Government postpones 50c bed tax to next April

Parliamentary Secretary for Tourism Mario de Marco told Parliament yesterday that to help Malta remain competitive, the government had decided to postpone the introduction of the 50c levy per bed-night announced in the budget from January to April.

Closing the debate on the motion for the House to approve the Malta Tourism Authority estimates for 2009, Dr de Marco said that the government was doing everything to keep Malta competitive.

He said there was collegiality in the Cabinet on tourism. If anything, the financial crisis had helped everyone - the government, the MTA, the MHRA and all stakeholders - to unite and work to come out of it stronger to face the challenges ahead.

Starting off the debate, Dr de Marco said tourism was sometimes described as the business side of government, which was an investor, a risk-taker and could make a difference with its actions. Tourism generated revenue to help finance other sectors, including health and education, turning the wheels of the Maltese economy. He augured that the ensuing debate would be based on facts and existing problems, but also solutions.

The success of action on tourism also depended on events overseas, which were characterised by difficult times, and all efforts must be directed at reducing the negative impacts of such events.

The opposition spokesperson on tourism, Marie Louise Coleiro Preca, agreed that the sector should be discussed responsibly, but it was wrong to camouflage the real situation that went beyond the world economic situation. The opposition never wanted to make tourism a political football, but the bad situation in the sector was largely due to the receding economy and to bad government decisions over the years.

Between January and April 2009 tourist arrivals had decreased by 19 per cent, bed-nights had dropped by 14 per cent, and revenue had dipped by 11 per cent. But was this really due only to the recession in Malta's source markets? Surveys had found that people were still seeking one holiday a year, but affordable with good value for money.

Malta should be in a position to give visitors a unique experience, but to achieve this the government must get together with investors and dependents to determine how to get the sector back on its feet.

Mrs Coleiro Preca said that against the background of recession even for the most advanced countries in the world, with ensuing fear and uncertainty, the tactics and attitudes of old could no longer work. Innovation was the order of the day, and governments were not standing back from helping their own industries by forking out funds and waiving revenues, working not only on immediate strategy but also long-term.

Many in the sector were asking if Malta still offered value for money. Getting to Malta and staying here had been two of the most expensive elements since June 2008. In the World Economic Forum, in two surveys of 11 aspects Malta had first classified 100th and then 122nd. A recent survey by Thomas Cook had shown Malta to be one of the most expensive to live in, even because of the adverse exchange rate of sterling.

Mrs Coleiro Preca said that instead of identifying the maladies the government sought to exculpate itself, even by throwing the blame on operators for the lack of competitiveness. This was political irresponsibility.

Thanks to Air Malta and low-cost carriers, the cost of getting to Malta was now relatively competitive. Hotels had had to lower their prices even while having to shoulder new burdens, such as the utility tariffs. If, even with all these measures, Malta still did not attract the necessary volume this summer, the position would be much worse.

The government's major drawback was in not listening to anyone who knew better, or even scoffing at them. It had said the tourism situation should have recuperated by May, but MIA statistics had shown that tourist arrivals had already dropped by 15 per cent.

Competitiveness in holiday prices did not have to be found only in hotel accommodation. Malta was labouring under the highest inflation in Europe. The EU had approved the lowering of VAT on hotels, but the government had done nothing about it, saying that the step would not attract more tourism.

Mrs Coleiro Preca said the tourism product did not consist only of hotel accommodation. The most attractive rooms at the best rates would never be enough if the tourist left the hotel and found a small rubbish dump outside, or had to keep looking down in order not to hurt himself in the potholes.

The government was always speaking of capital projects, mentioning an outlay of €120 million over the next four years, but there was never any real progress even years after particular projects had first been mentioned. The government had even failed in keeping its own decision that there should be no active building sites in tourist areas at peak times.

Mrs Coleiro Preca said the government was now talking of zone management, but there had been too long a chain of unsuccessful experiments. Zone management would be successful only if whoever was appointed to it had a plan to follow, clear jurisdiction, resources and support. It was to be hoped that this would not be another new initiative costing money. There was no more time to waste while competitors put their acts closer together.

The government was failing to rope in the potential of good workers and investors and of Malta's heritage. The country could no longer afford to lose tourism, but needed a holistic plan. It would not be enough to have schemes without first getting to the roots of a problem.

There was a need of strong advertising. The MTA vote had been increased in the October 2008 budget, but it still needed extraordinary measures. The adverse turn of events could not have been foreseen in October. Any failure to act beyond the budget would be a direct threat to investment.

