29 AUGUST 2001

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Reflections and warnings on tourism

Former Tourism minister Karmenu Vella has worn many hats in his time. He is currently the MLP's spokesperson on tourism and a Deputy Chairman Corinthia Hotels International. However, apart from being a former tourism minister, he has also held the posts of minister of public works and industry. Here, Mr Vella speaks to Ray Abdilla on tourism and whether the country is, indeed, on the right track.

Karmenu Vella reminisces on the great extent to which the industry has changed over the last 20 years, explaining that the process is continual in its bid to adapt to consumer trends, demands, tastes, travel motivation and travel patterns. These changes, he explains, are also apparent in the sector's products, service, costs, operations and the level of competition.
However, Mr Vella explains that the real question is whether we as a country have managed to adapt and respond to these market fluctuations.
He explains, "I don't hesitate to say that tourism past and present are two completely different entities and that this ever-changing and developing industry is, in turn, having a real impact on the economies, societies and the environment on global, national, regional and local levels.
"Starting from scratch and keeping up the momentum are both important. As in any kind of business, the challenge is always twofold. The first challenge is getting off to a good start, setting ourselves in the right direction and achieving positive results from the outset. Secondly, and equally important, is the challenge to maintain and enhance results while simultaneously sustaining the right course of action."
However, when it comes down to the brass tacks of the sector. Mr Vella contends that there is a significant difference in attitude between the two main political parties in terms of commitment, the order of priorities and overall strategies for the industry.
He elaborates, "I don’t believe the present government is as committed to tourism as the Labour government was through its complete attention and total commitment towards the industry. All ministries were, in one way or another, pooled into Labour’s dedicated objective of setting tourism back on the right track.
"However, the present administration is assuming a very relaxed and passive role. As opposed to taking heed of and coming up with solutions to the industry’s ailments and concerns, it persists in conjuring up figures and statistics in attempts to make all those concerned believe that we have never had it so good. "The government's public relations machine is trying to make a drooping duck look like a super swan, by being more committed to hiding rather than solving tourism’s problems."
The shadow tourism minister believes that the economically crucial tourism industry is being overshadowed by the present administration's all-consuming urge to join the EU, as he explains, "The government's priority is to join the EU at any cost. This priority has left all other matters, including tourism, unattended to. If anything, the current government has shown that it can't handle more than one priority at once.
"I believe that the economic and financial mess we’re in today is the result of the present government’s deficiency in dealing with the right priorities.
"I can see how different governments have different priorities, but I fail to comprehend how any government can assign tourism, with its 25 per cent contribution to GDP, lower priorities than those of other sectors. The EU issue has taken over the economic issues of tourism.
Effectively, he stresses that Malta's tourism product has been and is once again, being grossly neglected.
"Our tourism product is rapidly deteriorating. While the private sector is doing its utmost to improve and protect its investment, the government is not even addressing tourism’s very basic needs. Competitiveness is constantly deteriorating and the sector's marketing people are required to sell an appalling product at an uncompetitive price."
In the search for the right type of tourist to fit Malta's bill, according to Mr Vella, one must inspect the positive and negative effects that various types of tourism have on our economy, society and environment.
He explains, "To be honest, I have never come across a destination that doesn’t handle some type of mass tourism. Obviously, there are many shades of the so-called mass tourism and we often tend to equate mass tourism with low revenue and high negative environmental impacts. But this is not always the case.
"To give an example, non-mass cultural groups bring about very few negative impacts but they also tend to spend less. On the other hand, rich golfers tend to spend more but hold a potentially great impact on our environment by demanding vast areas of land."
However, Mr Vella emphasises that, when talking about mass and up-market tourism, we must bear in mind that only some 10 per cent of Maltese bed stock is able to cater for the up-market tourist, while the remaining 90 per cent still depends on mass-tourism.
"Whatever the type of tourist, the important thing is that we learn how to manage our tourism industry. We must decide what we want and then plan to achieve what we want.
"Let’s be honest, for a number of years tourism in Malta was not planned or managed - it just happened. 40 years later, we have wound up being a mass tourism destination. This cannot be eradicated overnight. It is time for us to start managing tourism and not to remain in a situation where tourism is managing us.
