A new strategy for our tourism industry

The recent call by the Malta Hotels and Restaurants Association (MHRA) to explore a new vision for our tourist industry that takes into account Malta’s maximum tourist carrying capacity should not go unheeded - but it should not have come from the MHRA. But then the term of the board of the Malta Tourism Authority (MTA) has elapsed and a new one is still to be appointed!

Tourism planning is the prerogative of the government, after due consultations with all stake holders; for it is the government that must somehow reconcile the country’s conflicting national physical, environmental and social limitations, not to mention the conflicting  interests within the tourism industry itself.

Since the late seventies Malta’s dependence on the tourist industry was such that a crisis in the industry was a national crisis. The tourist industry itself depended for 70% of its custom on the UK market, which was dominated by British tour operators.

There was practically a crisis every time the Spanish devalued their peseta. Malta, with no financial services or gaming sectors to rely on, had to go the difficult road of subsidies and introduced the forward buying rate for sterling, which was actually an ad hoc devaluation limited to the tourist industry. Malta had no choice and for many years this subsidy dominated tourism policy.

This lasted well into the early 2000s when it was made clear to Malta by the EU that such state aid was not permissible under its rules. Luckily the first well researched tourism planning documents produced for Malta by the MTA, or its predecessors, were at hand. These were the Horwarth and Horwarth and the PA Cambridge reports. Incidentally, the Horwarth and Horwarth report was used extensively in the compilation of the supporting documents of Malta’s first Structure Plan in 1991.

These reports were instrumental in pushing Malta away from subsidised mass tourism into niche markets and diversification into the continental markets. They recognised the social limitations of tourism, and tried to set a limit to the volumes of tourists attracted in summer.

Subsidies were gradually phased out over some three years and half the massive savings made were invested in marketing, mainly TV advertising in the UK and stronger marketing on continental Europe. For two consecutive years our tourist industry achieved a volume of more than one million tourists without subsides.

As luck would have it, our tourism industry was faced with another crisis in the mid 2000s. This time it was practically all of our own making.

In the mid 2000s, the MTA went through a lengthy restructuring exercise that, among other things, led to several changes of chairmen and CEOs over a period of two years and disrupted its marketing activities. The MHRA played a prominent part in this turmoil, during which it was evident to seasoned observers that the people who were calling the shots were not accustomed to operate at the macro level in which they found themselves.

This led to a series of blunders that threw the tourist sector into a free fall: television advertising in the UK was called off and instead the MTA advertised considerably on CNN, foolishly contracted an expensive Swede to ‘brand’ Malta’s image and squandered money subsidising speedboat races and events like Isle of MTV.

Worst of all, the MTA decided to ‘invest’ by closing most of its offices and representations abroad only to find out, after two years, that it could not do without them… It then had to spend more money to reopen them. The real cost of this mess remains unknown, for this meant that the MTA did not market Malta abroad properly for three years.

All this upheaval coincided with the emergence of low cost airlines in the Maltese market and this led to a colossal debate between Air Malta and the MTA. Air Malta had a well tried business model that had functioned successfully for donkey’s years. It subsidised the politicians by employing surplus labour and the tourist industry by flying to a good 20% of its network to marginal airports, supporting itself with the profitable routes to London, Manchester and Frankfurt.

The introduction of low cost airlines right in the middle of a tourism crisis remains an untold story. Low cost airlines, if properly introduced, could have dramatically reduced our dependence on the UK operators whose bullying tactics were obvious.

The last thing to do was to trade the bullying of tour operators with that of low cost airlines. But the MTA - or better still the MHRA – panicked, and with an election looming on the horizon, the government gave in.

The real issue was not the undermining of Air Malta, but the undermining of the lucrative scheduled air traffic business when this should have been an important factor in the future of our tourism industry. British Airways saw the writing on the wall and promptly left. It took 10 years for them to return.

Malta ended up once again in the path of indirect - and not so indirect - subsidies: not only of tour operators, but also of low cost airlines and our own national airline.

And the results achieved in the last years? We have been told about years on years of record breaking but the feeling on the ground is not that happy. I am told that the current tourism data is not strictly comparable to the past, which is a diplomatic way of saying it is not that accurate as in the past, when it was based on a real head count of disembarkation cards.

Can someone explain why Bugibba, our second tourist resort, is a ghost town in winter with most hotels closed down, or how come Malta lost some 5,000 beds in hotels and tourist villages since 2003 while tourist numbers supposedly rose from 1 to 1.5 million? Why, as claimed by Robert Arrigo, the Opposition spokesman on tourism, the lower end hotels are contracting for next winter at €12 for half board?

How come that during these last ‘boom’ years, hotels could not raise their prices to enable them to register profits and allow for refurbishment? This has happened in spite of a massive improvement in our heritage sites and tourist product since our entry into the EU.

The MTA’s budget was practically doubled over the last 10 years but it still runs a deficit. The volume of tourism rose from 11 million nights to 13 in the last 10 years but nobody knows how much of this number is generated by the 30,000 foreign residents who are now living in Malta. These are not tourists and they are contributing to a boom in the rental market rather than in the tourism industry.

May we know how much of the MTA’s budget is spent subsidising low cost airlines, Air Malta and events with dubious benefits to the tourism industry, such as Isle of MTV?

The MHRA’s call for a new vision for our tourism industry has to be heeded. It is definitely the time to give a good look at the role that the tourism industry has to play in the next years, while learning from past mistakes.