The restaurants’ industry is critically important not just to support tourism but also for locals who, over the years, have increasingly frequented restaurants as lifestyles changed. Over the past few decades, investment in the catering industry multiplied as many entrepreneurs saw an opportunity for earning a living by satisfying the demand for restaurants.
Yet a survey by the Malta Hotels and Restaurants Association reveals some significant socio-economic trends in the restaurants industry.
The most significant finding is that “over the past three years, the number of local patrons dropped” as did profits. One could easily conclude this is the direct result of overpricing but there are certainly other factors affecting such negative developments.
Restaurant owners attribute the fall in profits partly to “high energy and labour costs, market saturation and poor access to bank financing and EU funding”. This is quite a tall order. The cost of energy for businesses has been debated extensively over the past year. One hopes that the Government’s new energy policy will deliver the promised results as, undoubtedly, energy costs are a substantial element for restaurant operators.
Market saturation may be a more difficult issue for restaurateurs. Free market policies dictate that the more efficient operators will survive while the weaker ones will have to close down or do something about it. The ultimate judge will be the public who decides which restaurants are worth going to and which ones do not offer value for money.
The owners’ concern about lack of financing is somewhat surprising because various EU-backed schemes, the Jeremie, have been very successful in providing finance at low interest rates and reduced collateral requirements to small businesses. Banks need to come up with their reactions to this claim that they are not supporting sufficiently restaurateurs.
The issue revolving around the cost of labour is a more serious one. Restaurant owners complained that “unfair competition from unregulated practices or black market labour caused serious problems”. Perhaps the owners could explain what they meant by “unregulated practices” but the prevalence of black market labour hardly needs any confirmation.
While the survey found that “one in five employees is foreign”, many restaurant patrons would argue that the number of foreign restaurant staff is much greater than that. It is not just chefs that are foreign but also waiters, cleaners and cashiers.
The issue of workers who work in the black economy needs to be addressed at a national level. According to some studies, Malta has one of the biggest black economies in Europe. Our black economy’s size is estimated to be equivalent to 25 per cent of GDP.
Rather than use high-handed tactics to address this issue, the Government needs to look at incentives to encourage both employers and low-paid employees to operate in the official economy. One such measure could be the reduction in employment taxes like National Insurance for workers earning the minimum wage or slightly more.
The vicious circle through which restaurant operators employ badly qualified staff and paying them low wages needs to be broken if the industry is to offer an enhanced experience to its patrons. Investing in local staff and ensuring that “educational institutions should provide more trade-oriented courses to address the skills shortage” should be a special item on the menu of reforms that the restaurant industry needs to focus on.
Restaurant patrons are a discerning lot. Restaurateurs need to respect their judgement by offering top quality, value for money service.