Let’s not have a nightmare after Christmas… | Philip Fenech

The prime minister has just expressed confidence that the situation will return to normality by around March. As someone who represents small and medium enterprises – including most of Malta’s leisure and hospitality industry – what is the feeling at street-level? Do the GRTU’s members share Dr Abela’s optimism?

Let me start with this: the leisure industry went through a lot of turbulence this year. In March, the entire market was shut down: and when we opened up again in July, it was at a time when tourism demand was down due to the global crisis. Meanwhile, domestic consumption fell to record lows. And then, in August, the clubs were asked to close down completely… and the bars were allowed carry on. Now, the bars have been forced to close, too. 

As for the ones that are still in business today: you have to bear in mind that the leisure industry is made up of different sectors. There are some that are mostly dependent on the domestic market; you have others that are mainly tourism-oriented; and then there are the ones that have a marketing mix, and cater for both.

So certain sectors of the industry - especially those that cater for the domestic market - are still somehow ticking over: though whether they are ‘doing well’ or not, is another question.

But then, the element that is completely tourism-related… those are obviously out of the market altogether. If you have a restaurant that always depended on the occupancy of a cluster of hotels – for instance, in Qawra… then you’re out of business completely. There are quite a few operators in this sector: and obviously, they’re feeling it,

So the situation, in a nutshell, is that business are essentially coughing up from their own funds, to keep themselves in the market; government is helping as best it can… and obviously, we are lobbying for stronger support to fill in this gap, until an eventual economic recovery…

On that point: how effective has the government’s recovery package - wage subsidies, vouchers, etc. – really been, in practice?

It helped. No doubt about it. The wage supplement certainly helped. The vouchers helped as well, to a certain extent: even if they went only to the domestic sector. But then again, it’s not just wages. A business also has rent to pay – and leisure business tend to be sited in high-cost areas – on top of water, electricity, and so on. 

And another thing that’s worth mentioning is that the social distancing regulations themselves also eliminated from the market certain establishments (mostly restaurants) that are so small, that they cannot meet the physical 2-metre spacing requirements between tables, for instance. Economically, it meant that what they’d be left with, in terms of occupancy, wouldn’t be enough to cover their expenses.  

So when you look at subsidies: yes, they helped. In some cases, they helped businesses directly. But in others, they didn’t really help at all…

This raises the question of what can be done, to keep businesses ticking over, beyond government subsidies and consumer incentivisation schemes. What sort of additional support are you asking for? 

There’s a lot than can still be done, and not just by government. The banks, for instance, could show a little understanding, by extending mortgages. Because the ordinary rules of engagement have changed. This is, after all, uncharted territory: none of us could predict how long this crisis would last. So we’re all improvising as we go along. 

And don’t forget that, before the crisis, there was an economic boom. There were a lot of projects on the go, all the time: extensions, refurbishments, and God-knows-what else. So we began the year with excess capacity – remember that we came out of 2019 with 2.7 million tourists. This means that, last March, our industry was geared up for those figures: and I’m not talking about bars now. I’m talking about bed content… about the direct demand, and the derived demand, across the whole cycle. 

It’s not just bars, restaurants and hotels… there are also the suppliers, the delivery-men… and entire chain of small operations, that all depend on Malta maintaining the previous year’s tourism figures. Not to mention the retail market: around 70% of which relies on tourism, too.

So a lot of people, across the entire spectrum, are now facing difficulties with loan repayments. And even just with ordinary trading loans. Because once you’re closed… [shrugs] that’s it. really. 

Banks do need a show a little more understanding about this situation… and stretch a little further, too. Especially at a time when they are also registering ‘forced savings’. Because if people aren’t spending, they’re saving: and that’s not a good thing, if it’s forced by circumstances.

But it also means that the banks themselves are liquid. So - just as everyone else has had to adapt to the new realities – the banks can make an extra effort, too.

As for government: I am aware that Keynesian economics is considered ‘dated’; but I would say that now is the time for it. Governments – not just in Malta – now have to pump more money into the economy. And there is, quite rightly, an understanding to that effect, within the European Union. State Aid is no longer considered such a bad thing… though there are restrictions, of course; and it’s only for the duration of the crisis.

In theory, that is also the reasoning behind the EU’s emergency recovery fund. But it doesn’t answer the question of how the money should be spent. What areas would you say are most in need of direct government intervention?

