29 March 2006

The Web
Business Today

Winston’s bottom line truths

The bashing Winston J. Zahra gave the Malta Tourism Authority last week came as a surprise for most who are not in tune with the tourism industry. Here was someone lambasting a government agency for its inability to live by its own targets.
Things have come a long way since Zahra sat down around the table with former Prime Minister Eddie Fenech Adami along with other non-governmental organisations clamouring for EU membership.
It is for this reason that Zahra’s outburst against a government he generally supports comes as a surprise. But for many in the tourism sector, Zahra’s critical analysis of the MTA was no surprise.
Tourism is facing a serious problem and here was one person who decided to speak out. Tourist operators are feeling the pinch and insist government is not doing enough to help the sector.
“A hotelier looks at the bottom line,” Zahra says. It is the stark reality any businessperson has to face day in day out.
From low cost airlines to MTA’s failed targets, much can be done to boost the sector, Zahra says. And unless action is taken now, the country can lose big time, he warns.

You lambasted the Malta Tourism Authority for missing its targets and deadlines. Why this focus on the MTA, what is wrong with the way it is operating?
The Malta Tourism Authority is the entity that is responsible for marketing the islands and achieving results for the tourism industry. The Prime Minister, clearly not happy with the industry’s performance in 2004, had given the green light for a restructuring process to go ahead and concurrently had set a target growth of 50,000 tourists in 2005, 2006 and 2007. That was the accepted target at the time and this week we saw the results published for 2005, which indicate a small growth of 14,500 tourists but overall expenditure dropped by Lm5 million. What confuses me is that when the MTA, or the minister or any other government exponent argue that last year there was an increase in tourism when revenue generated by the industry dropped by Lm5 million.

As a hotelier what is the figure that preoccupies you most; number of tourists, bed nights, revenue?
A hotelier looks at the bottom line. Ultimately, it is a combination of how many people come to the island, how long they stay and how much they spend each day. What tourists leave in monetary terms on our island is the figure that counts.
Even when we are saying we want a growth of 50,000 tourists I don’t think we are going far enough. What we need is a growth of 50,000 tourists, at least staying the same amount of nights with the same average spend as today.
If someone says the average length of stay is going to fall from just under nine nights to six nights then we need to see a 30 per cent growth in the number of tourists to at least make up for that drop in nights.

Within this context how should the MTA perform? How do you make tourists spend more money?
You have to make Malta attractive to the visitors and so you have to create an interest for the people to come to the island.
Secondly, we have to have the mechanism in place to bring them to the island. We have a serious problem with seat capacity and that needs to be addressed.
Thirdly, the whole experience has to give tourists value for money.
The reality is that we are also competing with a host of new destinations which is primarily driven by the marketing of the low cost airlines. Today, a lot of people in Europe who decide to go on a break, simply log on to Easyjet.com, Ryanair.com, Mybaby.com or any other major low cost airline website and choose their destination according to the price of the airline ticket to get there. Malta is not even on that screen so we are totally out of the short break market and that is the way things are going.

You criticised MTA for not reaching its targets but what needs to be done?
The next step is not really my decision. In 2004 we had spent a lot of time together drawing up a restructuring plan, which was turned into a roadmap for reform. People were given that road map to run with. When you look at that plan and the dates and milestones set out in it and whether they have actually been achieved, you will realise that a lot of things are in serious delay. Industry advisory groups had to be set up by March last year; these were only set up a few weeks ago. A consultative group of private industry had to be in place by March or May last year; the ministry is now saying that it will be set up in the next few days.
In July 2005 we were a team of around 10 people from the industry sitting around the table with Christian Sinding to create a brand platform for the islands. In a day we managed to do it. Why does it have to take so long to implement? We are now in March 2006 and the branding exercise will only start bearing fruit in 2008 if it is launched in October. It is true that a brand takes time to mature and develop but if we further delay the launch it will only give us results at a later stage.
The overseas offices have been totally mishandled. The agencies appointed to market the islands know nothing about Malta.

