Does Brexit threaten Malta’s tourism industry?

Brexit will take place. Malta’s government seems to be doing little to prepare our tourism industry for it. In this article, I look at how badly we depend on Britain as a tourist market, and what Malta is doing to prepare for it.

I – Brexit’s impact on tourism

After Brexit UK travellers to the EU will pay a visa fee to enter the Union. This will increase costs for the average traveller. As a result, the price of a holiday in non-EU destinations will start to look better. When considering our tourist market, Turkey, Tunisia and Morocco stand to benefit the most from this. These are the closest non-EU destinations with Mediterranean climates.

Update: As of November 13, the EU announced plans to have visa-free travel for Britons. This means the entire premise of this article is no longer valid. The only way non-EU countries can get an advantage over EU countries in the tourist market will be if they compete on price and quality. Since these are normal market conditions there is no longer any need to worry that Brexit will cannibalise Malta’s tourist market.

Caveat: Brexit hasn’t happened yet, so things could change again.

Below you can read the original article as I published it on July 03 2018.

After Brexit UK travellers to the EU will pay a visa fee to enter the Union. This will increase costs for the average traveller. As a result, the price of a holiday in non-EU destinations will start to look better. When considering our tourist market, Turkey, Tunisia and Morocco stand to benefit the most from this. These are the closest non-EU destinations with Mediterranean climates.

Is Malta ready to lose half a billion Euros?

(I’m leaving the Middle East out of the question because the situation is volatile. By this time next year, Lebanon, Egypt, Jordan and Israel could be contenders. Or maybe not, it’s hard to predict.)

In 2018, there is a fair price difference for flights in Malta’s favour. The proposed EUR 7.00 visa fee is not going to dissuade people from coming to Malta. Malta struggles to be the cheaper destination when you include all other expenses. The exchange rate between the pound and the euro is another unpredictable factor.

As a result, savvy travellers are going to think hard about coming to Malta starting from 2019.

Will this make any difference to Malta?

What is the effect of British tourists on the Maltese economy?

II – The Maltese tourist market

I took a look at the figures from Malta’s National Statistics Office (NSO).

The UK market accounts for a third of tourist expenditure in Malta, as the chart above shows. In total, the UK market contributes EUR 0.5 billion to our economy.

In comparison, the much talked about iGaming industry contributed EUR 1.1 billion to the economy in 2017. That’s how big the UK tourist industry is to the Maltese economy.

In fairness, we will not lose a third of the market in 2019. There will always be people from the UK who travel to Malta because of personal connections. There will always be people who want to come here.

We also shouldn’t forget that other markets could grow. Given the extra supply, who knows how many other French, German, Italian, etc. tourists would come to Malta?

Malta’s tourism market needs to be robust enough to handle Brexit-related shocks. Is it?

I don’t think a third of the market will just disappear.

I do think it will shrink.

Are we ready for that?

III – The larger tourist market

Malta doesn’t exist in a vacuum. Just as our sector has the potential to shrink, our non-European competitors’ has the potential to grow. They can target other European markets as much as we can. If their market increases because of larger numbers of Brits, they’ll soon be large enough to target other markets.

The logic is simple: if our competitors grow, they will be able to take more customers over time. This threatens the stability of our market unless we can grow too.

Does this mean our market will shrink further?

I don’t have the answer to this question.

And neither do you.

It’s clear our tourism market needs to be robust enough to withstand at least 1-2 years’ worth of shocks.

Is it?

IV – Preparing for Brexit

I don’t know that it is.

Update: The Maltese government has issued a Brexit factsheet which is online. They haven’t kept it up to date so the Brexit extension is not referred to. Still, it should be a positive sign, right?

The government’s factsheet repeats the stuff I wrote above noting that, “A weak sterling and declining economic performance resulting from a no-deal Brexit is bound to negatively affect the British travelling public’s spending power in Europe and could shift business to cheaper destinations such as Turkey, Tunisia and Egypt.”

When I published this article, a search on the gov.mt domain for Brexit showed only 7 results over the past month. None of them were tourism related.

This year’s tourist season has just started. In a perfect world the government would test new tactics this year to be able to have a refined strategy in place for the 2019 season. I cannot find any evidence of this anywhere.

I fear this means government isn’t doing anything. 

Update: Since the publication of the Brexit factsheet, there still is nothing being done about the Brexit impact on tourism.

Are we ready to lose half a billion Euros?

Are we ready for a larger loss, if other markets expand and start taking a larger share of European tourists?

Share this article with anyone working in the tourist industry because the situation might get worse.

References

1. EU proposes visa-free travel for Britons after Brexit; The Times of Malta; 2018-11-13
2. Post-Brexit travel to Europe: All your questions answered; Simon Calder; The Independent; 2017-08-06
3. BREXIT: Possible challenge to Malta’s tourism industry; Malta hotels and restaurants association; 2016-06-24
4. Malta Gaming Authority generates revenue of €66.3 million in 2017; The Malta Independent; 2018-07-03
5. FACTSHEET: Malta Government’s plans in case of a no-deal Brexit; Government of Malta; (Retrieved on 2019-04-22)

All references were valid and correct when this article was published. Changes to referenced websites or web pages may render some references invalid. If this is the case, please leave a comment below.