The impact of low-cost

Tourists have changed and the world tourism industry is changing to cater for them. Those parts of our public and private tourism structures that do not change to be relevant for the new tourists of the first decade of the 21st century will wither and die.

In 2006 tourism worldwide grew by three to four per cent as 10 million people more travelled than last year, despite terrorism, avian 'flu outbreaks, floods and the surge in the price of oil increasing air fares. Our neighbours in Europe and the Mediterranean grew.

Northern Europe, excluding the Baltic States, has been the strongest performer (up six per cent) in Europe, with Finland, Ireland and the UK leading the growth. Germany, the Netherlands and Switzerland also had more than average growth. Southern Europe and the Mediterranean recorded a healthy 4.6 per cent increase in arrivals, notably Spain and Italy. While our competitors' tourism industry grew, ours shrank. This year will not be better if we do not change.

Most of our country and tourism industry are still geared for tourists, who are fast disappearing, especially in Britain, our major market. Research by the British Civil Aviation Authority (CAA) shows how the traditional holiday tour operators, on which we remain so dependent, have lost most of their market. The CAA study shows that customers have abandoned the former giants of the holiday business. Total leisure air travel has more than doubled since 1995: from 20 million trips to nearly 50 million trips. The package holidays' share of the market has dwindled from nearly 90 per cent to less than half.

Low-cost airlines are winning the battle. This year, 50 per cent of the UK's outbound air traffic will be on low-cost carriers (LCC). A person in the travel industry told me: "If Malta does not have 50 per cent inbound LCC from the UK in 2007, it is not protecting Air Malta. It is losing whatever the difference is between 50 per cent and the actual LCC market share at Malta International Airport in tourism and business potential."

A month ago, Tom Ylkanen, vice-chairman of the European Travel Commission's (ETC) Market Intelligence Group, told delegates at the 14th annual World Travel Monitor Forum in Pisa: "Europe is well on its way to achieving yet another year of positive growth." The delegates identified the continuing expansion and spread of low-cost airlines across the region as an important factor that has stimulated demand "in many cases at the expense of destinations such as Cyprus and Malta, which have not benefited from low-cost airline services until now".

This year we will be able to see to what extent low-cost airlines will improve our performance in tourism. Even if they arrive always full, we are not going to have enough low-cost flights to capture the market share we need to make up for the share we are losing because of the decline of the tour operators. While we need more of them, and more affordable air links with our main markets, low-cost airlines on their own will not be enough for a strong recovery in our tourism. More serious measures are needed to rejuvenate our tourism and gear our islands for 21st century tourists.

"Government needs to pull its act together in the Tourism Inter-Ministerial Committee led by the prime minister. Government must show inspired leadership to bring a good working relationship between the Malta Tourism Authority and the private sector and mobilise the whole country to give tourists positive experiences at the right price and quality.

"It is important to note that several of Europe's leading source markets are mature ones," said Rolf Freitag, president and founder of IPK International and the European and World Travel Monitors, at the Pisa Forum.

The vast majority of today's European tourists travel to other European destinations on short trips of one to three nights. These travellers on short breaks rose by 10 per cent as against zero growth for longer trips of four-plus nights - again, attributable to increased demand for low-cost/no-frills flights.

More frequent trips

In its report "No-frills carriers: revolution or evolution?" the CAA shows that low-cost airlines have had a strong impact on the short-haul airline market, radically changing the fares on offer, and the choice of airlines, airports and destinations available to passengers.

"Other airlines now run their businesses differently as a result of the advent of no-frills airlines," the CAA stated. "However, contrary to common perceptions, no-frills airlines appear to have had little impact on overall rates of traffic growth, and there is little evidence of any marked change to the income and socio-economic profile of air passengers."

The CAA's group director (economic regulation), Harry Bush, said: "No-frills airlines have enormously increased the range of fare, route, destination and departure choices available to the travelling public. The emergence of no-frills airlines and the response of other airlines to this have benefited passengers generally, and have shown the advantages of opening aviation markets to competition.

The report contains a range of other findings, including:

• the success of low-cost airlines can be linked directly to the liberalisation of the European aviation market in 1993, which provided new opportunities that low-cost airlines have been able to exploit;

• low cost airlines now carry nearly half of all UK short-haul passengers;

• inbound traffic is now a more important element of UK low-cost airlines' business and more passengers are travelling to and from a much wider range of destinations, particularly Eastern European;

• UK airports have changed the way they operate, and there is much more competition for airline business than hitherto; and

• there has been a marked increase in the availability of flights from UK.

The CAA report shows that the average annual rate of growth of short-haul traffic is similar to that before the arrival of no-frills airlines. Most of the no-frills airlines' growth seems to have been at the expense of other carriers. It also finds that there has been little impact on the income or socio-economic profile of passengers.

The profile of UK no-frills and full-service leisure passengers is similar, and has changed little over the past decade. Although the number of leisure passengers from all income groups has increased, most of the increase came from middle and higher income and socio-economic groups.

"There has been a more significant impact on business passengers. They have a lower income profile overall now than ten years ago. The availability of lower fares to and from more destinations (and in particular the removal of fare restrictions) has made trips on a range of airlines more viable for lower income business passengers, particularly from the UK regions. This change seems to be linked directly to the effect no-frills airlines have had on the market."

To win and keep a share of the new type of frequent traveller on low-cost airlines we must ensure that we take all the necessary steps to satisfy and exceed the expectations of those who visit us. If we do not get more repeat business, the beneficial effect of low-cost airlines on our tourism will be weaker than that on our competitors.

evaristbartolo@hotmail.com