The MTA has defended its stand on the closure of foreign offices saying the modern way of going about marketing is to appoint agencies in the respective countries?
Do you think agencies that know nothing about the island are better than local people selling the island? This is an amazing way of going about things.
There are a lot of good and valid people at the MTA and in the last few days I have received a lot of phone calls from people who work with the organisation to show their support for what I said. But I don’t think that the people at the top are looking at the mirror and admitting they are not getting it right. They are simply burying their heads in the sand and that worries me.

Are you saying that Romwald Lungaro-Mifsud should leave his post? Is he not up to the job?
I told Mr Lungaro-Mifsud to his face when he was first appointed that he is not the right person for the job. Whether he stays or leaves is not my decision.

Was your outburst on MTA the result of personal pique with Romwald Lungaro-Mifsud?
Absolutely not. When Romwald was appointed I told him I did not agree with his appointment and the rest of the team on the restructuring committee did not agree with his appointment. But I also told Romwald he had my full support.
I did support him and even put the MTA in touch with Christian Sinding. I would have to be crazy not to support the reform process but that does not mean I am not going to say things as they are. It is nothing personal between me and Romwald. The only agenda I have is to drive the industry forward so that the commercial entities within it can make a profit which is sustainable and to ensure that the employees within the industry have their jobs safeguarded. My agenda is stated; there is nothing hidden about it.
I know that within the MTA a very small number of people have said that I am doing this because I want to take over the presidency of MHRA again or become CEO of MTA. This is absolutely not true.

Is your criticism a result of the fact that the golf course at Ghajn Tuffieha, just outside your new hotel, is less likely to materialise?
I’ve said it before that we are not even involved in the golf course and it came as a surprise to us just as everyone else. And I do not believe that any decision has been taken yet.
As far as I know the golf course is still at assessment stage and if the golf course site is changed to Pembroke it is still close to the Radisson in St Julians, or if it is shifted to Maghtab it is close to the Coastline Hotel, so it makes no difference to me. Why should it be about the golf course? Why is it that when somebody talks realistically and calls a spade a spade we are cynical and assume there is a hidden agenda?

You blame the MTA for the ills of the sector because it is the agency responsible for the marketing of the island. But has the industry itself reacted to the way the tourism industry is changing? Has industry been dynamic enough to embrace the internet-booking culture and the short-stay tourist?
From a hotelier’s perspective, today a lot of hotels are trying to sell direct over the internet but there is a missing link in the equation: low cost airlines. The hotel industry has no control over the airline industry and that has to be a decision that is centrally taken.

Everybody seems to agree that low cost airlines should start to operate to Malta but when it comes to the nitty gritty of things a number of problems are raised, some related to competition issues. What is the solution?
There are a number of ways to skin a cat. Ultimately, there are a number of solutions that can be put into place. These solutions can be either government or private industry driven or a combination of both. The issue is that we need to get the low cost airlines in and we cannot afford to procrastinate anymore on the decision.

This is what everybody seems to be saying. But what is the solution?
I disagree that everybody wants the low cost airlines in. It is very obvious that there are certain entities and certain people, who are opposing the entry of low cost airlines. This is very obvious because if everyone is in agreement I’m sure that cabinet would have taken the issue forward.

Is Air Malta a major stumbling block?
I think the protection of Air Malta is stumbling block but I also believe it is a valid stumbling block. Air Malta is our national airline and we have depended on it for flying in and out for a very long time. We have also depended on a number of other national airlines such as Alitalia, Lufthansa and British Airways. These airlines are critical to the tourism industry and whatever action we take has to this into consideration.
We cannot bring low cost airlines in at the expense of everything or at all costs. We have to do it intelligently. I believe it can be done by choosing the right partner or partners, I also think government has the option of subsidising landing fees for everyone utilising Malta International Airport.
Instead of the current cost of an average of EUR28 per passenger in landing fees, we can bring that down to an average of EUR10 per passenger for everyone, including Air Malta.
Charging EUR10 per passenger is something which low cost airlines can work with.

