A check-up for Malta’s tourism industry

As we draw near the end of the peak period of our tourism season we do well to examine how the industry has performed so far this year and also look at the prospects for the coming year. Recently Moody’s Investors Service issued a concise report on our tourism industry that was ignored by the media – unlike the more high profile report announcing the downgrade of our public debt.

The biggest threat to the continuing good performance of our tourism industry is the chronic economic slowdown in the markets we serve- John Cassar White

The good news so far is that both in 2010 and in the first nine months of 2011 our tourism industry made a remarkable recovery from the severe slump it suffered in 2009 as a result of the global economic crisis. The news gets even better when one considers the reasons for this success. There were, of course, some elements that are beyond our control, like the trouble in North Africa that has diverted some business from other competing destinations like Tunisia.

But what really matters to us is that some of our strategies are producing good results in this sector that accounts for just over 12 per cent of our GDP. Moody’s identifies in particular the “expansion of flight capacity to the island”. The effect of the low-cost airlines is quite noticeable as it has become much easier for travellers from destinations that were not sufficiently served by the legacy airlines to consider Malta for their holidays.

Perhaps even more remarkable was another reason quoted by Moody’s: “The ability of the Maltese sector to cater to different market segments, thereby smoothing the effects of seasonality and reduces reliance on a particular market source”. The small size of our economy exposes us to concentration risks in different areas including tourism. Our operators’ ability to market Malta to a variety of consumer segments has helped to reduce the element of seasonality in our tourism industry.

Malta can be sold successfully to those who want to “enjoy our beaches and casinos, others who want to explore our numerous historical sites and those who are attracted by offerings of luxury shopping and upscale dining”. To these one must add the 70,000 students that visit Malta every year to learn English in our successful language schools.

These positive developments are validated by other anecdotal evidence that confirm that the quality of service we give to our guests is improving. This summer I heard positive comments from tourist on the improved quality of service in our restaurants, as well as the more evident cleanliness of our beaches and tourist frequented areas. The more negative tourist comments relate to the bad quality of some of our roads and the poor public transport service that has marred the holidays of many.

The health check-up for our tourism industry so far this year is quite good. So, can we relax and hope for even more positive results in the coming years? Moody’s Investors Service warns against adopting a complacent attitude as it claims that “clouds loom on the horizon” for Malta’s tourism industry. There are very good reasons for this cautious attitude.

While flight capacity has increased substantially in the last few years, there is a risk that this trend may be reversed as Air Malta reduces its capacity as part of its restructuring programme. Our national airline is reducing its fleet from 12 to 10 aircraft and it will also eliminate some of its scheduled flights to certain destinations.

Ryanair, which carries 20 per cent of visitors to Malta, also announced that this winter it will reduce the number of flights from the UK – our largest source market.

Other critical factors that could affect the health of our tourism industry next year is the price of oil that has a major influence on the cost of travelling to Malta. While many economists are predicting that the price of oil should remain subdued as a result of a fall in demand brought about by the global economic slowdown, there is still considerable volatility in the price of this commodity.

But the biggest threat to the continuing good performance of our tourism industry is the chronic economic slowdown in the markets we serve. Austerity measures implemented by governments across Europe could mean that potential visitors to our island will have less disposable income to spend on their holidays.

The British, Italians, Irish and Spanish are facing tough times that may mean less travelling abroad for holidays.

All this calls for yet more effort by the operators in our tourism industry.

jcassarwhite@yahoo.com