Editorial | Tourism key to recovery

Tourism was the sector hardest hit by the COVID-19 pandemic and this contributed immensely to the economic downturn, the Finance Minister said this week.

Clyde Caruana was commenting on public finance figures that showed the deficit for last year reaching 10.1% and for this year being revised upward to 12%.

Caruana said tourism was brought to a halt by the pandemic and this meant that tourist expenditure shrunk significantly.

The industry last year saw tourists spend €455 million, a drop when compared to the €2.2 billion they spent in 2019.

“This is the principal reason for the large economic impact Malta sustained from the pandemic, which reflected itself in public finances,” the minister said.

It is no wonder that government is targeting tourism in a big way in its economic recovery plan.

But tourism remains susceptible to the uncertainty of a pandemic and recovery will not be easy and linear. It will also depend on how consumer behaviour will react in a post-COVID world.

Indeed, Malta may even be looking at a future where it will be necessary to tap different markets and cater for new needs.

Tourism is an important player in Malta’s economy and making sure the sector recovers will have to be a priority.

Within this context, it is positive that the Nationalist Party has come out with an extensive policy document that contains several concrete proposals for recovery.

Some of the proposals may have to be fleshed out more and some are questionable in terms of their practicality but the general drift is a positive one.

The proposal to reduce VAT to 7% for bars and restaurants – as in the case of accommodation – should be considered to make Malta a more competitive offering.

However, the proposal to reduce the VAT rate also for any operators providing tourist services or supplying a service to the industry, creates a question mark as to where the line will be drawn.

Will this apply to food suppliers to the industry? Will this apply to transport companies? Such a wide-ranging proposal could create a significant black hole in public finances. The PN has a duty to explain its ideas fully.

Another proposal to subsidise airlines to the tune of €10 per seat filled in the summer and €20 for the winter, subject to a three-year agreement, is one way of enticing tourists to Malta.

But again, it raises a question of consistency given the PN’s tourism spokesperson’s doubts on government’s plan to give visitors who book directly with hotels €200 in vouchers to spend.

A PN proposal for a one-time grant of up to €25,000 for tourist operators who promote Malta abroad is commendable, especially if, as the party is suggesting, this advertising targets niche markets.

The tax deferrals proposed by the PN for the industry should also be considered to give the sector a breathing space over the next 24 months of painful recovery.

An interesting proposal is for tourist rental vehicles to be electrified by 2025. It could serve to have such a car fleet that is fully electric and rental companies should be helped make the changeover.

The ideas floated by the PN can provide a basis for regeneration in tourism and government would do well to take a long hard look at them.