Rising fuel costs and subsidy cuts push Malaysians to cut travel, straining tourism operators and domestic demand
PETALING JAYA: Malaysia’s domestic tourism sector is facing a perfect storm as soaring fuel prices and steep cuts in petrol and diesel subsidy quotas force travellers to rethink their plans, putting tourism operators under mounting financial strain.
Higher fuel costs are hitting consumers’ wallets directly, especially for daily transport, prompting many to scale back on non-essential journeys, a shift already having an impact on domestic tourism.
“Subsidy cuts result in higher living costs, particularly for transportation. As fuel prices rise, consumers naturally limit discretionary travel,” said Universiti Malaysia Terengganu Tourism Management Programme head Dr Mohd Rahimi Abdul Halim.
“This behavioural shift aligns with the theory of demand elasticity, where demand for non-essential tourism products drops as prices increase. Consequently, local tourist destinations, homestay operators and recreational service providers may see fewer visitors in 2026.”
Tourism service operators are also grappling with rising operational costs.
Sectors reliant on diesel – from tour boats to coach buses and tour vans – are facing higher expenses in fuel, maintenance and logistics.
“Many operators are forced to pass these costs on to customers through higher package prices. But in a climate of shrinking demand this can backfire, risking reduced bookings and competitiveness.”
For Mohd Rahimi, keeping Malaysia’s tourism resilient requires operators to adopt innovative strategies.
“Operators need to optimise operations with technology, for example, smart booking systems and efficient route management can reduce fuel usage.
“Value-based tourism products, including short-haul packages, ecotourism and community-based experiences, provide affordable options.”
Road-based tourism, particularly the recreational vehicle (RV) and camper van sector, is feeling the pinch of lower demand sharply.
Malaysia Motorhome and Caravan Association president Farman Othman said the industry is highly exposed because its entire ecosystem depends on road travel.
“With fuel costs rising, RV owners, rental users and tour package operators are naturally more cautious in planning trips this year,” he said, adding that travellers are already choosing shorter journeys, nearby destinations and reduced travel durations to control expenses.
Yet the RV community is adapting rather than abandoning travel altogether.
“The community does not see this as a reason to stop travelling. Instead, they are adjusting to be more prudent and efficient.
“More people are planning routes carefully, combining multiple locations into single trips, sharing logistics in convoys and reducing unnecessary movement.”
Tourism operators and rental services are also reshaping offerings, focusing on short-distance trips, weekend packages and cost-friendly local camping concepts.
Farman highlighted the importance of user education in reducing fuel consumption, including prudent driving, load management and careful trip planning.
He urged policymakers to support the sector through practical measures, particularly those aligned with the Visit Malaysia Year initiatives.
“The challenge of rising fuel prices highlights the need to strengthen the RV tourism ecosystem, including more RV-friendly stops, overnight parking and an organised campsite network. Toll discounts for caravan users, who currently pay Class 3 rates, could also help.
“Improving basic facilities and RV infrastructure will allow travellers to continue supporting domestic tourism despite rising costs.”
Farman added that introducing locally produced motor campers could further cut fuel consumption and operating expenses.
“Collaboration among operators through shared logistics, combined packages, targeted marketing, seasonal discounts and flexible bookings can also help attract price-sensitive domestic tourists.”