Last month Tony Zahra, president of the Malta Hotels and Restaurants Association (MHRA), stated in an interview for this paper that Malta was reaching “maximum capacity” for hosting ever more tourists. The interview was remarkable and worth re-reading.
That the head of an industry body whose members are profiting handsomely from every additional arrival was calling it quits was astounding. What was motivating him was not so much the plight of Malta’s residents, suffering from the associated construction frenzy, a creaking infrastructure and shrinking public spaces, but a phenomenon economists call “the curse of the commons”.
The textbook example for economics students is a community-owned pasture where sheep graze. Each owner of a flock grazing on the common wants to maximise their animals’ headcount, which individually makes a lot of sense. More animals, more profit. Yet it has dire consequences for the pasture and all the herders put together.
The result of over-herding is the complete exhaustion of the grazing grounds, which will cause each herder a loss that all herders together could have avoided by agreeing in time on a sustainable cap. It is a “curse”, because individual profit seeking is causing mutual loss. The herders in the textbook seem to suffer the same problem as the MHRA and its members: they are incapable of agreeing on what is good for all of them. Hence Zahra’s call for political “vision”, his code word for politicians doing the right thing for the common good.
A while ago the MHRA commissioned research from consultancy firm Deloitte that predicted that by 2027 Malta would need five million tourists per year to avoid empty rooms.
Last year we had close to three million visitors, and 2024 is promising to top that. Zahra says planning for new hotels and extensions already approved by the Planning Authority will add 27,000 rooms, demanding 15,000 more staff. “Do we want that?” he asks. “Our Planning Authority is a Permitting Authority!” Zahra is lamenting a lack of infrastructure planning to accommodate this rise in visitor numbers and the consequences for drainage, electricity demand, transport and housing, and calls for politicians to decide for his hapless members.
He sees demand weakening for five-star hotels, where discounting will damage profitability for all, especially more modest hotels unable to compete. We have been “too successful” (Zahra) in attracting low- budget tourism, to be prepared for a downturn. If the only product we are offering is sun, booze and beaches, we will be outpriced by the likes of Turkey, who will always sell sun more competitively. As long as the sun will draw tourists, that is.
Climate change, causing more extended heatwaves, will increasingly favour cooler climates – northern countries.
And, I would add, the day when tourists are disenchanted with our overcrowded island ‒ its jammed beaches and crammed sites ‒ may be approaching faster than we think.
A fall in visitor numbers may make us residents rejoice. When I visit Vienna, the city of my youth, I find it difficult to stomach the hordes of tourists congesting Kaertnerstrasse, the equivalent of Valletta’s Merchants Street. It is now nigh impossible to walk its full length at any time of the year without pushing and shoving. And what about all these cheap souvenir shops and cannabis outlets, instead of the grand old retailers, catering for the well-heeled? Vienna felt classier 30 years ago.
We may have too many low-quality tourists but we are compounding this with too many rooms and cruise ships- Andreas Weitzer
But we abhor tourists at our peril. Tourism is one of our best export products. Malta’s tourists contribute €3 billion to our economy ‒ 17% of our total economic output. Tourists fill our tax coffers, without burdening the budget like residents do. It feeds many of us, from shop owners to restauranteurs. Tourism is a good business. For all of us. Yet is has to be conducted in a planned manner, for mutual benefit.
Malta is not alone in this predicament. Locals from Barcelona to Venice are on the barricades, attacking tourists and taking to the streets. They protest not only the encroachment on their way of life, but the inexorable rise in accommodation costs which they blame on lopsided real estate development and the rise of peer-to-peer rental platforms like Airbnb: more and more inner-city apartments are dedicated to short-term rents, pricing residents out of their neighbourhoods. Venice has put a curb on cruise ships and is charging day trippers a €5 fee. Barcelona recently introduced a €7 tourist tax.
It is worth remembering that total visitor numbers are not a good measurement for broad discontent. France has 100 million visitors per year, more than any other country, yet even Paris has not suffered overcrowding. The world’s most crowded places are small countries and small cities. Andorra, the tiny country between France and Spain, had 32.4 visitors per resident (v/r) in 2023. Dubrovnik had 36 v/r, Venice 21, Bruges 21, Amsterdam – a place least capable to cope with visitor numbers in its tiny historic centre – 12.
Malta, with six tourists per resident, seems airy in comparison. Yet tourists in Amsterdam spend approximately €1,100 per visit, or €11,000 per resident, but less than €800 in Malta, or €4,800 per resident. Yes, we may have too many low-quality tourists but we are compounding this misdirection with too many rooms and too many cruise ships.
Cruise ships are a headache everywhere. Passengers are spending little on their land visits. They are fully catered for by their host ship. They don’t pay for accommodation and they do not frequent restaurants. A tax on each visitor, or higher mooring charges, will change little. It will only be a small part of the overall price of the cruise. More meaningful is an outright ban on mooring, or a mandatory voucher of say €100 per passenger to be spent on the island, or otherwise forfeited. Locals will gain little advantage from higher port costs.
Tourism is a pillar of Malta’s economic success. Failing this business by overreach would have dire consequences for all. But to confuse tourism’s success with rampant construction activity is a mistake, as Zahra had pointed out. He believes Malta’s hoteliers, with their experience and acumen, should branch out and go abroad, instead of cannibalising each other’s business. This is their choice. But to save the “common” is a political task.
It is high time to develop policies in alignment with sensible, long-term goals. The Planning Authority, a chronically failing and abused authority, should be allowed to grow teeth. For a retail investor, Zahra’s remarks are a reminder of the weaknesses of Malta’s stock market.
Andreas Weitzer is an independent journalist based in Malta.