31 May 2006

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Business Today

Re-branding Malta

With the Mediterranean losing its charm with travellers, Malta needs to find its niche attraction

According to the prime minister's latest prognosis, the country is getting healthier economically.
It is undisputed that progress has been achieved since joining the EU and the perceived improvement in the economy is confirmed by NSO. The confirmation of European funds to the tune of EUR822 million starting next year is most welcome.
Some may ask if these good tidings will tempt the exchequer to loosen the purse strings. GRTU proposes different modes but most likely it is to be a lowering of income tax bands, a 5% VAT rate on food and drinks in hotels and a reduction in FSS for SME 's. Another bold step could be the rethinking on how to match the request by low cost airlines for a volume discount on landing charges.
Meridiana, Italy's main low-fare airline, has started operations to Malta. Although, no match for the volume carriers such as Easyjet or RyanAir it is certainly a modest breakthrough.
More positive news which will contribute handsomely to the state coffers is Tecom, the company owned by the Gulf Arabs who intend to invest Lm110 million in SmartCity an ICT paradise which would create 5,600 new jobs. The acquisition by Tecom of 60% shareholding in Maltacom is a strategic move and will further ease pressure on government cash flow. Financial observers point out that Tecom’s offer is below the current listed price but according to Lehman Brothers Europe, who advised the privatisation unit, it is "consistent with the current market valuation for telecom incumbents".
Again, one would comment that as has been the case with previous privatisation offers, they tend to be discounted mainly due to the penal condition linked to a guarantee of full employment.
In most cases this made political sense and although Maltacom is profitable it also carries surplus workers.
Another positive sign is amply pointed out by the minister of tourism as he proudly reminds critics of 1,009 new jobs last year. In his opinion, such a number is expected to go up as we begin to reap the benefits of new capital investments in hotels. In this context, Air Malta is shedding its non core investments and this policy has generated seven bids for the Crowne Plaza Hotel on the site of Fort Cambridge in Sliema.
Offers reach Lm23 million which is more than double the ticket price for the land parcel at Pender Place. Such proceeds help in no small way to lower the deficit. With hindsight,
It just shows how this site situated next to the burgeoning Midi development also built on public land; vastly appreciates in value.
Conservationists plead for the Holiday Inn site not to be turned into another concrete jungle adding to the cacophony of luxury apartments on the once pristine Tigne peninsula. The alternative to office blocks and residential units is of course more bedstock. It comes at no surprise that MHRA is warning that the proliferation of more bedstock in an already saturated Sliema/St Julians area needs to be monitored by the authorities.
But since the successful bidder must assume the entire workforce of Holiday Inn, one assumes they would opt for a hotel with the obvious expansion of five star accommodations.
MHRA is sensing a saturated market with the opening of the St Julians Le Meridian, the new Radisson Golden Sands and expansion plans at the Hilton and the Westin Dragonara. So is there a solution in sight?
There is no quick- fix solution and studies confirm that the future of our tourist product shows reason to be cautious. With exotic resorts competing head-on with the Malta destination, we are likely to lose market share to upcoming destinations, especially in the Asia-Pacific region.
Overall, Mediterranean tourism is losing the virtual monopoly it held over the world tourist market until a few decades ago. This relative fall in tourist numbers to the Mediterranean is linked to the globalisation of tourism, which entails more and more competition among world destinations.
One possible solution is to re-brand by attracting alternative tourism focused on the importance of cultural tourism as a key factor in boosting arrivals. Lobbying for more cultural tourism leads us to start discovering and preserving our heritage and invests more in our culture. Otherwise, this legacy from the past remains in a state of neglect. Can we spare cash to refurbish St Elmo and raise the Opera house from its ruins?
Unless we spare millions to finance direly needed upgrades we cannot expect better than a miserly single digit growth in arrivals.
All this is confirmed by reading the World Tourism Organisation’s latest barometer.
As an island destination, we suffer from an ageing tourism product, combined with severe under capacity in three star accommodation category.
A lot has been written by MTA’s appointed consultants about ways in guaranteeing a plan securing new arrivals of 50,000 annually for the next three years. This plan faltered.
Others favour the low cost airlines solution. Quite the contrary, a cautious view is being taken by bureaucrats who believe the introduction of low cost airlines would sound the death knell for our national carrier and its 1,700 dependents.
They call it a cliché that more wealthy tourists prefer using the low-cost airlines because they would rather spend more money at their destination.
But not everything is doom and gloom.
The positive news is that there was a 6.8 per cent increase in the number of British tourists. Other moderate increases were recorded from Austria, Belgium, France, the Netherlands and the US. The minister for tourism regularly writes in the media trumpeting the new investment in quality hotels. Inevitably these result in sustainable jobs. But critics reply that by comparison, these openings are dwarfed by the thousands of potential new jobs that the arrival of two million tourists are expected to generate by the arrival of low cost airlines.
By comparison, official reviews assure us that no frills airlines are here to stay while the effect of direct sales channels such as the Internet and TV travel channels are challenging traditional tourism products and distribution routes, namely the package holiday and tour operators.
In that retrospect it is vital to point out that Malta is in competition for the millions of passengers that no frills airlines will carry to competing destinations.
In the meantime, Easyjet registered two Maltese companies while Ryanair, one of the world's biggest growing airlines, promised to fly two million extra passengers within three years. In other countries low cost airlines operate cheaply from secondary airfields but this is not physically possible at Gudja airport.
Thus the thorny issue of low-cost airlines is back in the headlines after hoteliers blamed the government for prevaricating on the issue. Deciding what is best for the future and acting upon decisions made takes a lot of political courage, hence the delay by the government in discounting landing charges .Hoteliers and developers of luxury apartments have invested Lm400 million in five star complexes only to realise that they had to slash rates to maintain business. Is the MTA progressing in the re-branding exercise? Can this mean that we are not succeeding to attract the upper segment in the tourists market who can afford luxury holidays?
MHRA warn us that the way forward cannot lie in offering more cheap 'bucket and spade ' tourism but to incorporate a cultural route based on our rich Mediterranean historical, cultural and gastronomic heritage with its high potential as a tourist resource. As stated earlier, government’s finances are now in a sustainable position and thanks to EU funding the economy faces a rosier prospect.
It is decision time but the omens are favourable so we must spare no effort to re-brand.

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Editor: Kurt Sansone
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