The Contribution of the Tourism Industry to the

Maltese Economy in 2014

Report Prepared for the

Ministry for Tourism

April 2015

Dr Gordon Cordina

The Maltese Economy in 2014

Agriculture2%

Manufacturing11%

Construction5%

Whole and Retail15%

Transport5%

Accom and Food8%

ICT3%Financial Services

5%Professional Services

12%

Public Admin, Educ & Health

26%

Recreation incl. gaming

3%

Other5%

189,000 Full-Time Equivalent JobsSectors with a major direct impact from Tourism Expenditure account

for 31% of total employment

Tourism expenditure has

minor (as measured

statistically) direct impacts on other sectors such as

education, health and real estate

Tourism74%

Other26%

Accom and Food Sector Turnover: €0.9bn

Tourism23%

Other77%

Transport Sector Turnover: €1.3bn

Direct Effects of €1.5bn Tourism Expenditure

Tourism25%

Other75%

Wholesale and Retail Sector Turnover: €1.2bn

Tourism5%

Other95%

Recreation incl. Gaming Sector Turnover: €2.2bn

Direct Effects of €1.5bn Tourism Expenditure

Whole and Retail

Transport Accom and Food

Recreation incl. gaming

-

2,000

4,000

6,000

8,000

10,000

12,000

6,963

2,366

10,895

333

FTE Jobs Directly Created by Tourism Expenditure

Tourism (Direct); 11%

Other; 89%

Contribution to Job Creation

Every €10m tourism expenditure sustains 137 jobs

Every 10,000 tourists sustain 121 jobs

Total: 20,500 jobs

Potential of further job creation through input-output effects

An illustration of Potential Input-Output Effects with other economic sectors

Sectors with important Tourism

contribution

Intermediate Consumption (Purchases of

goods and services from

other firms, net of utilities)* (€m)

Estimated Intermediate Net

Consumption Attributable to Tourism* (€m)

Estimated Job Creation*

Accommodation and Food 550 410 4,200

Transport 800 180 1,900

Wholesale and Retail 450 110 1,200

Total 1,800 700 7,300

*author’s estimates

An estimated 7,300 jobs are created by tourism expenditure through

purchases of operators, in addition to the 20,500 estimated direct jobs

This can be extrapolated through further expenditure rounds

Further detailed data is required for more precise estimates

2013 20141,000,000

1,100,000

1,200,000

1,300,000

1,400,000

1,500,000

1,600,000

1,700,000

1,800,000 International Tourist Arrivals

Pers

ons

Growth in International Tourists in 2014

International tourist arrivals increased by 107,656 (7%)

Expenditure by international tourists rose by €88.4 million

(6.1%)

2013 2014 1,000,000,000

1,100,000,000

1,200,000,000

1,300,000,000

1,400,000,000

1,500,000,000

1,600,000,000

Expenditure by International TouristsEu

ro (€

)

This was the main driver for growth of the industry in 2014

Effects of 6.1% growth in Tourist Expenditure in 2014

Total: 500 jobs

Potential of further job creation through multiplier effects0

100

200

300

400

500

600

185

261

Additional Job Creation in 2014

Whole and Retail

Transport

Accom & Food

Recreation

Around 10% of growth in private sector jobs

Every €10m increase in tourism expenditure

created 67 additional jobs

Every 10,000 extra tourists created 57 additional jobs

Summary Benchmark Indicators over the

Medium Term

A Medium Term Perspective of Growth

2010 2011 2012 2013 2014100

105

110

115

120

125

130

135

140

Headline Indicators(2010=100)

Expenditure

Arrivals

Nights

Real GDP

Employment

Indicators of activity show sustained growth in excess of that of the overall economy

Employment growth staged a recovery in 2014

Headline Performance Benchmark Against Other Mediterranean Destinations

Malta

Other Med Desti

nations

All Spain

Balearic Is

lands

Canary Isl

ands

Andalucia

Portugal

Cyprus

Turkey

Slove

nia

Croatia

Morocco

Bulgaria0.0%2.0%4.0%6.0%8.0%

Growth in Tourist Arrivals (2014)

