Economic growth may increase by a quarter of a point through a single policy decision allowing hotels to add two floors, a recent study has shown.
GDP will increase by an additional 0.25 per cent after 2019 if 18 of the 92 hotels that conform to the planning policy introduced last year add two floors.
The paper released yesterday by the Central Bank of Malta analysed the impact of the revised planning policy that extended hotel height limitations.
Under the new planning rules, hotels can apply to extend their establishments by not more than two additional floors above the height limitation permitted in the local plan.
The policy does not apply to hotels located in a scheduled area, in an outside development zone, on a ridge or within an urban conservation area.
The Malta Environment and Planning Authority may also consider extensions of more than two floors if the hotel premises are not less than 5,000 square metres and the site is surrounded by existing or planned roads.
The extension of the Intercontinental Hotel in Paceville was the first approved by Mepa this year under the new policy.
According to the study, 92 hotels from all star categories are eligible to apply for height extensions. The study is based on the assumption that 18 hotels would take up the offer to increase floors, translating into an increase of more than 2,300 or 5.8 per cent in bed capacity.
Capacity is assumed to be increasing gradually, starting from the second half of 2016 and reaching its full potential from 2019 onwards.
The study concluded that the capital investment by the hotel industry would amount to €100 million spread over four years.
The impact on GDP of the policy would start being felt from 2015 onwards, reaching a peak of 0.3 per cent in 2019.
It would stabilise at around 0.25 per cent in the long run.
This growth would be driven by the initial investment in construction and the increase in bed supply, which would translate into more tourists coming to Malta.
The development would also have a positive impact on employment, income and the fiscal balance.
The economic impact could be higher if investment was complemented with demand-side-oriented policies to address the issue of seasonality.
Reacting to the findings, the government said it was committed to continuing to strengthen the tourism industry by cutting utility rates for businesses in March 2015.
kurt.sansone@timesofmalta.com