One priority would be to incentivise airlines – all of which are currently running at reduced capacity, with most of their planes grounded – to come back, when we open up in March. Because when that happens, we’re going to have to compete with other countries. 

And the competition will be fierce. An airline company will find it much easier to open a route to a much bigger-capacity destination, that can take millions, than to Malta. Though having said this: we are lucky, in a sense, because we have built up have very good relationship with airlines over the years. It’s a personal rapport: there’s a lot of love… we have 53 airlines flying to Malta, and part of the reason for that is…. they like flying here.

So that counts for something, too, at the end of the day. All the same, we still have to incentivise them. For a major airline, starting up again, after a prolonged shut-down, is not like ‘flicking a switch’. They risk losing millions, every day. And given how much Malta depends on those airlines coming back… this also means that the start-up process, in itself, will be a long and slow process. 

How long do you yourself predict, for a return to some kind of ‘normality’?

Until we get to a point when all businesses are at least functioning again – without needing subsidies, just to tick over – I’d say it will take at least two years, of slow, patient rebuilding. But at least – hopefully – it will have started…

Part of that process depends on the success of the vaccine – which, in any case, is out of our hands – but part of it also depends on our own behaviour in the meantime. You have separately expressed concerns about ‘excessive partying’ during the imminent festive season – but isn’t that also true of the industry as a whole? Doesn’t it depend on things – like socializing, for instance – that defy the current health protocols?

That’s partly true, but it also explains why the entertainment sector, in particular, has been so hard-hit. Nightlife… concerts… mass events, and all that… it is all, in fact, built on the very opposite of ‘social distancing’. It’s all about people meeting, hugging, kissing, dancing… which also explains why the concern is not just about economics. The pandemic has also affected our most basic, intimate human relations:  so there’s the impact on mental health to consider too.

But it doesn’t mean that all of it has to be eliminated, either. There are ways you can still socialise, while respecting all the health and safety protocols. It’s just a question of adapting to the new reality, as best you can.

But what we’re scared of is this: there are already indications that there will be displacement of business over the festive season. People are booking private parties in farmhouses, complete with DJs… and OK: it’s one thing, if it’s private parties organized by specific bubble: a couple, or a family, or a small group of friends. That’s perfectly acceptable... it is, in fact, what we should be doing. 

But we’ve also heard of parties for over 100 being booked at a farmhouse. And if that’s the case – and there may be quite of a few of these events – that’s going to defeat the whole purpose of all the national effort we have all put in so far. Not just the leisure industry - though it was hit harder than others… but the entire country.

At the risk of an unfair question: some might argue that you’re more concerned with the competition, than with the spread of COVID-19….

Some already have argued that. I’ve been accused, on certain blogs, of complaining only because others are ‘taking away our business’. But no, that’s not the scope at all. The scope is that… all this national effort, all these sacrifices we’re making – not just by losing business; but also by wearing masks, observing social distancing regulations, and all the rest of the stress and anxiety we experienced this year… our recovery from all that, now hinges on how successful the post-January recovery period is in practice.  

So what happens during the festive season has a direct impact on the bigger picture. Because if –after all this pain, and all the economic hardship we went through – the economy does do not start improving by around Easter, as predicted…  we will end up back where we started. The recovery period will only have put us back into retrenchment. And we will end up having to cure the effects of the festive season… instead of the virus itself.

Now, my message is: is this really worth it, just for nine days of the year? Don’t get me wrong:  I’m not saying that ‘nobody should party over Christmas’. Nothing of the kind. As long as people observe protocols, we can still have a good time, in every town centre. 

But the worst thing that can happen is if it all goes underground. Because people have a lot of pent-up tension, after all the anxiety of 2020…. and there’s a danger that they will vent it all at once, because they think they have an ‘escape route’: in the sense that, by going to an underground party, at a remote location, they feel ‘safe’. 

That’s what scares us the most.  There is a lot of tension building up – for let’s face it: after such a horrible year, people will certainly want to celebrate New Year’s Eve – and there’s a danger that we will end up in the same situation as the United States: which has just experienced a surge in new COVID-19 cases, after Thanksgiving. 

So, what I’m, suggesting is… let’s party responsibly. Let’s stick to organized, controlled parties, in different pockets here and there… where people can have a good time, in small groups, without endangering the whole national effort. At least, until we start the recovery process…