Food inflation and inbound tourism

As this column has been advocating, food prices in Malta generally move according to the changes in European food prices.

The below graph shows that when comparing the HICP Annual Rate (monthly) for Food between July 2023 and December 2024, the rate in Malta and the euro area average were closer between August and October 2023. However, the gap widened significantly from December 2023 onwards, before gradually reverting toward the 2023 difference by the end of 2024.

It would make sense to have a closer look and compare the HICP Annual Rate (monthly) for Processed and Unprocessed food, for Malta and the Euro Area Average Rate. These are being presented below.

With regards Processed Food, the difference between the Malta rate and the Euro area average rate is slowly diminishing towards the end of 2024 and is by and large following the price movements in the euro area.  On the other hand, unprocessed food price movements in Malta are rather volatile, with the price level at the end of 2024 even dropping rather than registering any price increase.

As can be seen below, now that the November 2024 inbound tourism figures have been published, we have an overall increase of 29.5% in the number of inbound tourists for the period January to November when comparing 2024 to 2019, which has brought a 27.8% increase in real expenditure for the same period, when comparing 2024 to 2019. Since the increase in the number of inbound tourists was a bit higher than the real increase in expenditure, this meant that the average real expenditure per tourist for the period in 2024 has decreased by -1.28%.

That said, this decline in real expenditure has narrowed, as it was wider until some months ago. The below figures shed some light as to why. While up until August 2024, the average real expenditure per tourists was higher in 2019 than 2024, on a monthly basis, this has reversed from September 2024 onwards.

In conclusion, as this country aspires to attract a higher quality tourist, I believe that close monitoring of the real expenditure per tourist is needed as a leading KPI for the tourist sector. Moreover, as we are now to embark on a new labour migration policy, the importance of such KPIs is ever more relevant. Since, the vast majority that are directly, or indirectly, employed in the tourism sector are foreign workers, and as we are moving away from the previous rather lax attitude of having such foreign workers coming to Malta, it is likely that the various prices of our services to tourists will be determined by labour costs, more than anything else. This will put more pressure on attracting the right type of tourist and on offering a touristic product that will be appealing to such level of tourists. We cannot keep being everything for everyone.