Emergency product ‘Malta’

MATTHEW VELLA gets the low-down on brewing trouble for product ‘Malta’. Have the Maltese Islands failed to get out the doldrums of national activity? Hotelier and Malta Hotels and Restaurants Association president Winston J Zahra wishes things could be different

At a time of tumultuous reform in the Maltese islands, with dubious planning skills incurring the opprobrium of Joe Public, hotelier Winston Zahra Jr has much to say about the threat of Malta’s dilapidating environment to the tourism industry. There’s much to suggest that Ghallis weighs heavily on his mind, although Zahra sees a place in the island for another, strongly-opposed human creation – golf courses. But the proposed landfill at Ghallis threatens not only the Coastline Hotel, one of the gems in the Island Hotels chain. Ninu Zammit’s landfill threatens to hit the tourism industry further across the island, according to Zahra:
"The Coastline happens to be the closest hotel but Ghallis threatens the whole industry. They intend putting a major waste facility, which also handles hazardous waste, at 900 metres away from the Qawra coast, where there are over 40 per cent of the beds that exist in Malta. We are certified mad."
Asked whether Ghallis poses fatal consequences for the Coastline, Zahra says that a decision in that regard has not yet been discussed. He says that what has to be focused upon is that fact that Ghallis "is the wrong place for a landfill and a waste management facility due to the negative effect it will have on tourism on our Island."
This would be just the tip of the iceberg for what is plaguing the Maltese tourism industry, which for many people, seems to be encountering its moment of truth as the recent spate of closures, jobless workers and recriminations about who had to act faster become the order of the day.
"Basically this is a situation where the industry is emerging out of a tough two and a half years – 9/11, bad performance in the economies of a number of our core markets, SARS and Iraq – these combined factors have affected the travel industry worldwide and we are not outside that scenario. This has led to a number of hoteliers finding it unsustainable to remain in the industry, re-analysing their investment, some of them feeling they can get a return in another activity. Predominantly it seems to be real estate at the moment.
"This is no surprise. We had been warning of this scenario for a long time, through statistics and forecasts, which unfortunately were spot-on. What we said last June, predicting closures in winter is actually happening. We don’t feel that this is a crisis situation, but it is unhealthy. Some of those operators leaving the market and others considering leaving still have properties which are not past their sell-by date, which goes to show what sort of level the rate of returns in the market has fallen in the Maltese industry."
Despite successful performance by certain other operators however, Zahra says the average profitability in Malta is much lower compared to international benchmarks, the result of a very high ‘European’ cost base and a very low, ‘non-European’ rate base: our industry is plying European standards at Hammamet bargains.
"The solution to this problem is not rocket-science, by any stretch of the imagination. The solution is to work together collectively, Government, opposition, MHRA and the constituted bodies and all stakeholders, to see how we are going to make demand grow in our island. Our problems are the problems relating to ‘product Malta’. In terms of hardware – infrastructure and the environment – these aspects are lacking on the national front. The contribution of private industry in terms of infrastructure is totally out of synch with what we have nationally."
Most worryingly, a functional problem of the whole tourism product is the fact that the Maltese experience is falling short of expectation. The marketing purports a reality which is no longer veritable as the islands fall victim to lack of environmental and urban planning. Even so, many will ask, what is our product?
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"There is a mismatch between the product offered and that what is professed. If we want to secure a future in tourism we have to bring up to scratch both hardware and software – us, the people, the hospitality we offer – we have to see these improvements to deliver what we are marketing. The question is however a bit of a chicken-and-egg quandary – should we market something that is not yet in place, or should we wait until the improvements are in place and then start the marketing? That is quite difficult to answer. We cannot stop all our marketing until we reach all improvements, otherwise everything will go to the dogs.
"The product being marketed right now is moving away from ‘sun-and-sea’ and more towards what John Grech of the Malta Tourism Association terms ‘product clusters’, traditional market segments branded as clusters, to enable tour operators to sell their product more easily to identifiable market segments."
Zahra says Malta has the potential for cultural and heritage tourism, sports tourism ("we underrate this area when considering sailing and yachting in Malta… we need more in the way of golf courses, but again that is potential). I ask whether Malta being a safe country could be marketable, but Zahra says that depends on how loud internationally that sort of cry would be. A subtler tactic would be more ideal, he says.
"Our marketing has to be more targeted and focused, moving away from nationwide marketing within a country like Germany, which we don’t even have the money for, to specific target markets or segments within Germany. The discussions in MTA are heading in this direction. There are a number of us from the private sector who sit on the MTA board. There is a also a strategic think-tank made up of the chairmen of MTA, Air Malta and Malta International Airport and myself as MHRA president, aiming to set one common strategy for the island within which all these entities will work towards. It is very important to finally have this direction and the strategic unit is now beginning to work."
