Malcolm Bray is Head Economics at Bank of Valletta
The international context throughout 2023, characterised by weak economic growth, high inflation, and elevated interest rates, presented challenges for tourism. The concern was that travel would suffer as households reprioritise their spending to make ends meet. Nonetheless, tourism across the world performed strongly in 2023, as people exhibited a great desire to travel post-pandemic. This factor, together with good air-connectivity, enabled Malta to attract a record number of tourists in 2023, reaching the 3 million milestone, 8% more than in 2019 (pre-pandemic). Malta’s full tourism recovery was thus achieved one year earlier than originally envisaged. Statistics by the UN’s World Tourism Organisation show that tourism to southern Europe and the Mediterranean has performed better than the rest of Europe and globally, and Malta has managed to keep pace with its peers.
Such results reflect the strong drive by the sector to recover from its unprecedented downturn, as well as the additional strong public support which it has received since the pandemic shock, first through the wage supplement scheme and at present via energy subsidies.
NSO statistics reveal interesting developments compared to 2019. The tourism recovery was driven by the youngest age cohort, as the 65+ were still slightly below the 2019 level. Business travel has likewise not yet fully recovered. There has been a shift away from package travel. Repeat tourists have diminished. The estimated average length of stay declined from 7.0 to 6.8 nights. The Italian market accounted for some 18% of the total, becoming the largest tourist source market, marginally overtaking the UK market.
In 2023, the average per capita tourist spending on accommodation and other items (such as shopping and excursions) were both lower than in 2021. When considering Malta’s high inflationary period over the past two years (2022: 6.1%; 2023: 5.6%) this means that in real terms the drop is larger. This suggests that tourists addressed the challenge created by inflation by restraining their expenditure where possible.
When combining the tourists and residents enjoying a staycation in Malta, the total nights spent within collective accommodation has remained basically flat compared to 2019. However, over the same period the number of beds within collective accommodation expanded by 4.9% to reach 44,656 beds. In terms of composition, there was a rebalancing, with a strong absolute increase in the 5-star category offsetting a reduction in the 3-star category. The expansion in total bed supply thus resulted in a small reduction in the overall occupancy within collective accommodation establishments, from 65.6% in 2019, to 62.2% in 2023. Specifically, NSO data show that occupancy in 5-star hotels stood at 60.9% (2019:67.6%), which was lower than that for 4-star hotels which was 68.0% (2019:70.4%).
Looking ahead, the outlook for tourism remains benign. The latest forecasts by the European Travel Commission place the growth in visitors to the Mediterranean region at 9.4% in 2024. Thus, as long as air connectivity remains solid in Malta, this should allow the country to tap a fraction of this expected additional pool of tourists, auguring well for this year too, also when considering the geo-political tensions hitting competitors in the region.
Against this background, there are various themes which merit attention by the tourism sector. Additional expansion in collective accommodation capacity must be carefully assessed to maintain equilibrium between future supply and realistic demand projections. Moreover, it is important for Maltese businesses to prioritise labour productivity since a persistent increase in population density, driven by a larger workforce, could lower the attractiveness of our destination. There is scope for greater adoption of technology to boost productivity particularly within a labour-intensive sector such as tourism. ESG must also be taken up seriously. Future regulations, tourist expectations, as well as the way banks are being asked by regulators to conduct their business, means that tourism operators must place at their core environmental, social and governance considerations. These should not be seen as a cost but rather a way to future proof their business and adhere to their corporate social responsibility through sustainable practices.