News | Sunday, 18 January 2009

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Tourism in 2009: All about pounds, shillings and pence

As the sterling finds itself weak against the euro, tourism in Malta is up for a nosedive this year. By DAVID DARMANIN

With the pound sterling hitting an all-time low against the euro last month, there seems to be little hope of retaining our market share from UK tourism this year.
Since the start of 2008, the UK government has been pushing for internal tourism in a bid to revive British economy, while a series of newspaper articles last year stamped Malta as an expensive destination since it joined the euro. The Maltese government took great offence at such stances, but short of suing The Times of London and The Guardian, little could be done to find a remedy for such damning statements.
Qawra hotelier Robbie Borg, who formerly owned the low-cost airline British Jet, says figures for this summer look “disastrous”.
Even the president of the Malta Hotels and Restaurants Association, Kevin de Cesare, was not too hopeful on the bleak projections for this year.
The fact of the matter is that Malta will be losing out on UK tourism not merely because we have joined the euro, but because the UK is not doing well at all.

A brief history of the pound
The pound sterling is the world’s oldest currency still in use, and that must make the British very proud. The record, in fact, shows that the English have been very conservative whenever discussion on currency developments took place.
Upon introduction of the French Franc in 1824, Lord Wrottesly had proposed decimalisation of the sterling but this was rejected. Since then, until the end of the imperial shillings system in 1971, the sterling remained virtually untouched.
In 1990, the UK joined the European Exchange Rate Mechanism (ERM) to reduce exchange rate variability but this only lasted two years. On the day known as Black Wednesday, the EU forced the British government to withdraw because its economic performance made the exchange rate unsustainable.

Sterling fluctuates against euro
It is not likely that the UK will consider joining the euro in the foreseeable future, and Gordon Brown stated this publicly when he was still Chancellor of the Exchequer.
The situation now is that the euro and the pound sterling fluctuate against each other, causing havoc on both sides of the common economy in times of crisis.
It all seemed great for the UK when in November 2007, the sterling hit a 26-year high of $2.1161. But since then the currency weakened dramatically against the euro, falling below €1.25 last April and reaching its lowest ever point at €1.0219 last December.

Cause and effect
It now makes sense to shop online, using Sterling denominated websites.
Because many UK suppliers are in dire straits, Maltese companies purchasing from the UK are now being granted more flexible credit terms, as fears of losing clients for competition increases.
A major Malta-based software company must be really concerned with its sterling denominated invoicing and expenditure in euro.
Hit hardest will most definitely be tourism, with 35% of inbound tourism made up of UK nationals.
“Compared to last year, sales are disastrous at the moment,” hotelier Robbie Borg told MaltaToday. “The weakening of the pound is not the only reason why we are in this situation, but it definitely plays a major role. The Qawra and Bugibba area looks like a ghost town. People are almost scared of walking in the streets of Bugibba in the evening because it looks so empty. The credit crunch has really had an effect on all this, but we also saw a steep decline since British Jet was sold.”
When Borg still owned the airline, his yearly figures for inbound tourism touched the 85,000 mark, whereas now his tour operator company Bargain Holidays is attracting less than a third of that amount.
“Heating up hotels in the lean months has become so expensive that many have opted to close in winter. The Suncrest is closed, and so are Palazzin, Sunflower, Carranne and the Flora. Mind you, those hotels that decided to stay open are in shambles this month,” he added.
“Because of the current economic situation, holidays for British tourists have become dearer, and it is not only Malta that is suffering. The euro is certainly not to blame since if we still had the Lm as currency we would still be in the same situation.”
Describing the situation as “hopeless”, Borg said that one of the very few things that may help the tourism situation is if government had to invest some €30 million in a “Cyprus style” advertising campaign.
“Whenever you turn on the TV to a UK station you invariably come across a Cyprus advert. They managed to brand the destination well. If Malta had to follow suit we would be able to regain hope.
“The British government has now increased taxation on long haul flights, and this could be of some help,” Borg said. “Air Malta is now starting to operate from Bristol and Newcastle again, destinations I used to service with British Jet. Hopefully, they will manage to attract some tourism there. But we also have to take into account that a number of airlines shut down and that tour operators decreased. Moreover, I never saw a penny of profit when I serviced those airports.”
By sheer coincidence, MHRA President Kevin de Cesare was caught on his mobile phone while on a shopping spree in the UK. “If you need to go shopping, London is the place for prices at the moment,” he said as he picked up the phone.
“There seems to be a great push for holidaying outside the eurozone here in the UK, so yes I think we will be suffering, This is why it is now the right time to get our product right and invest in the introduction of new routes and seat availability,” he said.
“There will be a sudden slump in tourism, that’s for sure. With new routes from Bristol and Newcastle, and perhaps a couple more to be announced, we might be looking at an improvement but it’s going to be tough anyway.”

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