New hotel investment is key to tourism success

There is no doubt that the accommodation sector is a fundamental component of the tourism industry.

Almost 75% of our visitors stay in what is termed ‘collective’ accommodation, which represents hotel-type beds. Hotels have a major influence on the competiveness of our islands; on the reputation of Malta as a tourist destination; and ultimately on the nation’s tourism growth prospects.
Hotels are also critical to the development of a number of market segments. This implies how important it is to ensure that effective government policies are in place to support, and direct, the development of this sector in line with our growth objectives.

Over the years the hotel sector has contributed to the economic and social development of the islands in no small way. It is critically important that it continues to do so in the years to come. It is also of significance to note that, traditionally, hotel investment in Malta is almost entirely locally owned.

Although we have registered progressive growth in tourism over the past six years, until recently the hotel industry had been expressing some concern regarding the long term sustainability of the industry. Among other things, hoteliers lamented rising costs which were affecting their competitiveness and undermining the investment capability of the sector, both in terms of refurbishment, and even more so in terms of possible new hotel development.

Evidently, there was no appetite to invest in new hotels and between 2007 (which was when we started to register growth in arrivals) and 2012, the number of available hotel beds dropped by almost 4%.

Despite the improvement in performance over these years, bar the dip in 2009 as a result of the global economic crisis, we started seeing a number of hotel products growing old and looking tired and dated. This was negatively affecting the satisfaction levels of our visitors and, therefore, slowly, our competitiveness.

Faced with this predicament, from the very start the government worked on a number of fronts to find ways to strengthen the industry’s sustainability. In the first instance, we aimed at maximising connectivity to our islands through current and new route expansion, as can be evidenced by recent growth figures, which last year reached an all-time record of 13 million bed nights, representing 1.7 million arrivals, and more importantly better yields.  

This positive performance not only increased the demand for new hotel beds but also, even more importantly, instilled renewed confidence among tourism stakeholders.

In response to this tourism demand growth, we introduced new schemes to incentivise the expansion of existing hotels, and rather than taking up more land through the development of new projects, we allowed the development of extra floors on existing hotel stocks, which also improves their cost structures through further economies of scale.

We also undertook a number of measures to help stabilise the prices of energy sources, main overhead for the industry, and more significantly we delivered on our promise to reduce energy costs by 25%. This measure alone will translate into millions of euros in savings for the hotel sector, which shall strengthen its competitiveness and help it to provide capital for re-investment in the product.

These initiatives all paid off, and the response by the hotel sector was indeed very encouraging. Over recent months we have witnessed new hotel development and the inauguration of a number of hotel refurbishment projects which represent millions of euros’ worth of investment, an improved product and more employment opportunities.

The investments in the upgrading of hotels and in new developments we have witnessed over the past months, among others currently in progress and underway, depicts strong confidence on the part of the tourism industry stakeholders.
This development also acknowledges the tourism industry’s positive performance which, after a number of years, has started to produce an even better return that allows for further funds for re-investment purposes.

The positive and optimistic economic climate we are witnessing is also the result of coordinated efforts between the private sector and the government through a number of joint initiatives that are underway, together with others planned for the future.
In March, I launched the National Tourism Policy for the period 2015-2020, based on the principle of sustainable development, which underlines the importance of safeguarding the positive aspects of the country’s attractiveness as a tourism destination for the benefit of visitors and the host population alike.  

Our vision for tourism is based on the concept of ‘controlled growth’, which is also achievable through the targeting of appropriate new source markets with the aim of achieving higher rates of economic return.  It is also based on the principle of aiming for high quality delivery at all levels of the tourism value to, in turn, improve our competitive positioning in the wider international tourism market.
The recent announcement by the Corinthia Group of a €400 million investment in the development of a luxury hotel project on the site currently occupied by the San Gorg Corinthia, the Corinthia Marina and Radisson Blu hotels in St Julian’s, is an excellent investment initiative example that captures the essence of our tourism policy.

This multi-million investment will deliver hotel rooms with a higher level of quality in luxury accommodation through major innovation that will deliver higher yields, better returns and increased employment.

Development and improvement of the tourism product at all levels is key to our success, as customers are becoming increasingly demanding and expecting higher quality together with new experiences.

It would be foolish if we were to assume that we can continue to attract the numbers we now have become accustomed to, without seeing to product development at all levels.

The main challenge for the tourism industry is to continue providing even better value for money. This can be achieved through the upgrading of product offerings, innovation, and the introduction of new services and facilities that provide a more varied tourism experience.

All this will help us compete more effectively in the global market place and is the path we are determined to follow, in perfect synergy with the private sector.