"I agree with the fact that it’s better for the country to get fewer tourists who spend more, than more tourists who spend less. This has long been said but it’s never been done. Can you expect to get fewer tourists when you’re continuously increasing your bed stock? Can you get better rates when you’re increasing the supply at a faster rate than the demand? It’s all elementary, yet we do the exact opposite and continue to reposition ourselves facing in the wrong direction.
"I think it is important that we get a good mix of all types of tourism, as both volume and spending are important. Without volume, airlines would not achieve the critical mass to justify operations. If we stamp out, for example, volume tourism from the UK, the airlines would reduce their operations and we would end up also losing the higher spender. We can only start reducing mass tourism once we have built a high enough volume of high spenders."
He points out some differences between the present administration's tourism policies and that of the opposition, "Nothing is being done about the product and its competitivity. There has not been any improved working relationship between government and the private sector - if anything, these have worsened. The previous government’s policy to retain Air Malta within the tourism portfolio has been reversed - during the Labour administration this had proved to be an excellent move.
"Ventures, which were intended as tourism projects, ended up as real estate development with speculative intentions. The avalanche of bed stock increase will cause a downward trend on rates, attract cheaper tourists, and reposition Malta backwards. Plans to improve roads, beaches and the general environment have literally vanished.
"To be honest, I sincerely doubt whether the Nationalist Party has any tourism policies at all. At least I don't see anything really spelt out, or anything being applied in practice."
The country's former dependence on the British tourist has, according to Mr Vella, been continuously diminishing over the years - not by decreasing UK arrivals, but by increasing arrivals from other markets. "Other European markets are improving but not as much as we would have liked them to. However, I feel that there are other markets that we have been totally neglected. The Middle East, the Gulf Area, Spain and Portugal are just a few examples. We have always looked north, while totally neglecting our Eastern and Western flanks.
"In order to attract new markets, we need to constantly revise and review our tourist offer. Our traditional product was developed for the British market and it is very difficult to sell such a product to the Swiss, Austrians, Scandinavians and other non-UK tourists. We cannot discard this highly important issue any longer and the sooner we tackle it the better."
Regarding the decline in numbers Mr Vella is adamant that the number of bed nights are a better indication than arrivals.
He explains, "Last year we lost around 12 percent on bed nights and most of the loss came from our core markets. This year, NSO statistics show that we can partly recover that loss. Government’s optimistic statements try to give the impression that we could not have had it any better.
"However, MIA figures are contradicting NSO statistics. MIA figures on passenger movements are showing that the number of passengers coming into Malta is decreasing. The indications and feelings within the industry are more in agreement with the MIA rather than with the NSO figures."
When asked about the Frosch Touristik crisis and the way in which it was tackled, he believes that the FTI crisis was completely mishandled.
"I had read several statements that appeared on local papers and then during a meeting I had with an FTI official, it was very clear that there was another side to the coin.
"Last year, FTI moved some 120,000 German tourists to Malta. Airtours, who had bought FTI to Malta, decided to downsize their operation to Malta. They had two alternatives they were prepared to discuss and if they could obtain some rate reductions from hoteliers and some assistance from government, they would downsize from 120,000 to 80,000. However, without assistance, they would have to downsize from 120,000 to 40,000.
"I was assured that FTI did not want to discuss a reduction on all rates with all hotels, but only partial rate reductions with fifteen certain hotels. I do not think the hoteliers were in a position to reduce rates and this proposal was unfair on them. They did the right thing not to concede any rate decrease and I think that FTI understood this. Although I still think that the hoteliers might have overreacted.
"But the government didn’t play its cards right. Without going into too much detail, I am absolutely certain that there was room for negotiation. But, as far as I know, the FTI official was never even granted a meeting with any high level government or MTA officials. And so, I believe that the whole issue was never even seriously discussed. Today we all know what the result is. Anyway, that’s water under the bridge now.
"Having said that, and looking at things with a more positive eye, one might argue that this could help Malta reduce its over-dependence on a single operator in the German market. It could also be argued that other smaller operators could very well replace what was lost through FTI. Provided we don’t end up bringing in the same FTI volume at more reduced rates, this could also work out fine.
