MALTA TOURISM DEVELOPMENT PROCESS FROM 1950s

MALTA TOURISM DEVELOPMENT PROCESS FROM 1950s The development of tourism in Malta took off in the late 1950s. Prior to this the Maltese economy was geared towards providing services to the British military base. The tourism industry was not at all important during that time. However, this situation changed as a consequence of the fact that the British Government started running down the base due to Malta s loss of strategic importance. New areas of economic development had to be identified. Tourism, together with ship repair and light manufacturing were identified as possible areas capable of immediate development. These sectors had to earn the Maltese economy much needed foreign currency. This foreign currency requirement is due to the fact that Malta has to import most of its requirements since it has very limited resources which are not at all numerous in variety. So, in the late 1950s, Government initiated a programme of capital spending on improving access to beaches, and on promotion and advertising. In 1958, the Malta Government Tourist Board was set up with the aim to start promoting Malta. However, very limited funds were available, Lm0.5 million spread over a five-year period. At the same time there were only 25 hotels with some 1,200 beds. Tourist arrivals were about 12,500, leaving a gross income of only Lm 765,000. In the mid-1960s, a grants programme to encourage new hotels was adopted. This was a costly measure but very successful. In fact, by 1969, Malta had 101 hotels with over 7,500 beds and over 186,000 tourists visiting the islands and leaving over Lm 10.8 million as earnings. Tourism development slowed down in the 1970 s as a consequence of a change in administration and in mentality. The grants programme was halted and funds were channelled towards the creation of industrial infrastructure. This was done because, then, the tourism industry was considered to be very vulnerable. Consequently, hotel building activity declined. Over 10 years, from 1970 to 1980, the number of beds increased by only 3,000 whilst the number of hotels fell from 110 to 100. However, tourist arrivals, especially from the UK, increased by fourfold, from 170,853 to 728,732. During this period there was a shift from hotel to self-catering accommodation. Apartments which were previously used by British services now became available as tourist accommodation. New apartment blocks were built. Places like Bugibba and St Paul s Bay were built up in less than 10 years. Whereas in 1979 apartments provided 14,000 beds, in just three years to 1981 this had increased to 29,000 beds. At this time, 76% of the tourists came from the UK and 60% of all available accommodation was in self-catering. Demand continued to increase, prices rose but quality fell. The then current Maltese infrastructure could not take this

new scenario with the result that massive infrastructural problems, such as water shortage problems, began to arise. All this resulted in a drop in arrivals, especially from the UK, which dropped by 35% leading to a 28% in the total figure. This decline continued until 1984 when tourist arrivals fell to almost 480,000 compared to 728,000 of 1980. Income from tourism also fell from Lm111,900,000 in 1980 to Lm 63,100,000 in 1984, a decline of 44%. This situation was accentuated by the international recession. The accommodation sector was also adversely affected as occupancy rates declined. Self-catering accommodation was the most badly hit. Beds in this sector fell from just over 29,000 in 1981 to just over 6,600 in 1991. Some of the surplus accommodation was sold to Maltese people for domestic use whilst the rest, after investment, were upgraded to holiday complexes. These complexes offered basic hotel facilities to a predominantly self-catering holiday. Measures were taken to combat this decline. These included diversification into new continental markets. New tourist offices were opened in Frankfurt, Paris, Amsterdam, Milan. Further additions to the accommodation sector were halted. A Forward Buying Rate scheme was introduced in 1986 to the UK tour operators. This helped to increase tourist arrivals from this market and restore tour operators commitment to Malta. This resulted in an increase in tourist arrivals and in tourism earnings in 1987. However, the UK market accounted for a smaller share of the total as a consequence of the diversification efforts undertaken. In 1987, there was a new change in administration and in mentality. It was realised that tourism could not keep growing at the rates of previous years. Malta had to increase foreign exchange earnings from tourism by maximising revenue from a better quality tourist. New steps were taken to improve the overall tourism industry infrastructure, including: A major reclassification exercise for all hotels new permits only given to 5* or 4* hotels New airport terminal by 1991 Setting up of an Institute for Tourism Studies (Hotel School) Commitment towards the setting up of excellent conference facilities

