Industry players fear visitor arrivals may shrink more if the Indonesian forest fires spewing the haze - which has cast a pall over Kuala Lumpur, the country's main gateway, and several other cities since 2 August - are not brought under control soon.
"Some (hotels) have reported cancellations, although it's not alarming at the moment. We are concerned about the current haze situation, which is very unusual," said Mohamad Ilyas Zainal Abidin, president of the Malaysian Association of Hotels.
The smog eased on Friday in Kuala Lumpur and surrounding areas as shifting winds carried the smoke to northern and eastern towns, including to the popular resort island of Penang.
Other main tourist destinations such as Langkawi Island, the rain forests of Borneo and the gambling resort of Genting Highlands have been spared.
Weather officials warn that the haze will return to Kuala Lumpur and surrounding areas if the wind direction changes.
The smoke comes from forest
fires in nearby Indonesia
"We had a great time in Penang and Genting Highlands the week before, but it is a disaster in KL (Kuala Lumpur). We can't go out because the smoke is harmful to the children," said Fahad al-Gahtani, a 31-year old Saudi Arabian. "It has spoiled our holiday."
Worried about the health of his children, 4 and 8, al-Gahtani cancelled all activities in Kuala Lumpur and was stuck since Monday in a hotel near the country's iconic Petronas Twin Towers, once the world's tallest buildings.
The pollution, which crossed very hazardous levels last week, is the worst ecological crisis since 1997, when a similar haze blanketed large parts of Southeast Asia.
The smoke comes from forest fires in nearby Indonesia, lit each year by farmers and plantation workers to clear land during the dry season.
Tourism is Malaysia's second-largest foreign exchange earner after manufacturing.
About 15.7 million visitors spent 29.65 billion ringgit ($7.8 billion) in the country last year.
There are signs that the haze is
hitting tourism-related business
The government expects 16.4 million visitors this year, bringing in an estimated revenue of 35 billion ringgit.
There are signs that the haze is hitting tourism-related businesses.
Sunway Lagoon, Kuala Lumpur's No 1 amusement park, closed on Friday after the government ordered schools to shut and people to remain indoors.
It reopened on Saturday, but visitor numbers were lower than its weekend attendance of 20,000, said a spokeswoman.
The hotel industry has urged the government to mount an information campaign to highlight the fact that such severe haze is not an annual phenomena, that it is confined to selected areas and that many other tourist spots remain unaffected.
"We must assure travellers that this is just a short-term phenomenon and that there are many alternatives to Kuala Lumpur," said Tunku Iskandar of the Malaysian Association of Tour and Travel Agents.
Low-cost carrier AirAsia Berhad is believed to be planning promotional events to market flights to haze-free destinations such as Langkawi island and East Malaysia, which still enjoy clear skies and clean air, sources said.