Tourist arrivals last year grew for the first time after three years of decline, and airport movements last January rose eight per cent over January 2004, Tourism Minister Francis Zammit Dimech said in Parliament yesterday.

Just over 1.17 million tourists visited Malta last year, an increase of 39,450 tourists, or 3.5 per cent over 2003.

Those gains meant Malta had recovered from the losses made in 2003 and 2002 although it had still to recover the losses of 2001, the minister said during the debate on the financial estimates of the Malta Tourism Authority (MTA).

Tourism, everywhere, had suffered over the past few years, he said. In 2001 tourist arrivals in Malta declined by three per cent, in 2002 they declined by four per cent and in 2003, by one per cent.

Tourist bednights last year dropped by 0.5 per cent over 2003. Total tourist spending rose by 0.6 per cent.

Dr Zammit Dimech said the UK market last year showed a drop of 4.3 per cent. The German market gained 7.8 per cent, arrivals from Italy were up 10.2 per cent, and the number of French visitors was up 12.6 per cent.

Dr Zammit Dimech said MIA's activity report of passenger movements for January showed that arrivals rose by 8.2 per cent over January 2004 while departures rose by 6.4 per cent - these figures obviously also including Maltese travellers.

Turning to tourist spending, Dr Zammit Dimech said that while tourist spending grew by Lm2.5 million, 0.6 per cent, last year, the Economic Survey for the first nine months of last year climbed by 3.4 per cent.

Making comparisons with competing tourist destinations, Dr Zammit Dimech said that according to World Tourism Organisation figures, the number of tourists last year globally rose by 10 per cent. In western Europe alone, growth was of two per cent while in southern Europe/Mediterranean the growth rate was three per cent, which meant that Malta's gain compared favourably.

The Malta Hotels and Restaurants Association (MHRA) had said in a report that occupancy levels in the third quarter of last year had risen but, sometimes at a cost in room rates. Five star hotels had seen a four per cent rise in occupancy and a five per cent improvement in room rates. Four star hotels saw a seven per cent improvement in occupancy but the average room rate fell marginally. Three star occupancy was unchanged but the room rate improved.

Indeed, NSO figures showed that 14.2 per cent more tourists stayed in hotels last year.

Dr Zammit Dimech said last year's results were pleasing and a recovery was evident, but the government could not be satisfied that that was enough. As had been said in the budget, the government wanted arrivals to climb by 50,000 per year. It was for this reason that the Malta Tourism Authority was being restructured.

The aim of the restructuring was for the authority to become more of a mover and not just a monitor. Targets were being established for gains from the various markets and segments and the pay of authority officials would increasingly be performance related.

Dr Zammit Dimech said the authority's chairman, Chris Grech had said he would end his term on March 31 but would continue to help in the drawing up of strategies for growth.

The next step, the minister said, would be amendments to the MTA Act, particularly with regard to appointments, including segment advisory groups, which would be constituted in consultation with the various tourism sectors and the Opposition. A call had been made for the appointment of a managing director, but no appointment would be made until all were satisfied that the best person for the job would be appointed.

The future depended to a great extent on how competitive Malta could be. Competitiveness could not be measured on price, but on value for money.

Opposition tourism spokesman Evarist Bartolo said it was good that the number of tourists was growing but there were various ways how to measure performance. Malta saw more tourists last year compared to 2003 but market share remained low compared to some years ago. Malta was being increasingly seen as a "mature" destination that was getting tired and urgent action was needed to revitalise it in the eyes of prospective tourists.

The biggest problem Maltese tourist businesses had was to maintain economic sustainability.

In the budget the government had announced various measures which made life more difficult for tourism. It was calculated that costs for a four star 100-room hotel were up by Lm1,000 per month because of the price increases for kerosene, other fuels, water, electricity and wages, for example. The situation was such that he knew of a reputable four star hotel charging Lm4 a day. Others would not go so low but were charging Lm6 - half the normal rate. Hotels were not finding enough funds for re-investment.

Ensuring sustainability was essential since 20 per cent of private sector debt with the banks, or Lm230 million was in the tourism sector. And it was worrying that bankers saw tourism as a "very high risk" area.

The conference and incentive travel sector was still not sure what amount of VAT could be recovered in terms of what was announced in the budget. Indeed, had it been EU membership which imposed the need to refund VAT because this tax could not be charged on intra-European travel? Would VAT be charged on non-European conferences?

The government spoke on the responsibilities of the private sector, but the government had a major role to improve the tourist product. The government needed to upgrade the country to five-star levels - in areas such as the environment and the roads, for example. Without that, it would be useless spending more on marketing.

Mr Bartolo said that while one often spoke on hotel investment, Malta dearly needed investment in several other areas of the tourism product. Serious public-private partnerships were needed, for example, for the better presentation of historic sites. Visits to such sites needed to become an experience. Why had the arrangement with BOV International for improving the Tarxien Temples been pending for years?

The MTA, formed six years ago, had absorbed Lm53 million so far. All competing destinations had a strategic plan for tourism. Malta's, however, would only be published at the end of this year.

To date the MTA only established targets, such as that of three per cent annual gain, which were not realised. A whole country approach was needed in the drawing up of the strategic plan, but there was also need for a whole government commitment for tourism. The MHRA itself had complained over the poor state of the environment, the roads, the beaches and the cultural sites, all of which were government's responsibilities.

And, Mr Bartolo said, Malta needed to decide whether its sea would be used for tourism or fish farms. The two could not co-exist and important diving sites had already been harmed by the fishfarms - let alone the Cirkewwa harbour development which could have been better handled.

It was good, Mr Bartolo said, that tourist arrivals rose last year. More were needed, and tourists also needed to spend more here. Spending was down 2.8 per cent and the length of stays had declined last year. The drop of 20,000 tourists from the UK was a source of concern. It was no wonder that the MHRA had expressed concern and rightly insisted with the government to improve the state of the country.

