Economic figures reveal serious problems in tourism

Opposition tourism spokesman Evarist Bartolo said in Parliament that figures just published in the Economic Survey revealed the seriousness of the problems in the tourism sector.

Speaking during the budget debate, Mr Bartolo said that in September employment in tourism dropped to its lowest level in the last five years; from 9,083 in 2000 to 8,360 in September.

An analysis of wages showed that growth in tourism was the lowest at 2.1 per cent. This was lower than inflation and lower than other sectors of the economy, including manufacturing, which had its own problems.

Between 2002 and 2004 there had been a decrease in the value added of tourism. In 2002 gross value added in tourism was Lm85 million, this year it was Lm83 million. Even more worrying was the gross value added not as a part of the GDP but as part of gross tourism earnings: the resultant figure from 2002 to 2005 had dropped by six per cent to 40 per cent. This meant Malta was forking out more money for tourism than it was reaping from it: the so-called leakages.

The share of tourism in gross value added was dropping. In 2002 it was 7.4, in 2005 6.8. By contrast the property sector was leaving double what tourism was leaving, 14 per cent, which explained why more people were preferring to leave the tourism sector and move over to property.

Tourism bank loans from June 2004 and June 2005 had increased by only 1.2 per cent. This had gone into hotels which were closed down in favour of land development. Hoteliers were also rolling over their loans because they could not service them. There was new investment in hotels being built, although the fact that part of them was going to timeshare meant that this was more property than tourism.

Many hoteliers were postponing refurbishment because of lack of cashflow. It was true that the country in general needed sprucing up, but hotel refurbishment must be kept up in parallel.

Even if tourism arrivals this year were up two per cent, this did not mean much when countries such as Greece were seeing growth of 12 per cent, and Cyprus seven per cent.

When tourism used to be smaller, Malta's share of it used to be bigger than at present.

Malta had a favoured destination status treaty with China, yet while several countries were attracting thousands of Chinese tourists Malta was doing nothing. France was approaching one million Chinese tourists a year, but it had taken them three years to get there. Malta had not even started.

Mr Bartolo insisted that the government should not cause further problems in the sector of English language teaching to foreigners. The government should not scare host families away with new tax bills backdated eight years or so.

Student-hosting was a very important sector. It was already bad enough that last year hotels had packed several students to a room and done a lot of damage to the market.

The question of visas to visitors from non-EU countries should be stepped up as Britain, Cyprus, Ireland and others had done. The growth market in the teaching of English was from outside the EU. Cyprus alone was expecting up to 70,000 Chinese students a year.

What had become of the VAT refund for conference organisers promised in last year's budget speech? The sector was losing business heavily because of the uncertainty. There was not even a follow-up in the budget for 2006.

It was already bad enough that the government had taken a false step by not negotiating a VAT rate of five per cent for hotels and restaurants during the EU accession negotiations, like other accession countries had done. In July there had been an opportunity to put things right by telling the EU in what labour-intensive industries and services Malta wanted reductions in the VAT rate. What had the government done about this? The tourism situation in Gozo was even worse than Malta's. If a 66 per cent occupancy rate in Malta was a problem, what about the 33 per cent in Gozo? It was no wonder that more hotels were being brought off stream, including the 5-star Mgarr Hotel.

Mr Bartolo said that over past years there had obviously been wrong ideas about mass tourism to Malta, with low-star tourism being frowned on and quality tourism directed to higher-star accommodation while the country's own overall quality remained low-star. Malta did not have much choice whether or not to cater for mass tourism because it needed both quantity and quality, with the resultant economies of scale.

Figures from a UK study by BTI on Solid Performance for the Global Hotel Industry showed that budget hotels continued to out-perform four- and five-star properties. It was important to have good-quality budget hotels in Malta. The study showed that average room rates continued to increase in all star ratings. It was important to ensure that Malta had what the market really wanted. How did Malta compare with the world average hotel room rate of £107?

Mr Bartolo said the MTA had given the least priority to the strategic plan that should have been ready by the end of this year. The quoted target of three per cent growth should have seen Malta being invaded by tourists, but that had not been achieved. And what of the MTA reform?

Mr Bartolo insisted that it was essential to improve the environment. The projected golf course at Ix-Xaghra l-Hamra was nothing but madness, but just as mistaken were plans for the building of some 21 villas at the top of Ramla l-Hamra valley in Gozo. Was this government against everything red. Why didn't it just focus on the opposition?

Joseph Cuschieri (MLP) said the government had fallen short of its target to raise the number of tourist arrivals by 50,000 this year.

In the first nine months of this year, arrivals had only increased by 21,245 and the number of tourist bednights dropped by 1.1 per cent. Last year the government also said it wanted to maintain the 50,000 increase in the next two years. No mention of this was made in the budget speech.

Mr Cuschieri observed that arrivals had dropped from France, Belgium, Russia, the Netherlands, Switzerland and Libya. The quality of tourists had also deteriorated. And although there was an increase of 21,000 in the number of cruise passengers, the number of liners remained the same.

Mr Cuschieri insisted that the government needed a clear vision for tourism industry growth. It needed to be clear on the markets it would target. The tourism product needed to be improved, with particular emphasis on the environment and service.

In the coming weeks, the MLP would be publishing a policy document on renewal in the tourism sector.