It is widely agreed that the tourism industry is facing its largest ever hurdle as a result of the COVID-19 pandemic – one that is laden with seemingly insurmountable challenges, as well as a glimmer of opportunity to rebuild a better and more sustainable industry for today’s world.

Currently, however, the scenario on the ground continues to be one that beggars belief – with a sector that attracted 2.8 million tourists throughout 2019, an increase of 5.9 per cent over 2018, the numbers this year look very different indeed.

Leslie Vella, Chief Officer Strategic Planning and Deputy CEO at the Malta Tourism Authority says the past few months were obviously and unequivocally very bad for tourism worldwide, since COVID-19 has had a huge impact on people’s freedom to travel as lockdowns, restrictions and impositions to quarantine and self-isolate collectively contributed to enormous declines.

“This invariably led to vast cancellations in airline services and was further exacerbated by economic uncertainties and employer performance, which further contributed to the drop in traveller numbers,” says Mr Vella. “By the end of August 2020, NSO data for inbound tourism to Malta showed a decline of -71.2 per cent, when compared to the first eight months of 2019.”

Leslie Vella, Chief Officer Strategic Planning and Deputy CEO of the Malta Tourism Authority 

Mr Vella continues that the onset of the second wave and the time gap between the present scenario and the availability of a vaccine, scheduled for the first quarter of 2021, render the next few months challenging for travel worldwide. “Businesses are emerging from a very lean summer and potential tourists are facing various issues in their own home countries which will make travel a lower priority item in the next few months.”

To this end, the Deputy CEO asserts that Government has been instrumental in extending a range of medium-term assistance measures aimed at sustaining the country’s tourism industry. “This ranges from fiscal measures to wage supplements and even demand stimulus measures through the voucher schemes. The importance of the small but relevant domestic tourism market has also come to the fore during these tough times. So, it is a question of not only keeping afloat by cutting costs but also of adapting to new potential realities by introducing innovative approaches or tapping previously ignored segments.”

Speaking of the future of the industry going forward, Mr Vella says that the pandemic has been a lesson to all the world’s economies that, in spite of our civilisation’s sophistication and technological and economic prowess, there are still forces or events that may jeopardise the foundations on which the entire global economic framework is built. “Climate change is one such future scenario whose existential nature is beyond doubt and deadlines are ticking in its regard too.”

“We may have to adjust to a new travel paradigm which may depart from the volume-driven global tourism growth of the past one and a half decades, and evaluate investments in light of the new realities which are emerging. Having said that, there will be a light at the end of the tunnel, and we continue to believe in tourism and its revival albeit under potentially different circumstances,” Mr Vella asserts.

“Locally, we are addressing this through the formulation of a new Tourism Strategy which will take us to 2030. This strategy will combine the principles of recovery with rethinking and revitalising our tourism, to ensure that our tourism offering will remain valid, competitive and sustainable in the years to come.”

Vice-President of the Malta Hotels and Restaurants Association, George Micallef, sheds light on the developments earlier in the year, saying that once the airport reopened on 1st July with limited flight schedules from selected markets labelled as safe, the start of August was seeing an encouraging pick-up of hotel bookings.

“However, this was short-lived when UK put Malta on the red list, among other countries, which subjected visitors returning from Malta to a 14-day quarantine. In a matter of days, we were flooded with cancellations, while new bookings trickled in, and we returned to where we had started within a span of a couple of weeks. We can safely say that this summer was a write off.”

Speaking of the shoulder period ahead, Mr Micallef asserts that the situation is bleak with extremely low occupancy levels, generally hovering around 10 per cent or, even, below.

“The imposition of lockdowns and restrictions announced over recent weeks in most of our main source markets continues to exacerbate the problem,” he explains.

“Most hotels struggle with the thought of whether to stay open or not. Either way, the challenges ahead of us are enormous, not only because we were all unprepared for it, but also because it is impossible to plan ahead.”

George Vella, Vice President of the Malta Hotels and Restaurants Association 

Reflecting on past shocks to the tourism industry, the VicePresident says that tourism has faced various crises over the years – the Gulf war, the global financial and economic downturn that affected tourism in 2009 and 2010, the political turmoil in the Mediterranean region, terrorism threats, and other calamities, “which all impacted tourism in a big way, but the extent of the COVID outbreak has brought the global economy to its knees.”

Despite the sector having proven its resilience over the years, Mr Micallef states that the pandemic will have lasting effects. And, although tourism will undoubtedly return, he believes that attitudes on travel will change, “and we must be prepared to adapt to travellers’ behavioural changes. Visitors will most certainly become more health-conscious and sanitisation practices will have to become the norm for service practitioners. Travel patterns are also bound to change and the effects these will have on the sector are largely unknown.”

Delving into the debate concerning hotel bed supply and Malta’s carrying capacity, and whether Malta should rethink plans for further hotel and accommodation developments, Mr Micallef states that the country’s size poses a unique set of challenges.

