The Labour Party acknowleges that economic success for Malta and greater generation of wealth cannot be properly achiedved unless we secure continuous growth in the tourism industry. 

Winning is all about growth through better accessibility, higher visitor numbers and  greater generation of revenues for the industry. Winning is also all about the ability to return a decent profit and secure the competitiveness and sustainability of the industry. Government should therefore maintain as far as possible a winning environment wherein the visitor numbers increase and industry remains profitable by insulating it from bureaucracy and from unsustainable operating and administrative costs that hinder investment. 

We are not in competition with ourselves but with rival Mediterranean destinations. We must secure our competitiveness for today as we speak, but also for tomorrow.

Accessibility and sustainability are so closely interlinked that they are inseparable.  Without any doubt the sustainability of the industry is dependent on accessibility.

Since the recession of 2009, when we were scraping the bottom, the industry bounced back, in so far as visitor numbers are concerned, with appreciable results in 2010, better ones in 2011 and, after a weak and disappointing first quarter in 2012, second quarter readings were positive and I expect third quarter ones to be even better where indeed we have seen very good increases throughout the summer months.

Notwithstanding the very good results, one still cannot escape the fact that the industry has not yet recovered to levels attained in 2007. Indeed according to a recent survey by Deloitte commissioned by BOV and MHRA in 2011, and published in March of this year, occupancy in 5 star hotels stood at 68.1% in 2007 while it stood at 66.7% by the end of 2011. In 4 star hotels occupancy stood at 78.4% in 2007 while last year ended at 74.6%. And in the 3-star category the figures are 70.5% for 2007 and 66.9% for 2011.

Taking into account the fact that according to NSO data the second quarter of this year showed better results than those of the same corresponding period of last year, and taking into account also that the summer months this year have been better than last year's, and  if in the best of hypothesis the fourth quarter of this year will potentially show better results than last year's, we would be tempted to believe that finally full year results will show that the industry has fully recovered to 2007 levels.

This might, and will probably, not be the case unfortunately because of the dismal results obtained in the first quarter of this year when in 3 months  we lost 25,000 arrivals, almost 11% down (i.e 143,000 bed nights lost).  This is not meant to pour cold water on the results obtained after the first quarter of this year, which I must say are very good, but rather to emphasise that most probably this year will end with more or less similar results of last year, but nowhere near those obtained in 2007.

The bottom line is that in respect of occupancy all the three hotel categories, with  the three and four star hotels the worst off, are still lagging behind the results acheived five years ago.  It is clear that in spite of the fact that Government has spent more in 2010 and 2011 to bring tourists to Malta than it did in 2007, we are not getting further than where we were five years ago.

Although nights in hotels are down by 1.3% this year, according to NSO data, it is also true that between January and September of this year arrivals increased by 16,640 over the same corresponding period of last year. True that Middle East unrest, particularly in the Turkish region, could have served to divert traffic, but even if that is the case Malta has done well to bring it this way and not lose it to rival destinations.

However, notwithstanding the good results, we should not be complacent about the immediate future. I am very reliably informed by the industry that seat capacity in the first quarter of 2013 will be on a par with that of the first quarter of this year, which means that we are unlikely to recover first quarter levels of 2010 in arrivals.

More sombre is the news that - unless something is done by the authorities by the turn of the year - there will be less seat capacity available from the UK in the summer months of 2013 as Thomas Cook is redimensioning its role, which will mean less aircraft, less accessibility, less connectibility, less bookings and less arrivals, right at the top of the season. This at a time when there will be more than a thousand more beds available courtesy of Edrichton with the re-opening of two hotels that were previosly closed.

There are other challenges:

Average achieved room rates and consequently accommodation income per available room show a modest increase in the three categories, and this is good to see, but this is not the whole story.

Non-accommodation income is down, rather significantly for 5 star hotels, and this is not being reflected in increased profits for restaurants outside hotels.

In spite of a significant improvement on 2010, the year 2011 still shows a worrying big drop in Gross operating profit per available room, ranging from a drop of approximately 10% in the 5 star category to a drop of 17% in the 3 star category.  This is especially of concern because the government induced extra operational costs are not yet factored in!

And in spite of improved average room rates and accommodation income, the Gross Operating Profit Margin is down in all categories, with the situation looking worse for 3 and 4 star categories.

Government can help to improve the industry's sustainability in different ways,  but  the  two most important challenges that any government needs to address are of course accessibility to our Islands and the rising operating costs.

Properly addressed these two challenges will together help to raise profitability for the industry, which will improve sustainability in the long term and allow for re-investment. Government should in return see increased economic activity and improved earnings.  So it also pays government to see that the industry improves its sustainability as ultimately it’s a win-win situation for all.