Too chummy with Labour? | Tony Zahra

Tony Zahra, hotelier and president of the Malta Hotels and Restaurants Association, is visibly irked when I ask him directly whether his organisation is too chummy with the new government.  I ask this question in light of the organisation's support for the government's plan to partially privatise Enemalta. For I find it a bit difficult to see a direct link between the desirability of Chinese shareholding in Enemalta and the fortunes of Malta's tourist industry. But his answer to my question, which suggests that any solution is preferable to the status quo, says a lot about the sense of frustration felt by the private sector at the dismissive attitude of the previous government towards any criticism by those sectors which were traditionally close to its fold. Still, Zahra seems oblivious to the risks entailed in the current government's policy of co-opting the private sector in decision making.

A case in point is the participation of the MHRA in a committee entrusted to draft a new policy on hotel heights, which would effectively allow hotels to rise over and above the extra two storeys above local plan limits granted to them in a policy devised by the PN government. Zahra himself is a direct beneficiary of the policy proposed by the previous government and enacted in May by the present one. I'm reminded of this just I enter the hotel: I can't help but notice a planning application dating back to 2009 stuck to a column, which foresees an extra two storeys for the San Antonio Hotel.

The interview starts on a chummy note, for it's very difficult not to warm to Zahra's charm and his media friendly demeanour (in fact, he accepted to be interviewed just an hour after landing in Malta from a long business flight). He literally enters the hotel with luggage in hand.

I point out to Zahra that the MHRA immediately welcomed the memorandum of understanding signed between the Maltese government and China with regards to the sale of part of Enemalta to a state-owned Chinese company, which would also take on part of the corporation's debt. But how does selling a stake in Enemalta to China benefit the tourism industry?

Zahra immediately points out that the MHRA has been vociferous on the energy issue over the past five years.

"We have consistently said that what was happening in Enemalta was not correct."

He explains that over the past years, his organisation has been hitting out at inefficiencies at Enemalta, especially in discussions held at the Malta Council for Economic and Social Development.

He refers to statistics showing that for every €1 of oil that is burnt, the extent of electricity produced stands at 30 cents. Moreover, electricity revenue was at about 25 cents. On the other hand, in Europe the energy produced stands at 50 cents for every euro spent. This was due to the various inefficiencies plaguing the corporation.

"We were constantly telling the government that it was making us completely uncompetitive. We were always told that there were no solutions. So when someone came up with a solution, we said, 'Ah, so there are solutions', and we welcomed any initiative that will help us turn this dinosaur in to a viable operation."

I point out to Zahra that the alternative being proposed would entail a loss of sovereignty over the energy sector, because not only Enemalta will be partly privatised, but it would also buy its fuel for 18 years from the same private supplier through a different agreement with a yet-to-be-chosen bidder. Isn't there a risk that decisions related to energy from then onwards will be taken by foreign companies who aren't sensitive to local realities (among them concerns related to tourism)?

Zahra's answer suggests that, at this stage, things can't get any worse.

"The energy organisation, as it stood, was a millstone hung around the country's neck and there was absolutely no effort to take away this millstone from our neck. So I welcome any investment in Enemalta."

He asks, "Why should we be concerned that someone is at least doing something? We should be very happy because for five years we were told that nothing can be done".

He also reveals how two years ago, he had discussed this issue in a meeting with former finance minister Tonio Fenech, who at that time was also responsible for Enemalta.

"He offered me Enemalta for one euro... he told me that provided that I was willing to buy the corporation with all its debts, I would have it for just one euro. That was the value he gave to Enemalta."

I point out that foreign energy companies are not charitable institutions and will come here to make a profit.

But as "long as they supply energy more efficiently than Enemalta", Zahra is not concerned.

It is at this point that I ask Zahra whether the MHRA's position in favour of the partial privatisation of Enemalta is a case of the MHRA becoming buddy-buddy with the new government.

Zahra is visibly taken aback by the question.

"I'm sorry... I am chummy with any government, but I will always say it as it is. And for five years, whenever I raised the Enemalta issue, I was ridiculed and told that there is nothing to do because of the price of oil. Then, we found that there were other factors influencing the price of oil," Zahra says, alluding to the oil procurement scandal.

