INTERVIEW | Tony Zahra: ‘Without a tourism vision, Malta may run into rough weather’

Malta Hotels and Restaurants Association chief Tony Zahra speaks to BusinessToday about the urgent need for a carrying capacity exercise for Malta and the importance of having a vision for tourism

Malta Hotels and Restaurants Association chief Tony Zahra
Malta Hotels and Restaurants Association chief Tony Zahra

How was 2019 for the hotel industry in Malta?

One has to first consider how the industry in general, worldwide, performed. Last year, the industry grew by around 4% globally. Malta did a bit better, with an industry growth or about 5%. The reason why I make the point about the global industry’s performance is that, generally, the sector has been growing all over the world, not only in Malta. What we’ve been achieving in Malta is very good, and we’ve slightly outperformed the global industry’s average. As the expression goes, however, “a rising tide lifts all boats”. So, Malta did well, but the reality is that the market was improving everywhere and we must remember that we form part of the world.

Did the political turmoil at the end of the year affect in any way bookings and reservations both at hotels and restaurants over the holiday season?

In terms of accommodation, the political situation does not appear to have had an effect. In reality, whilst what has been going on has been of great interest to the people in Malta, the impact it has had on the average person living abroad has been relatively small. If you take our biggest market, the UK, British citizens were more interested in what was happening in their local scene, such as the allegations on Prince Andrew and the events surrounding Brexit. I don’t think Malta featured heavily when it came to most holiday-makers. The protests were peaceful, so there wasn’t much which would keep potential visitors away from the island.

When it comes to restaurants, it’s a different matter, however, and the protests did have an effect here. The reports we’ve received showed that restaurants in Valletta were particularly badly hit in the first few weeks of December, but recovered over Christmas and New Year. Restaurants outside Valletta were patchy in so far as how they were affected. We’ve had some reporting that they were badly hit in the first three weeks of the protests, while others said they weren’t affected at all. And even restaurants in the same locality reported different impacts, with some saying they were hit badly and other saying they weren’t. There was no clear pattern, except in Valletta, were restaurants were generally badly impacted.

There has been talk in recent years of the Maltese hotel industry reaching saturation point – on a number of occasions you’ve mentioned the risk of over-tourism. Are we there yet? Have we reached saturation point?

The MHRA has been asking for a scientific carrying capacity exercise to be conducted for quite a while, but it has not yet been done. And we will only be able to understand whether we have reached, surpassed or are still to reach saturation point once such a scientific exercise is carried out. Any other way of gauging this will be very subjective, and one’s views on the matter could be challenged because there is no empirical way of verifying them.

However, it is a fact that Malta only has 316 km² of land, and around 33% of it is already built up – one of the highest percentages in the world. In view of this, I feel that we have to start being careful and smarter, and aiming more for a quality product. The idea is to have the same number of people visiting Malta, but with the ability to spend more.

We are often told that the focus of the industry should be on attracting higher-priced tourism. Does this mean we should only have four- and five-star tourists?

Let’s talk about quality rather than price. Quality has a value – you can still have two or three-star hotels, but these should aim to be the best hotels they can be in their class in Europe. Consequently, they would be offering a quality service, and quality translates into a better return on their investment. A three-star hotel doesn’t need to offer certain luxuries, such as spas and so on, but it still needs to have hospitable and intelligent staff. Having a three-star hotel doesn’t mean the service quality should go down.

In this regard, I feel Malta is lacking in quality somewhat. If you look at the restaurants in Valletta, for instance, very few differentiate the product they offer. They all seem to be offering the same thing. Quality means that you stand out from your competitor by offering something better and different.

Does the MHRA wish to see the end of the lower-starred hotels?

No, it does not. The MHRA wishes to see a greater push for quality across all hotels.

Malta is often home to serial copycats, especially in business. After the first boutique hotel popped up in Malta some five years ago, applications for similar developments keep on being filed all over the island. Is there such a demand to justify these? And how are boutique hotels hurting mainstream hotel destinations?

Typically, a boutique hotel would have around 10 to 15 rooms, while a mainstream hotel would have about 300. This means they serve different markets. Boutique hotels compete mainly with other boutique hotels, not with large or fully-branded hotels. I think they offer different types of products.

When it comes to whether there is an over-capacity of such hotels, I think there is over-capacity in everything in Malta at the moment. This is true of the property market too, for instance. A few months ago, I warned that we needed to be careful, because the number of beds which are coming onto the market means that we will require not the 2.5 million tourists which visit Malta, but 5 million tourists to fill all of them. And this connects with the issue of our carrying capacity. If we end up with a situation of over-capacity, this will lead to a price war, where hotels lower their prices in order to fill their beds.

How big a concern is Airbnb, and other direct booking services, to the industry?

Airbnb is an enormous concern. There are around 4,000 unlicensed Airbnb units in Malta. These don’t pay VAT and license fees, and by not complying with the law end up having a 40% advantage over those who do obey the rules. Such unlicensed accommodation hurts not only the economy, but also harms competitors who do comply.

The second difficulty which arises through Airbnb is that we have situations where Airbnb flats are housed within blocks of apartments which are otherwise occupied by ordinary full-time residents. When an apartment is turned into an Airbnb accommodation, it obviously starts seeing heavy traffic of occupants – visitors come for a week or two and leave. Often, such visitors come and go from their apartment at all times of day and night during their stay, and younger tourists sometimes don’t think twice about being noisy. This causes a significant inconvenience to the residents of the other apartments, and many Maltese people are experiencing this. This situation needs to be regulated. There shouldn’t be Airbnb units in residential areas. Airbnb units should be situated in blocks which are made up only of other Airbnb units, and these should be located in suitable areas of the island.

With one of the main suspects in the Daphne Caruana Galizia murder having been a director in one of the biggest companies involved in the hotel industry, did the MHRA fear a backlash?

Criminals can be found in all sectors. The MHRA will obviously not defend criminals, but it will defend its industry. Just because there was one rotten apple this does not mean that the whole barrel is rotten. In their vast majority, industry players operate correctly and abide by the law. The person concerned could have been coming from any industry or area.

How can the industry reinvent itself to guarantee a profitable future?

The industry needs to think in terms of where it wants to be in 15 years’ time, a time period which will pass in a flash. We should be talking about sustainability. I never agreed with our former prime minister (Joseph Muscat) that there should be this massive influx of foreigners into Malta. The impact which the increased number of foreign residents has caused is incredible. Can the island sustain these numbers? My view is no. The keyword is sustainability, so the way forward is to find the most sustainable path. Having over 30% of the island built up is not sustainable. Neither is having almost 400,000 cars on our roads. Have these things improved our quality of life? We really have to speak about sustainability and quality of life.

Where do you see the industry in the next 10 to 20 years?

Malta’s last tourism plan covered the period up to 2019, and there is no new plan to replace this, so it is not possible to know how the industry will be in the decades to come. This is an enormous shortcoming. How can we direct people on how to invest if we have no idea of what our vision is? A carrying capacity exercise needs to be carried out and a plan needs to be devised as soon as possible.

Do you feel positive about the future of the industry and tourism in general in Malta?

Yes, I am positive, as long as we can keep things on an even keel and have a vision. Without a vision, we might run into rough weather.

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