General infrastructural developments such as improved water supply and brand new distribution network. Latest fibre-optic technology for telecommunications and an extensive road-surfacing programme. In order to combat the perceived vulnerability of tourism, in 1989, a Master Plan for Tourism was completed setting out the strategic approach for the future development of tourism in Malta. The main weaknesses of the past Maltese tourist industry were a heavy dependence on the UK market, the seasonality of the industry and the quality of the product being offered as well as the environmental issues. The strategies suggested to overcome this situation were: Market diversification: For 1993, UK 49%, Germany 17%, Italy 8%, France 5% and the Netherlands 3%. Deseasonalisation: more evenly spread throughout the year, achieved through promoting an attractive tourism product to attract visitors in off-peak months. Product/tourist upgrading: the cultural and historical assets of these islands are being promoted instead of the traditional sun, sea and sand image previously associated with Malta. E.g. Hagar Qim/Mnajdra project. Aim at better appreciation of our assets. The first half of the 1990s registered growth in tourist arrivals and earnings up to 1994. Slight declines were registered in 1995 and 1996, which were then followed by periods of growth, but at a slower rate. The 1995 and 1996 decline were mainly due to announcing the removal of the Forward Buying Rate scheme. This scheme was replaced by the Tour Operator Support Scheme, which was introduced after tourism authorities realized that the unfavourable exchange rates would make Malta even less competitive. This would have resulted in further declines. Following a policy decision, the Tour Operator Support Scheme was phased out in October 2001. The scheme was replaced by other marketing initiatives. This policy was in line with the shift being made in the approach adopted to target the market. At this stage of Malta s economic development, the services sector expanded further and played a larger role in the islands economy. This was due to the expansion of other industries such as the financial and private services. Over 70% of Malta s GDP during the 1990s was generated through the manufacturing, services and through the public sector. National statistics do not provide the percentage contribution to GDP of the tourism industry. The tourism sector, given its fragmented nature, is spread throughout the various other sectors. However, tourism authorities, during the 1990s have commissioned studies to assess the economic impact of tourism in Malta. The latest study available, which is based on data for 1998, estimates that the full impact of tourism on GNP is 24.2%. At a direct level, the impact of tourism earnings on GNP is estimated at 10% (Mangion ML & Vella L, 2000).

During this decade, the number of beds on the market exceeded 40,000. This was mainly due to the large five- and four-star hotels which were built following government s policy to allow only this category of accommodation development. By the year 2000, 41,000 hotel type beds were available on the market together with an estimated 5000 beds in self-catering accommodation. The rate of growth of bedstock was by far exceeding that of guestnights with the result that occupancy rates were being negatively affected. During the past years, occupancy rates for all types of accommodation (excluding self-catering accommodation) have been in decline indicating a not so healthy situation. Occupancy rates increase almost to full capacity during the summer months and are lower during the winter period. In 2000, the overall occupancy rate fell to 47% primarily due to decreases in the occupancies of five and four star hotels and of villages, complexes and aparthotels. Overall the five and four star hotel segments still maintain quite healthy occupancies. During the year 2000, more tourists stayed in five star hotels registering higher guestnights and accounting for a higher market share. However, these increases were offset by the increase in hotel beds in this category, which increased from 2902 beds in 1999 to 3750 beds for the year 2000. Four-star hotel occupancy has gone down dramatically from an average occupancy of 70% throughout the previous five years to 56% for 2000. This is due to fewer nights being registered in four-star accommodation due to fewer tourists staying in this category of hotels. Villages, complexes and aparthotels also registered a strong decline in occupancy level for the year 2000. Although more tourists opted for this type of accommodation, their length of stay was much lower than that for previous years. This resulted in fewer guestnights and therefore lower occupancy levels. Three star occupancies for the year 2000 slightly decreased over that for 1999 due to fewer guestnights resulting from a shorter length of stay. It is worth noting that in the past years there has been a shift in accommodation usage, partly due to better quality accommodation charging lower rates. Having experienced a 60-year cycle of economic booms and slumps, the tourism sector has now become a main pillar of the Maltese economy. Tourism has now become the main contributor of the market services sector. Malta now attracts around 1.7 million tourists a year and accounts for 29% of Malta s GDP. Over the past seven years, the average annual increase in tourist arrivals was 5%. Over the past five years tourism activity in Malta registered relatively high growth rates. In fact, the positive performance recorded on a yearly basis has also exceeded the average growth rates for Europe as a region. In 2014, inbound tourists increased by 7.8% over the previous year. This growth was triggered by a reaction from government to address the stagnant performance in the years preceding 2006; the government launched a scheme to attract airlines to introduce new routes to improve the accessibility of Malta.