"Nothing was transparent, and I said this in January, before the election."

He also insists that the only alternative to this was the solution put on the table by the new government, suggesting that if other alternatives were presented he would also welcome them.

"So if welcoming this solution means that we are chummy with the new government, so be it. I am representing my members, and my members want action."

That said, Zahra makes it clear that the MHRA will be very vigilant to ensure that the new government honours its electoral commitment to decrease energy bills for the private sector as from 2015.

On its part, the government has been keen to involve the MHRA in drafting planning policies which have a direct bearing on the industry.

The new policy drafted by a committee mainly composed of industry representatives is proposing a complete relaxation of building heights for four- and five-star hotels located in development schemes and outside urban conservation areas.

The objectives of the new policy on hotel heights proposes that four- and five-star hotels will be free to add more than two storeys than permitted in the local plan, as long as the design "constitutes a landmark having unique aesthetic characteristics within the urban context".

A policy drafted by the Malta Environment and Planning Authority under the previous government and approved by the current administration in May limited the number of floors to be added to two.

The working group appointed by the government to draft a new policy regulating hotel heights is composed of two MEPA officials and six representatives of organisations involved in the tourism sector, namely the Malta Hotels and Restaurants Association, the Chamber of Commerce and the Malta Tourism Authority.

My first question is, wasn't it enough to give hotels the privilege of being allowed to build two extra storeys over and above local plan levels?

Zahra points out that the idea of two extra floors on hotels - over and above the local plan - had been "agreed upon with the previous government before the election". The newly elected government immediately approved the policy proposed by the previous administration, which had been issued for public consultation under the Nationalist government.

"The new government believes that there is scope for having landmark buildings. We are not against having landmark buildings, as these buildings can become attractions in themselves. So we are sitting on this committee and agreeing with the new policy, provided that the policy is aimed at having landmark buildings."

I point out that MHRA legitimately represents the financial interests of its members. Is it wise to have a committee entirely composed of representatives of the tourism industry?

Zahra disagrees, pointing out that the Chamber of Commerce cannot be labelled as a representative of the tourism industry and that the government itself is represented by the Malta Tourism Organisation, and ultimately the committee is chaired by a MEPA officer.

"In any case, we did not select the committee ourselves. We were asked to sit on it and we are participating in it."

Is there a risk of an oversupply of rooms through the addition of extra floors on existing hotels?

Zahra points out that the aim is a "consolidation" of the industry.

"What we are looking at is not necessarily an increase of rooms. I think we will lose some rooms which are not sustainable, and these will be replaced by others which could be more profitable.  One needs a readjustment to market conditions."

Isn't there a risk that this new policy will result in a lot of construction work taking place in prime tourist areas, something which could backfire on the industry?

"I am far from convinced that all hotels will be asking to develop extra storeys," replies Zahra.

I point out to Zahra that the San Antonio Hotel, of which he is one of the owners, applied for two extra floors back in 2009, and that this was only made possible by the new policy allowing hotels to rise above the limits imposed by the local plan.

Zahra insists that this application has been pending for three years.

"Three years ago we did not know that there was going to be a change of government."

He also clarifies that the extra two storeys were already foreseen in the policy proposed by the PN government, something which shows cross-party agreement on this particular development.

The new government also has plans to encourage agritourism, which Zahra welcomes.

"It will help bring more visitors to rural areas, while helping farmers to rent some of their rooms. It will attract a new niche market we need."

Isn't there a risk that we end up with a number of small hotels interspersed in the Maltese countryside, thus justifying more construction outside development zones?

Zahra insists that agritourism establishments should be limited to a maximum number of rooms, as happens in other countries.

"If you have more than 15 rooms it should not be even considered as agritourism. There should be a clear limit on the number of rooms one is allowed to have."

Does it make sense to continue building new hotels, considering the existing establishments already occupy a significant part of Malta's limited coastline?

Zahra replies that there are no applications for new hotels at the moment, a claim which is not entirely true, since an entirely new hotel has been recently proposed in St Julian's. But on principle, Zahra is sceptical about the need to have more hotels.

