FTI Touristik, the third largest European tour operator, has announced it is filing for insolvency, citing low booking numbers and mounting payment obligations. It is a sobering reality that today no company is too big to fail. In 2019, the venerable UK institution Thomas Cook went under due to a woeful merger, sky-high debts and the internet revolution.
Local tourist operators are keeping a brave face on the FTI insolvency and its impact on the local industry. The FTI group operates the Labranda Riviera Hotel and Spa in Mellieħa. The operators have not provided an official statement on this insolvency development.
The Malta Hotels and Restaurants Association and the Chamber of SMEs believe the tour operator’s insolvency is expected to have a minimal impact on local tourism.
Still, lessons need to be learnt from the collapse of FTI, which has two subsidiaries in Malta that employ 110 people.
The Malta Tourism Authority has not commented on the impact of FTI on tourism, while senior policymakers in other countries have expressed concern about this development. For instance, the Greek National Tourism Organisation has held meetings in Germany and Athens with all involved parties. They promised to help all affected tourists return home without interrupting their holiday plans.
Even if the impact on Malta’s tourism may be less significant, the local tourism policymakers must put the minds of tourists affected by this development at rest by informing them of the measures to minimise their hardship.
However, more needs to be done to ensure that the tourism industry does not suffer disruption whenever a significant tour operator goes under. It is unacceptable that in such circumstances, tourism operators expect the government, through taxpayers’ money, to foot the bill for short-term measures to minimise affected tourists’ hardships. When Thomas Cook collapsed in 2019, Germany introduced the Travel Insurance Fund to reimburse deposits for packages that will ultimately be cancelled.
All tour operators sending people to Malta for holidays must include travel insurance cover in case of their insolvency
According to the German newspaper Bild, FTI management negotiated with the ministries of the Economy and Finance the day before the collapse to cover a double-digit million financial gap to get through the summer. Understandably, the German government ultimately rejected the company’s request.
Since the onset of the pandemic, many European businesses operating on the verge of insolvency have benefited from their governments’ economic stabilisation funds.
Some Maltese companies were among these vulnerable enterprises that were kept floating thanks to taxpayers’ financed subsidies. Enterprises already facing solvency problems before COVID-19 should no longer expect to be bailed out with taxpayers’ money, especially when other national investment priorities are pressing.
The local tourism policymakers must insist that all tour operators sending people to Malta for holidays must include travel insurance cover in case of their insolvency. Alternatively, they must contribute to a national travel insurance fund to clean up the mess that innocent travellers face when their travel agents to go under.
At the micro-economic level, tourism operators must not put most of their eggs in one basket by just depending for their income on one or two travel agencies. Admittedly, this may increase the cost of a holiday in Malta. However, in the long term, diversification will help upgrade the standards of holiday travel to Malta.
The Maltese are also increasingly travelling abroad for holidays. Those planning to spend a holiday abroad should consider buying travel insurance that covers expenses in case their travel agency collapses.
The collapse of FTI does not constitute a significant risk for local tourism. However, lessons must be learned from this near miss.