Mr Bartolo observed that Malta was one of very few EU countries where tourism was of major importance for the economy. For the EU, tourism practically did not exist and there was no specific policy for it. Decisions were being taken in the EU without proper study of their impact on tourism. The tourism minister therefore needed to use his presence at the next European Tourism Forum meeting and at a related meeting of tourism ministers to put tourism on the EU's agenda.

It was good that the restructured MTA would have a European Unit. It was shameful, however, that Malta's representation in Brussels did not include a person whose work focused on tourism. The parliamentary European and Foreign Affairs Committee also needed a working group on tourism. As it were, Malta was not geared to monitor and react to draft EU laws which had an impact on tourism.

Mr Bartolo said he was surprised that the minister had not said anything on the ills of the MTA which had led to the need for restructuring. He was disappointed that the audit firm Deloitte in its analysis of what had gone wrong in the MTA had avoided reference to political responsibility - such as interference. Unless such interference, in areas such as recruitment, stopped, the MTA could not move forward. The unfortunate thing was that ministers were hands on where they should not be, and hands off when they should be taking action.

Could the minister explain why the MTA was sponsoring the musical 1565? Would this increase tourism?

The Deloitte report made an important point that despite the importance of tourism for the economy, this sector had been stagnant for five years and Malta had lost market share.

The report said Malta could accommodate as much as 1.5 million tourists, raising revenue by Lm13 million.

Mr Bartolo said the tourism sector was the heaviest taxed of all tourism sectors in the EU, a factor which was leading to high prices. The government should consider reducing VAT on restaurants to five per cent, while acting to fight tax evasion.

The Deloitte report rightly underlined the need to improve 'Product Malta' by the government, and the need for better control on MTA spending by its overseas offices which had gone on unchecked for years.

The report spoke of various "republics" in the MTA which did not speak with each other, something which needed to be avoided in the new structure.

It was worrying that the Deloitte report showed that of every Lm100 spent by the authority, only Lm58 went on marketing and promotion. This was where political responsibility came in, especially because of the way jobs had been given to supporters. In four years the payroll rose by Lm800,000.

It was good that the authority would now have leaner structures with clear purposes. Far too much time had been spent on analysis of the workings of the MTA itself and the focus now needed to be shifted once more to attracting more tourists and creating new markets.

Robert Arrigo (PN) said restructuring of the MTA was needed also because times had changed. He suggested the MTA should set up a unit to coordinate with Air Malta on better utilisation of seat capacity.

There was also need for better coordination with Malta International Airport, which was seeking to attract new airlines to Malta. Arrivals from Scandinavian countries rose sharply last year because of flights to Malta by Snowflake.

The club/tourist village travel concept to attract tourists from central European countries also needed to be given greater importance.

Mr Arrigo said the gap between arrivals in winter and summer had remained far too wide and clearly one needed to place greater emphasis on the former. Achieving arrivals of 1.5 million tourists was feasible, with proper planning and consultations.

Mr Arrigo called for better statistics, saying it was not good enough that 17 per cent of arrivals were shown under the heading "others".

He referred to Mr Bartolo's remarks on MTA recruitment and said he had a problem identifying who the supporters the Labour MP had mentioned actually supported.

Concluding, Mr Arrigo said sick leave across the industry was far too high and eroded competitiveness.

Winding up, Dr Zammit Dimech said he agreed in principle with Mr Bartolo in his comments on market share, but one needed to keep in mind that the number of destinations competing for the same market had increased.

The minister said the propsed VAT refund for conference and incentive travel, mentioned by Mr Bartolo, was not restricted to EU conference organisers.

As for the budget measures, it was worth recalling that the surcharge on water and electricity would be applied to a lesser degree on hotels. And the eco-tax would help to improve the environment, from which tourism would benefit.

The government was aware of its responsibilities to improve the tourist product. The environment had been placed at the top of the government's agenda, along with employment and education.

Evidence of this was embellishment of various toursist areas and the St George's Bay project and the cruise line terminal, not to mention the new airport terminal some years ago. Investment was also being made on cultural sites including the visitors centre at Hagar Qim/Mnajdra, the refurbishment of the Roman Villa and better facilities at Ggantija.

The route from the cruise liner terminal all the way up Glormu Cassar Avenue, used heavily by tourists, would also be improved. Plans would be announced shortly.

Although the average per capita expenditure by tourists had declined, total spending by tourists had increased by 0.6 per cent.

Turning to the EU, Dr Zammit Dimech said Malta was among the countries which had insisted that the constitution mentioned this sector. The government agreed that tourism should be a policy area to be given specific importance in the EU. He was pleased that EU Commissioner Gunther Verheugen would be coming to Malta for the European Tourism Forum and Malta would push for greater importance to be given to this sector at the forum.

Dr Zammit Dimech said the new European Tourism Unit at the MTA would have a link with the Ministry of Tourism for better monitoring of developments in the EU.

The government, the minister said, was shouldering its responsibility at the MTA by insisting on change. The government was giving Lm8 million annually to the MTA and it had a duty to ensure that its policies were implemented and that the funds were used well to benefit the national, not particular interest.

Dr Zammit Dimech referred to Mr Bartolo's questions on the sponsorship for the musical 1565. The authority, he said, had sponsored many groups and activities which Mr Bartolo had not mentioned. He saw nothing wrong in a part sponsorship of a musical on an important part of Malta's history. The MTA would buy the costumes, and once the musical was over, it would use the costumes for its own events.

Concluding Dr Zammt Dimech called for an all round effort to further improve tourism.

The estimates were approved after a division, the Opposition voting against.