During the period 2000 to 2006 the Maltese tourism industry was characterised by a rather flat period of performance. Until 2006, Malta was still heavily dependent on tour operator business. This made Malta less competitive as the travel market was being characterised by a new type of tourist, the free independent traveller who preferred to make his own travel arrangements rather than buying a predefined package trip. This situation started to be reversed in October 2006 with the introduction of low-cost carriers in Malta. This was a step forward to boost the Maltese tourism industry by aligning it with international trends. Low-cost carriers continued to penetrate Malta s travel industry in the following years. One very important side effect of the commencement of low cost airline services to Malta was the impact on the profile of tourists visiting Malta. The most relevant features emerging from the new type of tourism flows visiting Malta incorporate the following: Younger age-groups Shorter decision-making and booking lead times Shorter length of stay Use of different media (particularly the internet) when compared to the older, traditional visitor. Tourism activity recuperated in 2010, with an increase of 2.7% over 2009, the year of the Global Economic Crisis, and a positive performance persisted in the following years. Further expansion of the route network through the introduction of new routes and expansion of existing routes by both low cost and legacy airlines led to record levels being registered on an annual basis since 2010. Currently Malta is directly connected with around 92 airports providing links with 84 cities situated all over Europe. Malta s direct links feature both countries which may be considered as traditional markets like the UK, Germany, Italy and France and also relatively new countries like Spain, Poland, Scandinavia, Lithuania, Bulgaria and Romania. The share of passengers carried by low cost airlines increased from 13% in 2007 to 38% in 2014. The UK remains Malta s main tourism source market accounting for 28.8% of annual arrivals. 15.5% of incoming tourists visit from Italy, 8.4% from Germany whilst 7.4% come from France. The introduction of new air services saw a high growth in arrivals from Italy, which edged out Germany as the second biggest source market. Spain ranks 5th followed by Sweden, Netherlands, and Russia. Nights Spent in Malta With an average length of stay of 8.1 nights, 12.9 million guestnights were generated in 2013. Over a seven year span (2006-2013), guestnights increased at an average annual rate of 2.7%. In line with international trends for short break holidays, the average length of stay is decreasing from 9.7 nights in 2004 to 8.1 nights in 2013.