Peak Growth Off-Peak Growth

Malta gained market share in 2014 relative to other Med destinations in peak and off-peak business

Headline Benchmarks of Share in Source Markets

UK DE IT AU IE Average-15.0%

-10.0%

-5.0%

0.0%

5.0%

10.0%

15.0%

Developments in Shares in Selected Main Source Markets (2014)

Outbound Tourism Growth Growth in Malta Arrivals

Outbound tourism in major selected source markets was on average flat in 2014…

…but arrivals to Malta from these markets rose by an average of 6%

A Snapshot of Nights and Expenditure by Market

USA

Austria

Libya

Belgium

Irelan

d

Switz

erlan

dSp

ain

Netherl

ands

Russia

Scan

dinavia

France

German

yIta

lyOther

United Kingd

om0

500,000

1,000,000

1,500,000

2,000,000

2,500,000

3,000,000

3,500,000

4,000,000

4,500,000

100

110

120

130

140

150

160

170

Analysis of Nights and Expenditure per Night

Nig

hts

Expe

nditu

re p

er n

ight

(€)

Expenditure per night

Number of Nights

USA

Austria

Libya

Belgium

Irelan

d

Switz

erlan

dSp

ain

Netherl

ands

Russia

Scan

dinavia

France

German

yIta

lyOther

United Kingd

om0

500,000

1,000,000

1,500,000

2,000,000

2,500,000

3,000,000

3,500,000

4,000,000

4,500,000

-25.0

-20.0

-15.0

-10.0

-5.0

0.0

5.0

10.0

15.0

20.0

25.0

Analysis of Nights and Growth in Number of NightsN

ight

s

Grow

th in

Num

ber o

f Nig

hts

Number of nights

Growth in Number of nights (2014)

Expenditure per night tends to be lower for the larger tourism markets…

…while growth potential is concentrated in the smallest and largest source markets

Drivers of Tourism Activity in Malta in 2014

Definitions Inbound Tourism: Activities of non-resident visitors within the country of reference on inbound tourism trips

Visitors: tourist or same day visitor, on a trip to a place other than the usual environment, thus including cruise line passengers and crew

Domestic tourism: particularly with respect to stays by Maltese residents in collective or private rented accommodation, especially in Gozo

