financial crisis. This study examines the performance of tourism sector in Indonesia, Malaysia, and Singapore with regard to the recent global crisis. The three countries are chosen because of several reasons. Firstly, they have incorporated tourism as one of the focuses in their long-term economic development plan. Secondly, although they are closely related in terms of geographic proximity and regional cooperation, they differ in terms of size and openness of economy. All the commonalities and differences make it more intriguing to carry out the study. This study employs ordinary least squares method to investigate the significance of tourism in relation to economic growth. There are two models used in this study. First model employs GDP to represent economic growth and the number of international tourist arrival to represent tourism growth. Second model employs hotel’s rate of occupancy, average length of stay, and the number of tourist arrival as proxy of tourism growth. Comparative study is also done in the discussion in order to analyze how the respective countries differ in tourism performance. The study finds out that for the three countries, tourism is of significance for the economic growth. Tourism was also affected by financial crisis, as seen from the short dip in the performance of the tourism sector in terms of the number of tourist arrival and hotel’s rate of occupancy in first quarter of 2009. Nevertheless, the sector is considered as a resilient sector as it successfullyrecovered in 2010a. Based on the comparison, it is found that Singapore is affected much in comparison with the other two. It may be linked to strong real effective exchange rate, which makes the price less competitive compared to the other two. This study also finds that regional tourists actually play an important role in the development of tourism, because they comprise the largest portion of tourist arrival compared to outside-regional tourists, and the number has remained stable. Based on the result obtained, we consider tourism development as one of strategic economic pillars since it has significantly positive impact on GDP growth. We also deliberate that the countries should focus on catering to the preferences of regional tourists to accelerate the growth of this sector.