“Beyond the issues related to the pressures on Malta’s resources, arising from the increased numbers of visitors, and the risks resulting from an oversupply of beds, we must acknowledge that Malta has its limitations,” he asserts, adding that the accommodation supply is not made up of hotels only, but also private rented accommodation which has grown exponentially in recent times.

“In my view, the biggest challenge Malta faces in tourism is the management of bed supply for the years to come. There is no easy way out of this, and it will certainly be difficult to find consensus on the way forward. However, it is in everyone’s interest to have a clear vision for tourism of the future based on long-term sustainability, backed by a plan of action that lays out the foundation for long-term planning. But such a plan has to be owned by all stakeholders.”

A positive trend that emerged over the past months is a growth in the domestic tourism market, albeit mainly driven by the Government vouchers. While Mr Micallef says that the hotel sector can never survive on domestic tourism alone, “the domestic market needs to be nurtured and given due attention, as it is bound to develop further. It’s also important that it continues to feature in national statistics as it will help us better understand the dynamics of this segment and its impact on the hospitality sector.”

Hotelier and President of the Malta Business Bureau, Simon De Cesare, describes the last few months as an “absolute rollercoaster”.

First, “we had to close in March and April amidst fear and uncertainty of the future of our businesses, our massive investments and the livelihoods of all our colleagues who worked for us.

“Then, there was the excitement of the reopening of the airports and the glimmer of hope we saw in new bookings which were outpacing our expectations, and, finally, the reclosure of our tourism markets due to the spike in August. It has been a nightmare which could not have been foreseen or mitigated against.”

Reflecting on the present situation and the winter months ahead, Mr De Cesare says that, today, industry operators are hunkering down to try and get through the next six months of low season while operating with almost no hotel revenue.

“The occupancies we are looking at in November and December, and likely into January and February, are dire and sit in single digits. We keep hoping for a medical solution coupled with improved rapid testing in all areas, particularly at the airport, but the reality is that we just have to wait it out,” says the MBB President.

Simon De Cesare, President of the Malta Business Bureau 

“Fortunately we are starting to get some positive enquiries for Q2 next year and, should the pandemic be coming to an end, as is widely hoped, then we should start seeing the return of some tourists come Easter and into summer.”

Mr De Cesare says it is unclear how quickly the industry will bounce back, however. His feeling is that people cannot wait to travel and, once they feel safe again, will relish the opportunity to do so. “I think that there will certainly be some casualties in the industry by then, but that might just be what it needs to survive as a whole given the oversupply of beds in the market at the moment and the competition for depleted tourist numbers.”

Asked whether there are any measures that tourism operators can take to limit the effects of unpredictable future shocks, Mr De Cesare says the tourism sector has been more adversely affected than other industries in Malta and worldwide, and not for the first time.

“The 9/11 terrorist attacks and the 2008 financial crisis also had disproportionate effects on the industry, as it is reliant on the health of other countries,” he asserts.

“I don’t think there is anything specific, as an entire industry, that could have mitigated against the effects of COVID, however, I think there are actions that individual operators will consider going forward.

“Healthy working capital and cash reserves will be essential; flexible employment contracts should be considered, although, in my experience, employees were extremely supportive of the measures that had to be taken; the ability to partition your hotel to contain utility and other costs; and ultimately, I think all operators should consider the diversification of their businesses to allow for a spread of risk.”

Weighing in on the debate of hotel development and an oversupply of beds given the current visitor numbers, Mr De Cesare does not believe it is a case of limiting new hotels, but rather focusing on quality.

“I have seen recent 14-floor hotels which have 70 per cent of their rooms looking inwards onto a small shaft. This should not be allowed,” he asserts. “Hotels require proper management and applicants for new hotels should have to demonstrate experience in the market. These are not normal times and normal measures do not apply in such industries,” he continues.

“Our calculations show that should all new permits be developed into hotels, then the number of beds in Malta would double in the next five to six years. Will our number of tourists double too? Can our islands take it? Do our residents want it? And are our resources sufficient to take four to five million tourists annually? I think not,” he states.

“Quality needs to be enforced in our industry at planning stages and continued at operating stages. The reputation is all of Malta’s to lose, not just that of the rogue operators.” The MBB President believes there is a silver lining to the tourism depression over the next 12 to 18 months, however.

“This is the time to invest in the product. Tourist areas need work and upgrading on a more permanent basis rather than piecemeal every couple of years.” He adds that, at present, Malta is a mass-market destination with a successful track record for attracting tourism and corporate travel all year round but needs to attract more lucrative niche markets to remain diverse in its offering.

“It is a time to inwardly reflect on what is missing in our offering. Do we have enough beaches, cultural experiences, and leisure activities for tourists to enjoy? Are we considering the sustainability of our island and our resources? I hope we can look further than the current survival mode to consider these questions and come out stronger on the other side,” he concludes.

This feature was first carried in the Winter 2020/2021 edition of Business Agenda