What is rotten in our tourism?

We are still half way through 2007 and the Malta Tourism Authority (MTA) has already run out of money. Is it going to run up a deficit again for this year? How will it finance it? The MTA ended 2006 with a deficit of Lm1,190,736. The financial report for 2006 says that last year MTA spent "Lm10,721,207, up by 19 per cent from the previous year, leaving a deficit for 2006 of Lm1,190,736."

The MTA's board justifies this overspending by saying: "The deficit for the year was anticipated and comes as a result of the aggressive marketing campaigns undertaken during the year under review. During 2006 a number of new alliances were forged with leading tour operators as well as strategic marketing campaigns undertaken in tandem."

Although it spent the whole of its budget for 2006 and all the savings accumulated from previous years and ran a deficit of over a million liri, the year ended with a drop of 50,000 in tourist arrivals to Malta. In 2006, tourist arrivals and nights spent decreased by four per cent; tourist expenditure declined by 1.2 per cent. In 2006, MTA spent 19 per cent more than in 2005 and we ended up with 50,000 fewer tourists!

In a message in the April 2007 issue of the quarterly review of the Malta Hotels & Restaurants Association (MHRA), president Josef Formosa Gauci says: "2006 is now a part of history. It was a year that operators within the tourism industry are glad to see the end of."

Welcoming the reversal of declining numbers of tourists in the last two months of 2006 and in the first quarter of this year, Josef Formosa Gauci hopes that this improvement is not short-lived. He stresses: "It is imperative for the MTA to have adequate funds to carry out the intensive marketing campaign required in all our core markets on an all-year-round basis." Apart from marketing, he rightly identifies increased affordable flights to Malta and product improvement as the way forward to revive tourism.

As Government and the MTA still lack a good strategic plan and the necessary political will and resources to see it through, our tourism industry is still facing formidable structural problems that need to be addressed with vision, courage and stamina. Since its inception, MTA has spent millions and millions of liri on marketing, but still the tourists have not arrived in sufficient numbers. The MTA still does not have any effective way of ensuring that the money spent on marketing is yielding the desired results.

Tour operators have been given lots of money without binding them to any agreement on how many people they bring to Malta and Gozo. Advertising campaigns costing lots of money have been carried out on personal whims and fancies, instead of them being based on any scientific and evidence-based criteria on how to reach our customers effectively and affordably. Millions of liri of taxpayers' money has been squandered by the MTA trying to lure tourists to Malta and Gozo.

We need much better marketing. But marketing is definitely not enough. In a new article entitled "Destination marketing - is there a better way to spend your dollars?", J. Ragsdale Hendrie says "we continue to push for those 'new visitors' the only way we know how - throw money at those marketing strategies and high-priced marketing gurus. We have forgotten two maxims, which those who deliver the goods (our hospitality businesses) know very well: (1) It is easier to retain an existing customer than recruit a new one, and (2) the most effective referral is by word of mouth.

"So, why do we spend millions of dollars every year seeking that elusive 'new visitor', when currently we have throngs of satisfied and exuberant 'fans', who already think we are great and are ready, willing and able to carry our message to their friends, neighbours and associates? ...

"Flashy marketing has its domain, but most of us give far more credence to someone we know, extolling the virtues of a product or place. Put your marketing dollars to work creatively, harness that vigorous and connected ambassador, who already thinks you are great, and enjoy the success."

Beyond MTA

We do not have "throngs of satisfied and exuberant 'fans'". Unless we improve the way our country looks, unless we give better value for money, unless we improve the quality of the service and experience we give to our tourists, we will continue to have serious problems. We need to satisfy the tourists who visit us. When we do not, they return home and tell their family, friends and colleagues not to come to Malta and then we need to spend millions of liri on marketing and advertising to capture those new visitors who do not know anything about Malta.

Government and the MTA have been spending millions of liri, often in a panic, to increase the numbers and postpone more disastrous results. Instead of thinking strategy and long term, Government and the MTA have been opting for quick-fixes but still the tourism industry has not revived.

Through its inter-ministerial tourism committee run by the Prime Minister, Government has failed to tackle the macro-structural problems of lack of competitiveness in product and price, and while most of our competing destinations are thriving, we are facing a deep crisis. All the tactics taken on the micro-level give the illusion of success for some time, but then the stubborn fundamentals that lead to our lack of competitiveness take over again.

In the April 2007 issue of the MHRA quarterly review, MTA's chairman Sam Mifsud says that since he took over last September, increasing the flight capacity to bring visitors over to Malta "has been our top and most urgent priority. Only when we get this act together can we address Product Malta."

From the weak results we have had in April and May and the not-too-optimistic prospects for June and the coming months, it is clear that increasing the number of flights to Malta is not enough to increase the number of tourists to Malta and Gozo.

As tourists take shorter holidays, we need more tourists to make up for the shorter time they spend here. Otherwise we will simply continue to shift our dwindling existing market share instead of increasing it.

How is the MTA going to market Malta for the rest of 2007 if it has already run out of money? Chairman Sam Mifsud acknowledges the need for "serious soul-searching within the MTA itself to make sure it has the necessary infrastructure and manpower to maximise the resources available in an efficient manner."

A glance at its financial estimates is enough to show that MTA is still spending more than Lm2 million on staff and administrative costs. There are departments (like the local marketing department) where salaries and administration cost Lm1 for Lm1.30 they spend! In our overseas offices this year, the MTA will spend Lm1.1 million to administer Lm3.9 million. How does the MTA keep track of the return it gets on the advertising it carries out? What is the return on the expensive fairs it participates in? What return does it get on the strategic support of over Lm4 million that it gives to tour operators in our different source markets?

We have now been talking for at least three years of the need for the MTA to restructure itself and become more efficient and effective. Thousands of liri have been spent drawing up documents and plans to restructure it, but there is no sign that Government has got its act together at the MTA. For the last four years the MTA has been like a sand castle with different hands destroying it and rebuilding it. Successive new chairmen arrived and started to demolish the work of their predecessors to build new sand castles.

The MTA is still neither efficient nor effective. Most of the employees are demoralised and cannot give their best. They are badly led by a chief executive who does not communicate either with them or with the tourist industry. Many of the MTA employees have to work in an atmosphere of fear and suspicion. They have seen so many changes and have been made to go in so many opposite directions that they cannot take any initiative as they risk losing their job.

Identifying individual scapegoats and sacking them might help to improve matters, but the rot in our tourism lies deeper. The MHRA is right in saying that problems still persist at the MTA and that they must be addressed, but the major problems harming our tourism industry lie beyond the MTA. They lie at the heart of the Nationalist government that lacks the vision, political will, competence and energy to revive our tourism industry.