Malta’s accommodation and food sector expands, but reliance on foreign workers deepens

Malta’s accommodation and food services sector has continued to expand, contributing increasingly to the economy while becoming more reliant on foreign labour. Gross value added (GVA) generated by the sector reached €1.15 billion in 2025, representing 6.3% of total economic output. However, the sector’s rapid growth has also highlighted structural challenges, including relatively low wages, weak productivity and the need to sustain an industry heavily dependent on tourism and a transient workforce.

A Central Bank of Malta analytical study by economist Eliza Farrugia examines developments in the accommodation and food services sector, covering business formation, economic performance, employment, productivity, profitability and its links with other sectors of the Maltese economy.

The number of active business units in the sector stood at 4,297 in 2024, accounting for 7.1% of all registered business units in Malta. The sector has undergone a notable transformation over the past decade, with accommodation activities accounting for an increasingly larger share of businesses.

Between 2015 and 2024, the sector added 1,911 business units. Of these, 1,401 were in accommodation, while food and beverage services accounted for the remaining 510. The share of accommodation businesses increased from 9% in 2015 to 38% in 2024, while the share of food and beverage businesses declined from 91% to 62%.

The expansion of accommodation activities was accompanied by an increase in hotel bed-stock, which grew by an average of 1.6% annually during the period. The study also notes that the number of accommodation-related business units increased particularly in the years following the COVID-19 pandemic.

The sector remains dominated by small businesses. Micro enterprises, employing between zero and nine people, accounted for 93.4% of firms in 2023, while small enterprises represented 5.6%. Medium-sized and large businesses together accounted for less than 1%.

The growth in businesses has largely been driven by sole ownerships and partnerships, particularly within accommodation. This suggests that the sector’s expansion has been led primarily by smaller operators rather than larger companies.

Changes have also been observed in the type of accommodation used by inbound tourists. Collective accommodation, which includes hotels and similar establishments, accounted for around 75% of tourist nights in 2013, but its share declined to approximately 61% in 2025. Meanwhile, the share of other rented accommodation increased from 14% to 31%, reflecting the growing importance of alternative accommodation options.

The sector’s economic contribution has increased considerably over the longer term. In 2000, accommodation and food services accounted for approximately 4% of Malta’s total GVA. By 2025, this share had risen to around 6.3%, with accommodation activities contributing 62.6% of the sector’s GVA and food and beverage services accounting for 37.4%.

Economic growth was relatively modest between 2000 and 2009, averaging 1.1% annually. It accelerated significantly during the following decade, with average growth of 9.7% between 2010 and 2019. The pandemic interrupted this expansion, but the sector recovered strongly, with real GVA growth reaching 25.9% in 2023, 20.2% in 2024 and 15.3% in 2025.

The Central Bank notes that the sector’s performance broadly follows trends in inbound tourist arrivals and nights spent. The recovery and subsequent expansion were supported by rising tourism activity and improvements in air connectivity. Policies allowing greater hotel heights also played a role in supporting the expansion of accommodation capacity.

Employment has grown alongside the sector’s economic performance. The number of workers employed in accommodation and food services reached 32,473 in 2025, accounting for around 8% of total employment in Malta. Employment grew by an average of 6.9% annually between 2013 and 2025.

Of the total workforce in 2025, 23,871 were in full-time employment and 8,602 in part-time employment. Food and beverage services continued to account for the larger share of employment, although accommodation activities recorded substantial increases in recent years.

One of the most significant developments highlighted by the study is the sector’s growing dependence on foreign workers. Their number rose from 3,013 in 2013 to 18,673 in 2025. Foreign workers consequently accounted for 58% of total employment in the sector, compared with 35% across the overall Maltese economy.

The increase has been driven largely by non-EU nationals. While EU workers outnumbered non-EU workers between 2013 and 2019, the latter began increasing at a faster pace from 2020 onwards, particularly from 2022. The study cautions that part of the change in that year was attributable to the reclassification of UK nationals as non-EU citizens following Brexit.

The reliance on foreign labour is particularly notable given the transient nature of the workforce. Foreign workers in Malta have a median length of stay of around three years, while those employed in accommodation and food services remain for a median period of just 2.3 years. This creates an ongoing need for recruitment and replacement, potentially affecting continuity and the development of skills within businesses.

The sector’s labour conditions also stand out when compared with the euro area. In 2024, the average hourly wage in Malta’s accommodation and food services sector stood at €8.90, considerably below the euro area average of €16.70. Compensation per employee in the sector amounted to approximately €17,200 in 2025, compared with €36,000 across the Maltese economy.

Although compensation per employee increased by an average of 5.2% annually between 2013 and 2025, the sector continues to be characterised by relatively low wages. This is particularly relevant given its substantial contribution to employment and the economy.

Productivity remains another challenge. The study places accommodation and food services among the sectors with the lowest productivity levels in Malta, with only construction recording lower productivity. While the sector has expanded considerably in terms of output and employment, its productivity performance has not kept pace with its growth.

Profitability presents a more mixed picture. The sector ranked fourth among Maltese economic sectors in terms of profitability per unit of GVA in 2025. However, developments differed between its two main activities: profitability increased in accommodation, while food and beverage services recorded a decline.

The study also examines the sector’s links with the wider domestic economy. Input-output data for 2020 show that accommodation and food services generated output worth €714.9 million and used €473.6 million in intermediate inputs. Around €320 million, or 68% of these inputs, were sourced domestically, while €146 million consisted of imported products.

The sector relies particularly on distribution, manufacturing and real estate for its domestic inputs. This highlights the extent to which activity in accommodation and food services supports other areas of the economy, including suppliers and businesses providing goods and services to tourism operators.

The Central Bank’s analysis further indicates that the sector has relatively strong output and employment multipliers compared with other economic sectors, although its accounting multipliers are lower. Its economic importance therefore extends beyond its direct contribution to GVA and employment.

Tourism-related exports remain a major source of revenue. Travel receipts reached €2.89 billion in 2025, while net travel receipts accounted for 26.5% of Malta’s services balance.

The findings underline the considerable expansion of accommodation and food services and its growing importance within Malta’s economy. Yet the sector’s performance remains closely tied to tourism activity, while its reliance on foreign workers, relatively low wages and weak productivity point to challenges that could become increasingly significant.

Sustaining growth will therefore require not only continued tourism activity, but also attention to the sector’s labour conditions, productivity and ability to generate stronger economic value from its expanding workforce and business base.