Post-COVID − tourism new wine in old bottles

Pre-COVID, the island was basking in the glow of an artificial sense of hedonistic living. This made us believe that the party will never stop − but it did with the discovery last December of a lethal virus in Hubei China.

This week marked the long-awaited opening of the airport and sea ports with a trickle of tourists arriving to join us in the land of milk and honey. Gone are the days when the low-cost airlines attracted millions of budget tourists (mainly accommodated in Airbnb units) who roam our streets and tour the concrete jungle adorned by tower cranes that reach out like mechanical monsters clanging their way delivering building materials. Nostalgically, we all remember how the dream of having an upperclass tourist resort never materialised yet tourism secured us a multiplier effect that gently percolated in the lower echelons of the economy.

Historically, some may remember how it all started in the 1960s when the island was facing British services rundown and the ex-colony was trying to build up an alternative source of income to sustain jobs. Government was advised to incentivise local entrepreneurs to risk their capital and build a welcoming tourist infrastructure by way of hotels, restaurants and beach amenities.

To this end, millions were poured into improving access to scenic spots such as beaches, places of interest and historical monuments. Various incentives were granted by government to budding hoteliers, starting with granting of seafront sites at firesale prices, 10-year tax holidays and training grants for catering staff. Banks were also pulling their weight and gingerly took the risk to fund projects connected with the industry. This sector reached a consolidating point with the setting up of a national airline in the early 1970s.

Advertising helped to place Malta on the destination map for sun, sand and sea where beer is cheap and public transport on rickety “bone shakers” buses (quaintly painted in rainbow colours according to destination) attracted the British tourist in droves. Then, food and drink were cheap and the Mediterranean was being discovered by the masses which booked their place in the sun for bargain holiday resorts in places such as Spain, Cyprus, Greece and Malta. Back to Malta, the hotel lobby grew strong and influenced public opinion towards endearing the sector.

The gradual rise in job openings in hotels and restaurants over the past 50 years contributed significantly to attract vacancies for part-timers. Politicians hailed the way; the sector started reducing the unemployment queues and generated direct and indirect benefits to the economy. Bella Malta was the slogan that contributed handsomely to help balance the annual budgets (mostly in deficit) and give a multiplier effect to ancillary sectors involved in importation, transportation, travel agents, agriculture and fisheries.

All lauded the milk cow even though tourism is a volatile industry and wages on offer are not stellar. Having spent decades trying to attract tourists, the Malta Tourist Agency is now surreptitiously compensating low-cost airlines when they develop new markets and niches. The idea was hatched to create a fund aimed to improve beaches, roads and other public amenities; a nominal day tax per tourist is levied on all arrivals.

It comes as no surprise that the World Travel and Tourism Council, proudly remarks how tourism directly accounts for nearly 3% of the world’s GDP. McKinsey, a consultancy, reckons that one in five new jobs is generated by tourism. As a general rule, whereas the manufacturing sector employs relatively fewer people, tourism employs legions. There are side benefits, since policies designed to attract tourists, such as quality inspections on hotels and restaurants, improving general health and safety standards, also lure foreign investors.

The fly in the ointment is overcrowding. This brings hidden health costs, which are borne by local residents. Look around you and you will see that in the summer months, pavements, roads and cycle lanes are clogged. Armchair critics warn us that we should upgrade the sector to attract more upmarket tourists and stop subsidising low-cost arrivals which prefer booking Airbnb for cheaper accommodation. Quoting the NSO, one observes that arrivals for the whole of 2018 rose by 14.3% to reach nearly 2.6 million while total expenditure per capita stood at €809, a decrease of 5.5% when compared to 2017. Employment in food and beverage service activities based on 2016, showed 5,902 full-timers with over 7,000 low paid (mostly non-EU) parttimers. Restaurants saw an average spend per tourist of a mere €104 (our VAT rate on food and drink is almost double that charged by neighbouring countries).

Now after four months of COVID lockdown with zero visitors, one had hoped that no effort is spared to mend broken pavements, fill pot holes and enlarge sandy beaches. Quoting, the president of the Malta Hotels and Restaurants Association, Tony Zahra he emphasised the need to turn Malta into a destination built on quality and not just numbers. This seems like the panacea that over the years has eluded us. We all enjoyed better air quality during the lockdown but alas gradually, unless electric buses/cars are in circulation, we shall see a marked deterioration as 700,000 visitors are anticipated in the next four months. Tourists fan the appetite for more luxury hotels being built or extended and this results in the island looking more like an open construction site. We need to ask ourselves, can we expect high quality tourists when there are obtrusive tower cranes and unsightly debris in tourist zones?

In pre-COVID days, we forecasted an increase to three million visitors ushering in more carcinogenic fumes, cruise liners sludging the Grand Harbour and aircraft noise. Europe has witnessed CO2 emissions, which increased by about 80% between 1990 and 2014, and it is forecast to grow by a further 45% between 2014 and 2035. Needless to say, NOX emissions have doubled between 1990 and 2014 and are forecast to grow by a further 43% between 2014 and 2035.

Will the tiny island be spared this poisoned chalice? Can the MTA plan a five-year policy to regulate the market possibly reversing the damage to the environment by going for quality rather than quantity? One awaits and hopes for new directions from the young minister of tourism.

George M. Mangion is a senior partner of an audit and consultancy firm and has over 25 years’ experience in accounting, taxation, financial and consultancy services. George can be contacted at gmm@pkfmalta.com or on +356 2149 3041.