Issue link: https://maltatoday.uberflip.com/i/1210395
13.02.2020 12 OPINION George Mangion AirBnB attracts more middle-aged tourists George Mangion is a senior partner of an audit and consultancy firm, and has over 25 years experience in accounting, taxation, financial and consultancy services. His efforts have seen PKF being instrumental in establishing many companies in Malta and ensured PKF become one of the foremost professional financial service providers on the Island I t seems that the easy option for ho- tel owners to milk the tourism cow is finding tough competition from pri- vate accommodation - this is the new bul- ly that is challenging the status quo. For many years, since the early sixties, a nascent tourist sector was welcomed by politicians as a means to help bal- ance the annual budgets (mostly in defi- cit) create thousands of part-time jobs while bigger hotels invested in training of quality staff (particularly those run by a foreign franchise). Each year, the sector gives a healthy boost to ancillary trade involving im- portation, transportation, travel agents, agriculture and fisheries. All politicians pay surreptitious respect to the milk cow even though tourism had its ups and downs - a rather volatile industry. Having spent decades trying to attract more tourists, the Malta Tourist Agen- cy (under orders from political masters) is currently compensating low-cost airlines in their drive to develop new markets and niches. is has paid good dividends as arrivals kept increasing. To help improve beaches and other public amenities, a nominal day tax per tourist is now levied on all arrivals. On a global scale, it may come as a surprise that quoting the World Travel and Tourism Council - tourism directly accounts for nearly three per cent of the world's GDP. McKinsey, a consultancy, reckons that one in five new jobs is gen- erated by tourism. Whereas manufacturing employ rel- atively fewer people due to increased automation, tourism employs legions. ere are side benefits, since local pol- icies designed to attract tourists, such as quality health & safety inspections on hotels and restaurants, improving standards also lure investors to invest in hotels. As the global middle class grows, and annual foreign holidays become rou- tine, the world's most popular desti- nations expect heavy increases in the number of visitors. To elaborate on this topic, one notes how so far the Mediterranean is not a favourite stop for Asians, but it may soon be discovered and this will tip the scales, which will result in acute over- crowding. Naturally there is a slow- down of Asian visitors due to the recent (deadly) Corona virus which originated in the Wuhan province. Nonetheless, one observes that at present only four per cent of the Chi- nese population, 55 million people, own a passport. When passport ownership in China reaches the Japanese rate, ex- pect 340 million Chinese people will have passports. If and when that phe- nomenon occurs (barring temporary setbacks due to the virus), then expect the hazard of overcrowding to surface in the Med. For Malta, this means overcrowding in hotels unless more AirBnB facilities are sanctioned. e bigger the low- budget crowds, the less attractive the island becomes for the high spenders. Such overcrowding means more taxes collected yet it also brings hidden social costs. ese are borne by local residents who find that pavements, public areas, residential roads and cycle lanes are clogged. Armchair critics warn us that we should upgrade the sector to attract more upmarket tourists and stop sub- sidising low-cost arrivals which mostly book AirBnb for cheaper accommoda- tion. e NSO reported that arrivals for the whole of 2018 rose by 14.3 per cent to reach nearly 2.6 million while total ex- penditure per capita stood at €809, a decrease of 5.5 per cent when compared to 2017. Employment in food and bev- erage service activities based on 2016, showed 5,902 full time workers with over 7,000 low paid (mostly non-EU) part timers. Restaurants saw an aver- age spend per tourist of a mere €104 (our 18% VAT rate on food and drink is almost double that charged by neigh- bouring countries eg Zurich charges 7.7% vat in restaurants). Quoting official figures, one notes that in 2018 and 2019, tourists spent 10,081,852 and 10,068,632 total nights respectively in collective accommoda- tion, while the figures for the two years in the case of private accommodation stand at 5,429,361 and 6,162,148 total nights respectively, indicating a drop in the share of nights spent in hotels and a strong rise in those spent in facilities such as those advertised on Airbnb. However, the rise in those staying in private accommodation is substantial - in 2018, 614,480 tourists stayed in Air- bnb or other similar accommodation types, and this rose to 714,157 in 2019. In an interview carried in last week's BusinessToday, Malta Hotels and Res- taurants Association chief Tony Zahra warned of this very same trend and said that services such as Airbnb were of enormous concern to the industry. is has been the MHRA's battle cry arguing the case to tighten the tax en- forcement on AirBnB arrivals. Zahra, an ex-owner of hotels, strong- ly protests that private accommoda- tion is unregulated and presents unfair competition. He also spoke about the inconvenience Airbnb units caused to other residents in the apartment block. Nonetheless, private accommodation is being sought after because it is more competitive and also cheaper. e contribution to tourism by private accommodation is beyond expectations and the writing is on the wall - alterna- tive services will outnumber the hotel sector in 2020. Is this a bad sign? Operators have said that the advent of low-cost airlines and private accommodation was inevitable, with Ryan Air welcoming 2,439,915 pas- sengers to the island in 2017. All this hits the national airline with extreme compe- tition - it lost €30 million last season. Some argue that AirBnB is a demo- cratic way to share the returns from tourism and this means that there is a trickledown effect to the household owners who in their hundreds are ac- tively participating in the profits of such a proverbial milking cow. It is almost akin to a social service. It helps to pay the rent and other family expenses. Really and truly, the private accom- modation model fits more in the profile of the middle-aged visitor (see picture) who seeks a short, three to four day break. Private accommodation intro- duces visitors to a more authentic feel of the Maltese Islands and society in gen- eral. Moreover, it is argued that house accommodation adds a new dimension to a traveller's experience in Malta. Last year, then-Prime Minister Joseph Muscat (resigned 12 January 2020) said at a political activity that Malta would attract three million tourists by the end of 2019. In fact, while the total figures are not yet announced the arrival totals is expected to be close to the prediction. Muscat was enthusiastic about the fu- ture prospects of the sector, projecting that soon we should start attracting tourists who spend €5,000 a night in super luxury hotels which government wants developers to build. e recent trend of cheaper holidays certainly defeats arguments for pro- moting six-star hotels (some hotel own- ers were granted prime sites by Joseph Muscat's team in Castille at fire-sale prices to support such ventures). But wait ... a silent majority is voicing concern about the unbridled growth and the dire consequences on the quali- ty of life. is silent protest has coincid- ed with extraordinary growth in visitor numbers, traffic congestion in our nar- row streets and the consequent deterio- ration in air quality persisting through the summer months. Increasing the tourist numbers to three million with 900,000 cruise liner passengers means more carcinogenic fumes.