"During the peak season, we are reaching a level which we cannot surpass. We are what we are: we have a small land area and you cannot fit a million people a month in the space we have. We should reach a level which we can maintain safely from the facilities point of view."

He also warns against increasing the share of tourism in the Maltese economy.

"Tourism already represents 30% of the Maltese economy and 35% of government income. If we take it further, there is a risk of overdependence on tourism, which could backfire if something goes wrong with tourism... A single terrorist attack is enough to shake up the industry."

He is also sceptical about boutique hotels.

"All these things are very nice at face value, but the cost of running a 50-room hotel is considerable. You might end spending the same amount as you would running a larger hotel, while getting less revenue."

The latest NSO figures show a remarkable 3.8% increase in tourist arrivals and a 3.6% increase in the number of nights in July. Can the tourist industry continue to grow at this rate?

In March, Zahra had already foreseen that we were going to have a "perfect summer".

"We are on target to have an extra 100,000 tourist arrivals this year. We are confident that 2013 will be another record year."

But he warns that this should be no excuse for complacency.

"The tourist industry at this moment is recovering from the effects of the 2008 global financial crisis. In 2009 we experienced an unprecedented dip in revenue. It is only now that we are recovering to 2008 levels in terms of income, but our costs are much higher."

Zahra insists that the tourist industry needs three things to become sustainable: an increase of tourism in shoulder months, a decrease in utility bills and a decrease in VAT from 7% to 5%.

Zahra is quite optimistic that even 2014 will be another record year, with another increase of 50,000 tourists. But what is certain is that most of the increases are still taking place during the summer season.

"What we need now is to concentrate on the winter and shoulder months. My dream is to have 160,000 tourists arriving during every single month of the year."

The way forward is to create more activities which attract tourists throughout the year. He points out that the organisation of operas in Gozo attracts 800 German tourists.

"We need to organise an activity every week, targeted at different niche markets to bring in more tourists."

One issue which has a direct impact on tourism is the still-unsatisfactory public transport service. Zahra speaks of an ongoing dialogue with Arriva to improve the service but is disappointed by the constant changes in Arriva's management structures, which means that discussions always have to start from scratch with the appointment of every new general manager.

He also reiterates his opposition to the discriminatory tariffs, through which tourists (even EU citizens) have to pay significantly more than locals.

On his conversations with former transport minister Austin Gatt, Zahra says that he's being "very diplomatic" in recalling how Gatt "did not take our criticism kindly".

In fact, Gatt is clearly not in Zahra's good books.

"When we were calling on the government to allow low-cost airlines to operate, he used to call the MHRA the 'low-cost at any cost brigade'. This is the same minister who is now retired and does not want to comment anymore, the same minister who used to call us stupid and idiots..."

Zahra now feels vindicated, arguing that without low-cost airlines "the tourist industry would be finished".

The MHRA has lately expressed concern about the proliferation of unlicensed restaurants in the countryside, such as those organising majjalati.

"This is clearly an uneven playing field. People who do not follow the law do not have to abide by regulations, which come at a cost for legal operators. Today, the very compliant cost lots of money. Therefore those who are non-compliant enjoy an advantage over others."

Illegal hunting blots Malta's international reputation. Isn't the MHRA concerned?

On this issue, Zahra is once again very diplomatic, referring to the hunting phenomenon as very "divisive".

"We have a situation where hunters are saying that too much of a fuss is being created by the anti-hunting lobby and it is this which is creating the problem, while those against hunting argue that it is illegal hunting which harms Malta's reputation. We are trying to encourage both sides to talk to each other. We are part of that dialogue and our aim is to stop the illegalities."

Zahra's ultimate goal is to turn tourism in to a non-political issue.

"We should simply be concerned with which of the two parties can do the best for our industry."

He makes it a point to dispel the perception that the MHRA is close to any political party.

"We are not chummy with anybody, we like to say it as it is. I was very irked by this suggestion. We say it as it is, not as someone wants us to say it. My friend is the person who tells me I have a problem and not someone who comes up to me every morning to say 'Tony, you're a great guy'."