Issue link: https://maltatoday.uberflip.com/i/1430105
T he predicament currently facing the tourism sector is a real one and unfortunately there is no cru- sader to represent them in their quest to improve quality and raise standards. Can we ignore the sector when it is estimated to account for around 5% of the economy in 2019? And this figure increases further to 17% due to induced contributions. Really and truly, there exists a sclerosis in the system that so far has blinded op- erators not to take up arms and protest that they are under severe pressure to earn a decent return on capital invested. In the luxury end of the hotel segment the average occupancy levels in 2019 hovered around 80% yet with lacklustre daily rates ranging from €169 to €76. Surely, climate change is another fac- tor which will not help us attain the sta- tus of a champagne and caviar island. Changing demographics will have a ma- jor impact on visitor demand in coming years. In particular, trends such as the con- tinued growth of the global middle class and ageing populations mean that the global population will generally be rich- er and older in the decades ahead. Are we catering for this change in Malta? Additionally, the rise in prominence of emerging generations will further up- end current considerations that fuel the tourism market. Moving on, we cannot ignore the climate factors that influence the central Mediterranean. Southern destinations such as Malta are likely to face extreme heatwaves in the summer seasons, and of course this will alert MTA to undertake a serious rethinking of how travel activities are offered and how tourism is managed over the long- term. Quoting Raphael Aloisio, a Financial Advisory Leader at Deloitte, he said that "the writing was on the wall" for the tourism industry, and that increas- ing supply of accommodation property was starting to have an impact on prof- it, with a ten-year growth trend having started to stall in 2019. He highlighted that it was important to stop and re- flect after the "tsunami of difficulty" the industry has been through during the Covid era. An apologetic attitude was taken by MTA CEO Johann Buttigieg who wel- comed the positive September 2021 fig- ures. He is quoted to remark that "is is great news for Malta, especially given the circumstances we all have had to live with in the past months, and nat- urally, it fills us, as an authority, with a strong sense of positivity, coupled with the right amount of energy, to look for- ward to ending 2021 and starting 2022 with further positive results. He said he believed that MTA's marketing efforts, together with the €20m-strong tourism recovery plan which laid out together with the Ministry for Tourism, as well as, the excellent way in which the health authorities handled, the pandemic, all played a crucial role in the results." un- quote. A less sanguine attitude was taken by e Chamber of Commerce which conducted scientific research and posted a number of valid recommen- dations (supported by the Seed study). e writer has followed with interest a seminal study prepared by Chamber of Commerce on this important sector prepared in tandem with Seed Consul- tancy. A number of salient proposals have been reproduced in this article. e Chamber's report shows inter alia that a substantial number of 55,597 li- censed tourist beds were available in 2019, and that licensed bed stock could go up to 100,000 by 2030 - if all tourist accommodation projects currently in the pipeline materialise. is is certainly unhealthy, even if as predicted, over 3.2 million visitors do arrive by 2030. is would result to roughly 36.5 million available bed nights. e Chamber's report warns that "is will result in an unprofita- ble hotel occupancy of 61.3 per cent. Adjusting for those who would stay in private non-rented accommodation, currently, 16 per cent of all guest nights, this would result in the excess capaci- ty of available bed nights to increase to 17.7 million. It stands to reason that increasing un- licensed bed-stock would dilute occu- pancy even further, which then stands at close to 50 per cent" the report says. Realistically, one cannot underestimate the effect of lockdowns during 2020/21 as tourist expenditure plummeted from €2.2 billion in 2019 to a mere €455 mil- lion in 2020. Again, the sector's gross value added (GVA) contracted by more than 64%. e phenomenon of visitors seeking non-collective accommodation cannot be overlooked - given that those choos- ing hotels spent an average of 6 days in Malta, which is less than the 9-day av- erage spent by those opting for private accommodation (with host families). As can be expected, the share of guest nights spent in private rented accom- modation, increased by 8 percentage points, from 30% in 2016 to 38% in 2019. e Chamber recommends an educa- tional campaign to increase the number of host families; mainly targeting young families and pensioners who could ben- efit from extra income at their particu- lar stage in life. Another urgent reform is to lower VAT on all tourist services, including restaurants, to 7%. e anticipated in- crease in business and extra revenue will improve conditions of work and upgrade the sector to pave the way to- wards reaching a champagne and caviar status. Meanwhile, the present scarcity of workers can be explained as most of the new jobs created in the tourism sector between 2010 and September 2020 were taken up by EU and non-EU nationals (increasing by 7200). Concur- rently, the number of Maltese employed within the sector fell by around 3,100 employees during this period. Certainly, one cannot discuss tourism without studying the present connec- tivity and how it evolved over the years. With the advent of low-cost carriers, which started flying to Malta in 2006, Air Malta and other legacy carriers in- evitably started to lose market share. By 2020, only 34% of seat capacity was supplied by the national airline and this resulted in heavy losses albeit there has been a number of attempts to refinance the airline. Many concur, we that as a national air- line, it is too important to fail and follow the sad demise of Alitalia. On the other hand, the hotel industry needs the col- lective drive of all stakeholders to stop the mad race to build more structures - when logic dictates that it starts pulling down ageing units as these are lowering standards. Many tourism evangelists have been reassuring us that Malta can succeed to remodel its tourism product, redefine branding and bolden our conviction to quality and authenticity. Only thus, can we fulfil the dream to join the club of champagne and caviar tourism; omitted we linger in the sun, sand and cheap beer category. An initiation to champagne and caviar tourism George Mangion 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 8 OPINION 18.11.2021