"But, as yet, there is no tangible sign that this is being achieved. In addition, it seems that Airtours has FTI under control and is reducing its losses. In fact, Airtours recently stated that load factors and prices are improving significantly. So let’s hope for the best."
As far as projections for the sector's performance next year is concerned, Mr Vella emphasises that performance is not measured by forecasts, but by actuals, explaining, "For the last few years we have had nothing but very positive forecasts. More often than not, these forecasts were turning into less attractive actuals. Projections for 2000 and 2001 were also showing a "rosier" picture than they actually turned out to be.
"After the Minister’s forecast of a "rosier 2002", we can only keep our fingers crossed. But forecasts are useless and mean nothing unless they are backed by some sound economic reasoning and serious action plans. Otherwise we would be right in assuming that forecasting is only being done to divert our attention from past and present performances.
Mr Vella is currently working for the Corinthia Group, a position he relishes, "I must say that I’m enjoying it immensely. The Corinthia Group has a very positive and broad international outlook, is well focused on its objectives, and has attained a high level of professionalism in its approach to doing business."
Regarding the affect the EU has on tourism, he believes that it is very important to look at the EU with a more sober approach that bears Malta’s political and economic interests in mind.
"There is no direct correlation between EU membership and guaranteed tourism growth. As a matter of fact, there are many non-EU countries within Europe with higher tourism rates than other EU countries. Poland, the Czech Republic, Hungary and Switzerland are all performing much better than Germany, Ireland, Greece, Denmark, Finland, Sweden, Luxembourg, Belgium and Holland.
"Another case in point is that fact that, although Sicily has been an EU member for over 40 years, its tourism rates lower than Malta's. So it’s very misleading to relate full EU membership directly with tourism growth.
"One of the most important factors that will have a major bearing on tourism’s growth is competitivity. The key issue we have to address in manufacturing industry and tourism is, whether by joining the EU, we will become more competitive or less.
"In this respect, the government’s report on the adoption of the Acquis says it all. I quote 'The adoption of the internal prices of several commodities could have a direct bearing on domestic costs and may affect negatively Malta’s international competitivity in the industrial and tourism sector.'"
He adds, "Malta would lose its flexibility and must adhere to someone else’s decisions on matters of currency rates, VAT rates on services, Duty Free goods, the issuing of visas, timeshare operations, incentives, airline operations and other tourism issues. EU policies on all these matters will affect negatively our tourism industry.
"It is highly improbable, if not impossible, that decisions taken by other countries would be compatible with the solutions to our problems. During a recent speech, Minister Refalo deplored the fact that 'many of us are content to let others think for them.'
"I wonder, given that, how he can accept the fact that many of us will have to be content to let others decide for us."
Mr Vella warns that Malta is rapidly approaching its tourism carrying limit, which means that foreign service providers are no longer moving to Malta to generate new business but to take business away from the existing operators. These types of operators include operators, guides, incoming travel agencies, DMCs, excursion organisers, transport providers, and normal workers.
All this, according to Mr Vella, will also result in heavier economic leakages out of Malta, explaining that Malta risks reducing its net positive income from tourism while still being left with all the negative social and environmental impacts.
He adds, "Some argue that we can improve on environmental issues. But then why do we have to wait and depend so much on the EU to rectify the very basic problems such as rat infestation, beach pollution, roads and cleanliness? These are not simply tourism issues. Regrettably, these are harmful and hazardous health issues for the whole Maltese population.
"In a nutshell, we need to come up with a better product, which we have to be able to sell at a competitive price, and then begin marketing it in a more effective and efficient manner.
"I would say that our future challenge is not only to attract more tourists, but - more importantly - to manage our tourism better. In the long run, unmanaged tourism could have a more detrimental effect on the country than having no tourism at all."

The Business Times, Network House, Vjal ir-Rihan San Gwann SGN 07
Tel: (356) 382741-3, 382745-6 | Fax: (356) 385075 | e-mail: editorial@networkpublications.com.mt