Despite all goodwill from the tourism moguls, the industry in Malta faces a burgeoning challenge with collateral problems such as environmental degradation. There has been no concerted effort to provide appropriate planning in streets and towns. And Zahra emphasises that to improve product ‘Malta’ there must be a process which has to be well thought through, well planned and well executed with some urgency in order to fall properly into place.
"As MHRA, we always felt that the biggest threat to the industry is the state of our environment. Malta can sit above the Monacos of the world if we want to. We feel that we can develop our product in that way. People might say I’m dreaming, but if we get our act together collectively and invest our island properly, we can achieve this. We have the raw ingredients, we have the unique selling points. We have the culture and heritage sites that other destinations would kill for. But we have to look after these and our environment as well."
I tell Zahra that the contradiction in the Nationalist government’s administration history is that there has been a lot of money poured out but with little strategic planning to ensure a satisfactory product. The environment is again a focus of this lack of strategic planning.
"Without a doubt. Forget Ghallis and the Mnajdra landfill projects. Take the square mile that comprises Paceville and St George’s Bay. This is our golden mile, with over Lm150 million invested by the private sector in the last six years alone. Till today there has been practically nothing done by central government to upgrade area. The only investment by the government has been a ridiculous housing estate sitting on our doorstep just outside the hotels. This is not the place for social housing. The use of this zone was determined to be an upmarket resort for tourists. And yet we have no vegetation, no road infrastructure to be proud of, nowhere to sit or walk around. Outside the hotels the image is cheap.
"There’s more that needs to be done apart from what progress has already been made such as the promenades in Sliema and Bugibba. The positive aspect is that we have had Lm10 million allocated in the budget for these projects and it seems that action is about to be taken." Zahra says that it is easy to spend money, but it is difficult to see how efficiently and effectively that money can be spent: "This is where I think Government is lacking. I think we can get much further down the road with the same amount of money that is being spent if there is more controlled spending."
Zahra says the MHRA has discussed these problems extensively with the Prime Minister, the Minister for Tourism and other ministries. In a nutshell – a large nutshell – the challenge is, once again, product ‘Malta’. "Quarter two looks like there could be a turnaround and recovery looks slow but is hoped to be sustained. Once again I emphasise that we have to employ a collective effort to grow demand positively towards our island."
I mention Zahra’s proposal for a moratorium on hotel development – a moment of irony I proffer when Island Hotels was right in the middle of launching the Golden Bay project in Ghajn Tuffieha. Zahra disagrees:
"The proposal was misunderstood. Our position paper stated that there are enough licensed beds on the island. These 39,000-plus beds require a minimum of 1.5 million tourists, which is around 300,000 tourists short of what Malta attracts. We suggested a solution: the primary proposal was to enable a growth in demand to take up that bed stock. The second was not to allow new developments on virgin land and thirdly to encourage properties past their sell-by date to either sell out and get out of the market, or sell to an operator who wants to refurbish and revamp the hotel. And that’s what we are doing with Golden Bay, building a far superior hotel with 289 beds. Our strategy with the Golden Sands is 100% in line with the MHRA proposals on bed stock made to the government. It upgrades the product and replaces, as opposed to increases, the bed stock."
I tell Zahra that many are those who think there are too many hotels on the island. He states that oversupply is not the problem. "It is lack of demand that is the problem. It is the same argument from a different perspective. If we had 1.5 million tourists we would not have an overstock of beds."
And yet, there are actual cases of hotel operators which proceeded with massive hotel developments in full knowledge that preliminary forecasts predicted a bleak future. It is a cynical conjecture, but a plausible one at that – many operators are confident that their hotels, success or not, are prime real estate. And there goes product ‘Malta’ out of the window: "That is an argument that used to be made previously. But there are also a number of operators who are not necessarily pure hoteliers at heart, who would take a decision to build a hotel on the basis of the growth in real estate value as opposed to the profitability of that property.
"When a certain number of properties leave the market, due to unsustainability or to grab other opportunities in other sectors to make money, it is not a good sign. The positive spin would be that this is a reduction of bed stock, but that is not the right way to justify the hotel closures. The closures are indicative of a problem which we forecast and warned about, and one that we have to sit down and address. When a hotel closes and turns into real estate the jobs that are lost are not replaced."
The question beckons: is Government addressing the situation? "I am not seeing enough that is being done specifically," Zahra says. "I don’t expect Government to bale anyone out, but it has to provide the necessary infrastructure and support to make sure the industry has the best chances to prosper – it has to address the environmental and infrastructural issues with much more urgency and it has to appreciate that more funds are needed for the national marketing effort."