Seasonality Slightly less than two thirds of inbound tourism to Malta occurs during the peak months of April to September. Although Malta is still generally perceived to be a sun and sea destination, it features a series of tourist attractions making it suitable both as a mainstream coastal summer destination as well as an off-peak city destination. Over the years, efforts were directed to mitigate seasonality and intensify the share of offpeak travel to Malta. As a result, although tourism to Malta is concentrated during the peak months, the share of off-peak travel is on the increase through Malta s capability to attract different motivational segments during different times of the year. Cruise Cruise business in Malta has been growing. Over a seven year span (2006-2013), the average annual growth rate stood at 1.2%. 2013 was a negative year for cruise business generating 431,397 cruise passengers, declining by 23.3%, although losses are expected to be recouped between 2014 and 2015. Same-day visitors from the EU account for 88% of total cruise traffic, the main markets being Germany (19.3%), the UK (19.3%) and Italy (15.4%). Tourism Employment The study on the Economic Impact of Tourism in Malta estimated that in 2001, 13,477 full-time equivalent jobs were directly involved in tourism. This direct employment accounts for 9.8% of national full-time equivalent employment. As a result of the economic stimulus from tourists expenditure, the number of jobs supported by such expenditure increases to 40,000 full-time equivalent jobs. Thus the full employment impact of tourists expenditure is 29.0% of total employment in the Maltese economy. Close to 10,000 people were employed full time in hotels and catering establishments in 2014. An additional 10,159 people are employed on a part-time basis. Official statistics reveal that 6.3% of the full-time gainfully occupied and 17.9% of the part-time gainfully occupied population are employed in hotels and restaurants. Tourist Profile Malta s tourist profile has changed from one which was mainly focused on sun and sea to a much more varied motivational portfolio. Malta offers a diverse product offer which results in various interests being captured to tap the outbound travel market from source countries. As a result, tourism to the islands is spread all year round with the main reason for the seasonal spread of tourism being Malta s capability to attract different motivational segments during the different times of the year. Leisure oriented reasons still dominate as the main purpose of visit with 77% of tourists coming to Malta on holiday while 7.5% visit friends and relatives. The purpose of visit is further broken down into a number of motivational segments. These include history and culture, business travel which include meetings, incentives, conferences and exhibitions, diving and other sports and English language learning.

The outlook for Malta is to achieve a business mix which best reflects international trends, the country s offer, and its interest towards sustainable growth. In this regard, the aim is to decrease the country s dependency on the summer sun segment and increase the market share for trips having main motivations of winter sun, culture, sports and conference and incentive travel. Additional segments of importance amongst others include cruise and health and wellness. Visit to Malta Although the majority of tourists visiting Malta are first-time visitors, the share of repeat visitors is substantial. In 2013, 69% of tourists were on their first-time visit whilst 31% were previous visitors. Word-of-mouth recommendation from friends and relatives is the key factor influencing choice of Malta. The Internet, as an influential tool, has increased considerable in recent years, placing as the second most important factor for destination choice. In view of the fact that nearly one-third of tourists are repeat visitors, their previous visit is the third most important source of influence. Tourists are primarily motivated to visit Malta for its agreeable climate, for the novelty of the destination and for history and culture. Consumer research carried out by the Malta Tourism Authority in Malta s four core markets reveals different perception and awareness levels of Malta as holiday destination. In the minds of the German and French travelling public, Malta emerges as specifically associated with history and culture, activity holidays and language learning. In contrast, the British and Italian travelling public are less aware of Malta s historical product offer, as a result of which the image of Malta in these countries is more generic. Hospitality of the local people is one of the key attributes which should be given prime importance when promoting Malta as a holiday destination. Hospitality, together with authenticity and tradition features amongst the growing trends in tourism as travellers are looking at travel as an enriching experience. Organisation of stay Although the share of tourists visiting Malta on a package trip is still significant (47%), most tourists are opting for non-package type trips (53%). This shift is mainly attributed to growth of low fare services over the recent years. 71% of tourists utilised the internet when making travel arrangements for the Malta trip. Internet bookings were mostly made for flight (94%) and accommodation (82%). Demographics Most tourists visiting Malta fall in two main age brackets; 45 to 64 years (33%) or 25 to 44 years (32%).

Length of Stay 63% of tourists visiting Malta stay for seven nights or longer. Nonetheless, in line with international trends, shorter trips are exhibiting an increase. Economic Impact Tourism is a primary driver of the Maltese economy contributing to 29% of GNP and having positive impacts on employment, development of the country s infrastructure and foreign exchange earnings. 2013 was a record year for Maltese tourism, whereby nearly 1.6 million tourists visited the Island. The introduction of low cost carriers in late 2006, followed by further expansion of the route network were the major contributors of this increase boosting the Maltese tourism industry in line with this growth trend internationally. 2014 was another record year with 1.75 million tourists arriving Very Very significant when you consider that the islands population is a mere 420,000.