Determinants of Tourism Demand in Malaysia

HRMARS - This study examines the determinants of inbound tourism demand to Malaysia using an extended gravity model framework. The analysis incorporates economic, social, policy-related, bilateral, and external shock factors using panel data from multiple tourist source countries between 2010 and 2024. The study applies panel regression techniques, including pooled OLS, Fixed Effects, Random Effects, and PPML estimations, to identify the key factors influencing international tourist arrivals to Malaysia. The findings indicate that higher income levels, larger population sizes, favourable exchange rates, cultural proximity, safety, public health conditions, trade openness, and connectivity positively influence tourism demand, while inflation and geographical distance negatively affect the tourist arrivals. The COVID-19 pandemic is also found to have a significant adverse impact on tourism flows. The results support the extended gravity model and highlight the importance of economic stability, infrastructure development, tourism diversification, and resilience strategies in strengthening Malaysia’s tourism competitiveness and ensuring sustainable tourism growth.