Tourism

International

Domestic

Cruise Passengers

Performance Indicators – Nights and Expenditure 2014

2013 201410,000,000

10,500,000

11,000,000

11,500,000

12,000,000

12,500,000

13,000,000

13,500,000

14,000,000

Total nights

Total nights spent by international tourists increased by 5%

The average length of stay remained stable at around 8 days

Per capita expenditure dropped marginally to €904

Expenditure per night increased by 1.2% to €113

Composition of Expenditure - 2014

Package expenditure

maintained its share within

total activity in 2014

Total Package37%

Flight13%

Accommodation15%

Food and drink18%

Transport4%

Recreation5%

Shopping5%

Other2%

Total Expenditure by Tourists in 2014

January

Febru

ary

Marc

hApril

May

June

July

August

September

October

November

December

-

50,000

100,000

150,000

200,000

250,000

300,000

Total Expenditure by International Tourists

2013 2014

€'00

0

Seasonality of Tourism Activity - 2014

Hotel Occupancy

2013 2014

82.8% 87.2%

52.3% 55.5%

2013 2014Peak 981.50 969.78

Off-peak 762.65 769.78

Per Capita ExpenditureSeason

2.4% reduction in length of stay

Better room rates/spending

Seasonality of Tourism Activity - 2014

2013 2014 -

200,000

400,000

600,000

800,000

1,000,000

1,200,000

1,400,000

1,600,000

1,800,000

32.5%32.5%

Tourist Arrivals

Peak Off-peak

Pers

ons

The share of off-peak arrivals was unchanged in 2014

2013 2014 -

2,000,000

4,000,000

6,000,000

8,000,000

10,000,000

12,000,000

14,000,000

16,000,000

30.1% 30.6%

Total Nights

Peak Off-peak

Num

ber

2013 2014 -

200,000

400,000

600,000

800,000

1,000,000

1,200,000

1,400,000

1,600,000

1,800,000

27.2%27.7%

Tourist Expenditure

Peak Off-peak

€'00

0

But the share of nights and spend increased in the off-peak season

indicating progress in overcoming seasonality

Drivers of tourism activity in 2014 – the Med context

Cypru

s

Bulgaria

Baleari

c Isla

nds

Moro

cco

Turkey

Slove

nia

Croati

aM

alta

All Spain

Andalucia

Canary

Islan

ds

Portuga

l0%

2%

4%

6%

8%

10%

12%

14%Growth in Mediterranean Destinations 2014

Malta performed well in a Mediterranean context…

Spain

Germany

Ireland

Belgium

Switzerland

Scandinavia

Italy

Other

-20,000 -10,000 0 10,000 20,000 30,000 40,000 50,000

Changes in Tourist Arrivals (2014)

…compensated by growth in traditional markets

…and a significant diversification into other markets (longer haul/stay/expenditure)

…but was affected by shocks to Libyan, Russian and specific EU markets

Top 5 Next 5 Next 5 All Others0

10000

20000

30000

40000

50000

60000

Distribution of 2014 Increase in Tourists by Airport

27%

13%

9%

46%

5%

Distribution of Arrivals by Airport

Top 5Next 5Next 5 Next 60Others

Drivers of tourism activity in 2014 – Connectivity

GatwickFrankfurtFiumicinoHeathrow

Manchester

15 airports account for 50% of passenger

movements

and for 80% of the increase in 2014

As top airports approach flight capacity limits, further diversification

could be needed

Cruise Visitors

2014 2013 Change 2014 2013 2014 2013France 2.94 1.95 0.99 80,815 48,485 36.33 40.19 Germany 4.36 5.11 (0.75) 123,916 96,971 35.19 52.66 Italy 2.73 3.26 (0.53) 80,815 77,577 33.82 42.06 Spain 0.36 0.82 (0.46) 10,775 24,243 33.26 33.91 United Kingdom 2.33 2.46 (0.13) 75,427 96,971 30.95 25.40 Australia 0.84 0.62 0.22 16,163 9,697 51.82 63.89 Canada 0.79 0.56 0.23 16,163 14,546 48.87 38.78 Japan 0.10 0.13 (0.03) 5,388 4,849 18.81 27.50 United States 3.00 2.83 0.17 48,489 48,485 61.88 58.44 Other 4.22 3.41 0.82 80,815 72,728 52.25 46.84 Total/Average 21.67 21.16 0.51 538,766 494,551 40.23 43.64

Country Total Spend (€m) Visitors Per capita Spend (€m)

Visitors include an estimate for crew membersSource: Valletta Cruise Port

It is estimated that cruise line

operators in addition spend

between €40m and €60m on

supplies and services

Potential for home-porting and overnight stays by cruise

passengers can be further

exploited

(€)

944,290

479,600

520,000

377,630

2.3 million Passengers on Ferry Crossings (2014)

International tourists/visitors Gozitans (Work)Gozitans (Other) Maltese tourists/visitors

Domestic Tourism: Maltese Tourists and Visitors to Gozo

The expenditure by 377,630 Maltese

tourists and visitors in Gozo is estimated at €28 million in 2014

As passengers increased by 124,000 of which one half were international,

domestic tourism is estimated to have grown by around 5% in 2014

Domestic tourism has other facets which may

further develop in future

Outbound (Maltese) tourists /visitors

amounted to 430,000 in 2014- up by 5% over 2013

The Regional Perspective: The Contribution of Tourism Industry to the Economy of Gozo