Is there the political will to implement such a strategy?
That is a question you have to ask the Prime Minister. We’ve been procrastinating on this issue for a long time. I suppose if there was the political will, we would have found a solution by now. Where there is a will there is a way, the saying goes. So far we haven’t found a way so does that mean we don’t have the will?

Has the Labour opposition given you any guarantees as hoteliers that with them in government low cost airlines will come in?
No, I haven’t heard of any guarantees from anyone. But elections are two years away and if we’re going to start waiting for any promises from any political party to be implemented after the elections, that is too far away for us.
What ever needs to be done has to happen now, within the next two months. We don’t have time to waste.

How critical is the situation?
I personally believe that unless something serious is done now, we will fall below a million tourists within the next 18 months. This would have an impact on the industry which I wouldn’t even like to contemplate. It is very serious when a major operator decides to reconsider its operation.

Do you confirm that almost a year ago a number of people from the industry, including yourself had warned the tourism minister about First Choice’s intention to pull out?
I can confirm that. We told government that 2005 was not going to be a good year. We asked government to do something about the situation. But now a year later, when things have gone wrong they cannot expect us to sit down and stay quiet.
I read the Nazzjon and see an opinion article penned by Joe Zahra, the tourism minister’s public relations officer, in which he talks about seeing the bottle half empty or half full. I am not talking pessimism but realism. I am an optimist because if I weren’t my company would not have invested on this island. Of course I am an optimist but I am also a realist and I can see the writing on the wall. Trying to media spin in this way will get us nowhere and all it does is bother people in the industry in a big way.
What do they want us to do; take our investment elsewhere? An entrepreneur will not go down; he will close shop and go somewhere else.
Do we want to take the tourism industry seriously or do we want to keep treating it like a Cinderella industry? Should we wait to go below a million tourists and lose thousands of jobs in the process?

During the MHRA meeting last week it was obvious that the three start category hotels are suffering the brunt of the problem…
At Island Hotels Group we have a three star, a four star and two five star hotels so we have the range of hotels. We have 2,500 beds and we employ over 1,000 people. I see the full range of problems and I know what I’m talking about. The Group is run like a well-oiled machine and it looks forward to see what’s happening and forecasts projections. I did not wake up last week during the MHRA meeting because 2005 was a bad year. I was more concerned by what is going to happen in 2006. The first quarter has been a wash out.
Hotels cannot continue losing the money they are losing in winter and then try and make up for it in summer with the hope of having something left over to invest. It doesn’t work that way.

Michael Zammit Tabona, a fellow hotelier, has suggested that the extraordinary general meeting of the MHRA should adopt a resolution so that its members would suspend paying their fees to the MTA and instead pay them to the association so that it would in turn use them to market the island. Would you support such an initiative?
Last week I suggested to the MHRA to call an extraordinary general meeting. I understand that it is the council and president’s duty to draw up an agenda and put together the necessary motions that need to be presented.
I think the passing of a motion by MHRA is a very serious issue and whatever motion are passed during the EGM have to be taken extremely seriously. There are a number of options that can be discussed and I’d rather wait to see on the day what kind of motions are put together.

But would you support a motion to suspend fees payable to the MTA?
I would support any motion that addresses the problem constructively and gets things moving in the right direction.

Do you think Francis Zammit Dimech should resign his post?
It’s not my decision. That is a question I cannot answer. I have my responsibility to look after. Obviously, the results are what they are. They have to be analysed realistically and objectively and everyone has to be accountable for his position of responsibility and that includes the minister and the chairman of MTA.

Winston J. Zahra was interviewed by Kurt Sansone

Business Today is published weekly on Wednesdays.
Website is updated weekly on Thursdays
Copyright © MediaToday., Malta
Editor: Kurt Sansone
Business Today, MediaToday, Vjal ir-Rihan, San Gwann
Tel: (356) 2138 2741 | Fax: (356) 2138 5075 | E-mail