Tourism’s uncertain times

At last week’s Malta Hotels and Restaurants Association quarterly meeting reviewing the hotel industry’s performance it was evident that, despite some positive results achieved since the recession of 2009, the hospitality industry in Malta has some very stiff challenges ahead. While satisfied with the results achieved so far this year there were expressions of concern for the future by leading players of the industry. It is the uncertainty that lies ahead that is most frustrating, some of it brought about by circumstances on which we have little, if any, control over. However, other factors that put spokes in the wheels of further growth lie squarely in the hands of the government and there exists nothing that frustrates investors more than uncertainty.

2010 and the first part of 2011 showed very good growth in tourist numbers when compared to recession year 2009. This growth was facilitated by an expansion in seat capacity and the unrest in North African destinations such as Egypt and Tunisia. Needless to mention that the addition of new routes by low-cost carriers (LCCs) has greatly contributed to this growth, as new departure points such as Pisa, Bologna, Bari, Treviso and Trapani have facilitated the development of the Italian market, even upstaging traditional source markets that for years have been the mainstay of our industry. Tourists do not fall from the sky but need direct routes between source and destination markets. Without flights there can be no connectivity, and without connectivity there can be no tourism.

A fact that is often overlooked by observers is that this growth has been sustained not only thanks to the contribution by LCCs but equally because of Air Malta’s ability to maintain its 50 per cent share of seat capacity. The challenge does not only lie in maintaining a level playing field between the national airline and LCCs but rather in maintaining the same levels of seat capacity, or better, of both the national airline and of LCCs. This is where doubts start creeping in and where there is now great uncertainty in the short to medium term.

In regard to the future role of LCCs in the Malta market there can be no doubt that they will carry on flying their aircraft to and from Malta next winter and next summer. But the problem lies in the unfolding scenario in which they, particularly Ryanair, will not be flying to Malta with the same frequency as over the last 18 months. Indeed “Ryanair’s announcement that it will reduce the number of flights departing from the UK this winter could stifle this positive trend given that the UK is the island’s largest source market and that Ryanair carries 20 per cent of visitors to Malta.” (Moody’s, September 8)

This irritating development was known to the industry players, to the Malta Tourism Authority (MTA) and to the Labour Opposition since last April, with the latter prudently keeping a lid on it to give time and space for the MTA to negotiate a fair deal with the LCCs. It seems that the MTA’s efforts have paid off to some extent as some routes originally withdrawn for the winter have now been reinstated. But in all probability there will still be route-casualties in the low-cost highway. Ultimately you can take the mule to the water but you cannot make it drink. So if Ryanair has decided to ground many of its aircraft to cut fuel costs there is little that can be done, except to try and limit the collateral damage.

Then there is the other facet of the problem – the great uncertainty of the future direction of Air Malta’s restructuring process. It is fine to negotiate fairer airport charges with Malta International Airport with a “straight tough look in the eye”.

But it is the flight schedule that matters most. Will the national carrier’s reduction of its fleet and the size of its workforce impact its operations and the number of routes that it is currently flying? Or will it be able to reduce its workforce but maintain its flight operations at more or less current levels through a more efficient organisation? Unfortunately recent developments point towards the former direction, as this summer Air Malta has already cut back on its own seat capacity. Should Air Malta sacrifice more of its 50 per cent share of seat capacity on the altar of the restructuring process, then that could deal a major blow to the tourist industry.

And with Ryanair’s intended cutback on its own operations it will be unable to take up routes shed by Air Malta, unless other airlines fill in the blanks. But we know nothing.

It is absolutely necessary that Air Malta keeps an umbilical cord firmly attached to the MTA, which is ultimately responsible for the maintenance and development of Malta’s tourism industry. True that the restructuring process is all about making the national carrier a sustainable one, but the process must also go in the direction of feeding the tourism industry. At the end of the day Air Malta needs tourism to survive.

Last but certainly not least, there is also the total inexistence of an air transport policy for Malta, and with no tourism plan post-2012 yet in sight, there is also no political link between Air Malta and the MTA given that the minister responsible for Air Malta, Tonio Fenech, is not the minister responsible for tourism which falls under the remit of the Prime Minister and Mario de Marco. And as Mr Fenech spends more time abroad with another recession looming on the horizon, the future of our tourism industry cannot wait much longer for a clearer vision at Air Malta.

Decisions, and the right ones, must be taken now.

Dr Gulia is shadow minister for tourism.