The deputy president of the Malta Chamber of Small and Medium Enterprises (SMEs) Philip Fenech said that “there will be blood” if the tourism market does not regulate itself.

He was reacting to the study by the Malta Hotels and Restaurants Association (MHRA) which showed that Malta will need to bring in 4.7 million tourists to cater for the planned increase of hotels.

The study, conducted by Deloitte, and titled Carrying Capacity Study for Tourism in the Maltese Islands, showed that Malta would need 4.7 million tourists, staying an average just under seven nights, to cover 80% of hotel bed stock occupancy once planned projects are concluded. It said that to reach the same occupancy rates of 2019, there would need to be around an 80% increase in arrivals over the next five years.

Asked about the study, Tourism Minister Clayton Bartolo said Malta “definitely” cannot take so many tourists and government will not go in that direction. A 4.7 million figure is nearly double the 2.8 million visitors Malta had in pre-Covid-19 pandemic years.

Speaking to The Malta Independent on Sunday, Fenech said that during the “euphoria” before the Covid-19 pandemic, where businesses started investing in the industry in a fast way, they became blind to the changes that were happening and failed to realise what was really happening.

Fenech said that today’s situation in the market gives distributed business to the different sectors of the economy, adding that the economy has diversified with different types of segments of tourism.

The problem is, however, that the country now has excess capacity. Fenech said that investors started making their investments without looking at the bigger picture, and that if the market does not regulate itself, there are going to be collapses.

“Even if we work out the amount of bed stock and nights which tourists have to spend in Malta, even if we become more efficient in bringing the maximum number of tourists to the country, there is still going to be an excess capacity,” Fenech said.

He said that the reality now is that businesses are only looking at their own little patch to invest in, with many trying to further expand their properties or by investing in more hotels, restaurants and even retail outlets. Fenech added that that is more than the country can actually carry.

“There is going to be a bloodbath. Everyone will be competing for the same market which could mean lowering the ranks of hotels and restaurants. In business, there is competition, and the best will survive. The market will have to correct itself and that means economic pain,” Fenech said.

Fenech questioned if the number of beds in hotels will be dictating the number of tourists who come to Malta. He said that the study showed that there is “erosion” in the country’s infrastructure due to all the activity, such as overpopulated beaches, congested tourist areas, higher demand for staff, detriment to social wellbeing and more traffic on the island.

“We became lost in the excitement and change was happening so fast that we weren’t even realizing what was changing. Malta is not a country where you can have many franchises due to its size,” he said.

Fenech added that while growth and development of different segments of tourism is important, investors now need to take into consideration the excess stock and stop investing in more of the same.

“We need to start managing the stock that we have, to see which will survive, to give the best quality product at the best price. There cannot be a state of confusion. We need to take an approach in analysing the situation to plan the market better and continue building on the success of these last years,” Fenech said.

“I hope that we will be able to see the picture clearer and make our investments in a more sound way so that we do not cause collateral damage and lose our progress and see things from a high development framework, instead of from the ground only,” Fenech said.