Mrs Coleiro Preca said advertising was also needed to support the new routes to and from Malta. It was highly satisfactory to read that Air Malta had committed its full fleet to Malta's tourism, irrespective of potential losses in the process. The government must feel responsible to help the national airline sustain its routes, because it received no subsidies like the low-cost airlines.

When European countries had done so much to help out their banks, to the point of almost nationalising them, did not Malta have the moral reason to help Air Malta better? If not, there were still other ways of helping the airline.

At a time when package holidays were making a return, especially from the UK, Ħal Ferħ and the White Rocks complex remained closed without a plan. Up to 4.5 million Britons were still looking for all-inclusive holiday camps. Why could the government not tap that market? It was useless to keep blaming the adverse exchange rate of sterling.

Mrs Coleiro Preca said it was impossible to mention tourism without mentioning Gozo, where the deteriorating touristic situation was now getting worse. The island's tourism was becoming ever more seasonal, yet the government was still discouraging many operators. The Gozo Tourism Association's warnings of what should be done kept falling on deaf ears. There was no more time for playing with words, yet Eco-Gozo remained simply a slogan.

More than a year after the Prime Minister had taken tourism under his wing, there was still no clear policy or strategy. The last masterplan for tourism had been drafted in 1989. The government should be the fulcrum of all activities in the face of rapid changes, globalisation, climate change and demographic moves.

The government must look for skill, rather than their political colour, in its appointees. The appointment of some youthful members to the Tourism Policy Unit was positive, but they must be given the opportunity to see the fruit of their efforts before they moved away to other sectors.

It must also lead by example, not least by repealing the 50c charge on each bed-night from January, which would hurt lucrative long stays in winter. It should get a serious accounting firm to look into Ryanair's charges that MIA's rates were among the highest. The MTA should publish a White Paper on the five-year-old branding exercise.

Concluding, Mrs Coleiro Preca said all stakeholders needed to be proactive in the face of the challenging times ahead, seeking effective strategies and initiatives. But above all there needed to be the government's strong political will and stamina.

Opposition spokesman for the economy and the self-employed Gavin Gulia quoted from a business sentiment survey which showed that 47 per cent of respondents in the tourism sector felt that their business was shrinking and 12 per cent admitted that their business had in fact already contracted.

Although the global recession played a part in the equation, there were also various local issues and challenges, including the recurrent utility tariffs which had already had a negative impact on business.

Fifty per cent saw themselves worse off for the next 18 months.

Asked about correctional measures which they thought would reduce costs, 13 per cent said that they would reduce their workforce. A small percentage said they would strengthen their marketing initiative.

However, 58 per cent believed that the government should stimulate the economy while three per cent said it should not intervene. The former proposed lowering the utility tariffs and cutting down on red tape.

Dr Gulia said that the utility rates were really hitting the small tourist operator.

He quoted electricity bills for consumption between November 2008 and March 2009 coming to €2,500 for a small bar, between €7,000 and €7,500 for a snack bar with 60 covers, €15,000 for a medium-sized nightclub and €50,000 for a high-consumption nightclub. These would also need marketing and advertising to keep them competitive, but were restrained because utility tariffs were eating up their turnover.

Dr Gulia urged the government to include small operators to qualify as tourism operators and lower the VAT rate from 15 per cent to five per cent, in line with the European Commission proposal issued last May.

He said that even alcohol prices in Malta were on the high side and the EU directive also applied to beverages. A more moderate and reasonable VAT rate should be applied. Once Malta rode out the recession, the government could increase the VAT rate again.

Ċensu Galea (PN) focused on what the private sector could do to improve its slice of tourism. He identified three particular areas which welcomed 90 per cent of tourists: Gozo; St Julians, Paceville and Sliema; St Paul's Bay and Mellieħa.

He called on bars and restaurants to dispose of their waste properly, have advertising hoardings and make proper use of pavements for outdoor tables. The government should allow such furniture as long as this did not cause a nuisance to residents. On the other hand, the MHRA should see that its members were disciplined.

Concluding, Mr Galea said there needed to be more investment in the infrastructure.

Winding up the debate, Dr de Marco said that the achievements in the sector for 2008 were the result of close collaboration by the government, the authority and all stakeholders.

He had formed two focus groups to carry a scientific analysis of the deteriorating situation. The global recession had hit Malta's main tourist markets: the UK, Germany, France and Italy. Unemployment in these countries had led to uncertainty. Financial considerations meant less conferences being held abroad.

Dr de Marco said 98 per cent of tourists arrived by air and therefore seat capacity was important. Between November and March Malta had lost 14.7 per cent of its seat capacity, translating into a 15 per cent loss in tourism. For summer, seat capacity had been kept on the same level as summer 2008, while 600 European airports reported a reduction of five per cent. New routes were being served by various airlines, including Air Malta.

