Silvan Mifsud is director of Advisory at EMCS Tax & Advisory. Mr Mifsud is also a council member of The Malta Chamber
As the latest figures for inbound tourism until end June have been published it is interesting to understand what these figures are telling us.
From the perspective of the amount of tourists that came to Malta we can see that for the period January to June, Malta received 1.295 million tourists, which is an increase of over 6% when compared to the same period in 2019 (last pre-covid year).
From an expenditure perspective we can see that for each night, tourists have spent €112.25 per night, for the same period of January to June 2019. With regards 2023, tourists have spent €127.28 per night, however this figure is at nominal value and not adjusted for inflation. When adjusting for inflation, the expenditure per night from January to June stood at €112.12. So very much at par with the expenditure per night registered for the same period in 2019.
If one where to take the average expenditure per tourist we see that for the period January to June 2019 each tourist spent on average €726. For the same period in 2023, this has now dropped to €705, after adjusting for inflation. The average stay per tourist has remained the same, averaging six days, both in 2019 and 2023.
Now, as we know, economic theory suggests that the optimal point to be reached is where Marginal Cost = Marginal Revenue. This means that ideally the marginal cost of each tourist that comes to Malta is at least equal to the marginal revenue. Bringing more tourists beyond this point would end up creating more costs than revenue.
However, it is very difficult to precisely quantify the exact cost of tourism and hence the marginal cost per added tourist. There is a myriad of such costs, some direct and others indirect, leading from infrastructural costs, congestion costs and environmental costs, to mention a few. Having said this, we need to keep a watchful eye on the expenditure per tourist as the lower this goes the more likely it is to get closer to the marginal cost of added tourists coming to Malta. This is why anyone leading the tourism industry in Malta has to look at the average expenditure per tourist with a keen interest, just as the number of tourist arrivals, if not more.