Tourism Malaysia released their arrivals data for May 2026, recorded at 2.6mn over the year, 3.3% lower than the same month in 2025. Year-to-date, arrivals have now totalled 10.6mn, up 1.1% y-o-y. The May reading marks the third monthly y-o-y decline over 2026 and points to a clear loss of momentum after a steady start to the year, with softer inflows from the Middle East, where the regional conflict and associated flight disruptions have lifted fares and curtailed travel demand, and weaker European arrivals outweighing continued growth from Mainland China.
Although the Middle East accounts for only around 0.4% of total arrivals, or roughly 162,000 visitors, the US-Iran conflict has had an outsized indirect effect, where more than 37,000 flights to and from the Middle East were cancelled and jet fuel prices rose sharply. Similarly, disruption to Gulf transit hubs, such as Dubai, Doha and Abu Dhabi, fed through to European and other long-haul markets that route through them. Growth from Mainland China remains the principal offset, still supported by visa-free entry (now extended for Chinese nationals until December 31 2026) and by improved air connectivity, including the 21 new international air routes launched at the start of the Visit Malaysia 2026 campaign in January. Arrivals from Mainland China have grown 21% y-o-y YTD, at a total of 1.87mn arrivals so far.
Implications: Based on the first five months of arrivals data, we believe the slowdown is cyclical rather than structural. Monthly arrivals in 2026 are tracking broadly in line with 2024 and 2025 but remain below their 2019 pre-pandemic equivalent (see left-hand chart below), which indicates that the recovery in headline volumes is not yet complete. We see this weakness as the product of temporary factors, chiefly the Middle East conflict, elevated airfares and disrupted flight routes, rather than any lasting erosion of Malaysia’s appeal as a destination. On a cumulative basis, the gap to 2019 is narrow enough that a return to the normal seasonal trend over the remainder of the year would be sufficient to lift full-year arrivals above their pre-pandemic level (see right-hand chart below). Sustained growth from Mainland China, together with the policy push behind the Visit Malaysia 2026 campaign, leaves the structural recovery intact even as near-term momentum has eased.
What’s Next? Given the first five months of data, we forecast that arrivals will regain momentum over the remainder of 2026, with a pronounced pick-up across the June-August period and a further seasonal peak in December (see left-hand chart below). On this profile, we forecast that full-year arrivals will reach 27.97mn, an increase of 5.1% y-o-y and 7.2% above the 2019 pre-pandemic benchmark, confirming that the softening through Q2 2026 represented a pause rather than a reversal.
The summer rebound rests on the easing of the near-term drags identified above, in particular a normalisation of airfares and flight schedules as Middle East-related disruption fades, alongside sustained inflows from Mainland China. Carriers are already adapting, with the Malaysia Aviation Group exploring additional direct capacity from North Asia and Australia to bypass the Gulf bottlenecks, which should help reconnect long-haul demand if the conflict does not escalate any further from here. The principal risks to this trajectory are a renewed escalation in the regional conflict or a sharper-than-expected slowdown in European demand, either of which would weigh most heavily on the June-August window where the recovery is concentrated. The December print will be the decisive test of whether arrivals close the year above their pre-pandemic levels…