The MTA had offered €7 million in support of the new routes and the investment had paid off. New airlines were also promoting Malta on their websites. The mix was varied: 18 per cent were charters, 21 per cent low-cost airlines and 60 per cent scheduled carriers.

Dr de Marco noted that the introduction of low-cost airlines had meant a shift between tour operator and individual traffic. In 2006 the proportion of individual to tour operator traffic was 33:67; in 2007 it was 45:55 and last year it shifted completely: 54 to 46.

Hoteliers and airlines had generated better tariffs for individual traffic. Tour operator traffic remained an important source, with the latest NSO figures showing that such tourists had spent €68 million in 2006, €100 million in 2007 and €125 million in 2008.

The government was still evaluating a proposal by Ryanair to open up a base in Malta. This was a vote of confidence in Malta.

Dr de Marco outlined the MTA's publicity efforts through advertising and promotional activities.

Through the extensive campaign on the internet, direct bookings were on the rise. Suffice it to say that during the first five months of this year more than 35,000 room-nights had been booked, generating some €3.5 million.

This year the government had allocated €4.5 million more to the MTA to help in its efforts. Some 800 journalists as well as agency staff from Malta's main markets had visited Malta and their exposure was valued by professionals at €15 million. Malta was also visible in 65 fairs and exhibitions, including one in China. The MTA was continuing its efforts to diversify, appointing a PR agent in Dubai and initiating efforts in China and South Africa.

Turning to product development, Dr de Marco said that 30 per cent of the tourists were repeat visitors, meaning that for them Malta offered value for money.

He mentioned a number of initiatives for bay development in Qawra and Sliema (after the summer); a public attraction aquarium in Qawra, which by itself was not sustainable but would be through EU funds; a garden and park in Pembroke; and a €17 million bay in Qawra.

From its own funds the MTA would develop the Golden Mile and Wied iż-Żurrieq. Together with the local council, the authority had resurfaced or patched the roads of St Paul's Bay, costing some €500,000.

Dr de Marco said better management was envisaged for St George's Bay and Buġibba, Għadira and Golden Bay and Għajn Tuffieħa. This would include beach management, life guards and a conduct code and would mean a quantum leap in beach offering.

He announced a product development plan for Malta and Gozo, a diving masterplan for Malta and the sinking of a patrol boat off Comino for diving purposes.

There were also works on a national level to improve the product, including City Gate and Freedom Square, St George's Square, in Valletta, bastion rehabilitation costing €32 million, yacht marinas and rural tourist spots.

Dr de Marco said that product development also depended on the private sector, and already there had been the first call for tenders for sustainable projects, costing €10 million.

Fourteen hotels had already been eco-certified and 67 others were being evaluated, meaning that 30 per cent of Malta's bed stock were eco-certified. Beds in five-, four- and three-star categories numbered 40,000. Tourists now wanted bed-and-breakfast accommodation, tourist villages and agro-tourism facilities.

Turning to niche markets, Dr de Marco said Gozo continued to be as important as ever. Because of its seasonality it had to be helped through conferences, eco-tourism and agro-tourism. Cooperation with the Gozo Tourism Association was optimal.

During the first six months, hotels in Malta had lost conference business because of the financial meltdown. But the MTA had introduced incentives, and seven conferences, bringing over some 4,000 delegates, had been booked.

The sum of €250,000 had been earmarked to help organise seminars, competition or training camps for overseas sports organisations.

In the teaching of English, Malta was keeping abreast with its 2007 figures but had increased student weeks by 4,000.

Culture tourism was important for Malta, because nowhere were there 7,000 years of history crammed into such a small area. The MTA had helped Heritage Malta and Fondazzjoni Patrimonju Malti and brought over specialised journalists.

Dr de Marco said that 5,500 cruise liner passengers had visited Malta in 2008. Valletta was the fourth most popular port of call in Europe and the Mediterranean.

Between January and April, tourist arrivals had totalled 275,000, a drop of 12.5 per cent, mainly due to the recession, the shrinking conference market and the value of sterling against the euro.

With regard to VAT in restaurants and the EU directive, the government and the MHRA had decided to embark on an independent study. Dr de Marco said that not one European destination had lowered its VAT rate as suggested by the EC.

Competitiveness did not depend on VAT alone. It also depended on value for Malta, which was the least expensive destination of the eurozone after Spain. But Dr de Marco warned restaurateurs to be careful because food was the highest component of a holiday in Malta.

The government had asked the banks for a year-long moratorium on loans taken out by hoteliers. Ten had already benefitted, and six applications were being evaluated. This meant better cash flow for them.