International Day Trippers

International One Night Stay

International Longer Stay

Domestic

Tourism industry expenditure is estimated to amount to just

under 50% of Gozo GDP

-

20

40

60

80

100

120

140

160

180

200

33.28

122.22

27.94

Estimated Expenditure in Gozo (2014)

€mill

ion

The tourism industry is estimated to generate 30% of

private sector employment

6,900 Private Sector Jobs in Gozo

Other private sectorWhole and RetailTransportFood & AccomReal EstateRecreation

This is close to 20% of total employment in Gozo

Selected Aspects of the Contribution of Tourism to the Maltese Economy in

2014

5 star 4 star 3 star0

500

1000

1500

2000

2500

Change in Gross operating profit per available room (2014)

Euro

(€)

W&R, Tranport, Accom & Food

Agriculture

Other services

Construction

Manufacturing

Professional activities

Public administration, education and health

Information and communication

Financial and insurance activities

0 5000 10000 15000 20000 25000

Average Annual Salary by Economic Sector (2014)

Accommodation Sector Profitability and Wages

+17% +17% +47%

Improved profitability permeated the entire sector, including lower categories, indicating better quality tourism

Source: MHRA and author estimates

Average wages in the industry are among lowest in

economy…

…but they increased by 3.4% in 2014 compared

to 2.3% overall

Relatively high number of

expatriates in lower-skilled jobs

Accom &

Food

Real esta

te activities

Agri & fish

ing

Professi

onal

Other service

s

W &

R & Transp

ort

Public Admin

Information and co

mmunication

Constructi

on

Manufacturin

g

Financial a

nd insu

rance acti

vities0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Proportion of Full-time to Full-time equivalent employees

Enhancing Human CapitalA large

proportion of part-time workers within the sector in comparison to the other sectors of the economy

Source: Gainfully Occupied Population

More males at vocational level – trend reversed for

higher level courses

Only 27% of students at MQF level 5 or higher

The majority of students are less

than 20 years of age

Source: Education Statistics, NSO

Source: National Statistics Office

Number of Tourism Studies students is low compared to

workforce

Economy (Total) Accommodation and Food0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

Student enrolled as % of FTE

Hotel Bedstock and Non-Collective Accommodation

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec30000

32000

34000

36000

38000

40000

42000

44000

Bed Places

2013 2014

The availability of hotel bed-stock

followed seasonal patterns for

refurbishment and reinvestment

2013 2014 -

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

45,000

6,972 6,786

17,034 16,410

10,936 11,092

4,347 4,408

Average Bed Places

Other3 star4 star5 star

2014 saw consolidation in lower categories of bedstock with restructuring and

investment potential in the

upper categories

2013 20140

2,000,000

4,000,000

6,000,000

8,000,000

10,000,000

12,000,000

14,000,000

16,000,000

33.1% 34.4%

Nights Spent by Type of Accom-modation

Private accommodationCollective accommodation

Occupancy Rates

59.6%62.8%

Growth of private

accommodation is creating

opportunities for better

regulation and compliance

EU Funds 2007-2013Operational Objectives – OP 1 PA 2

Support the upgrading of the tourism product

Promote the Maltese Islands as a prime and diverse tourist destination

Improve the competitiveness of tourism and culture operators

Initiatives

Product Development

Niche Market Development and Branding

Aid Schemes to Tourism / Cultural Undertakings

97% of funds allocated have been committed, for a total of €116.4m

Other Various € 43,702,949

€ 116,433,075Total Various

Tourism Zone Upgrade Malta Tourism Authority € 14,004,463

Grant Scheme for Sustainable Tourism

Projects by EnterprisesVarious € 8,945,209

€ 15,345,000

Restoration & Rehab of Historical Fortifications

Restoration Department € 34,435,454

PA 2 Projects

Fort St. Elmo Heritage Experience

Grand Harbour Regeneration Corporation

Financial allocation: €120 m of which €102 m are Community FundingBeneficiary € Committed

PA 2 is absorbing 14% of OP1 fundsNew opportunities need to be reaped (Blue Economy, Social Funds, etc)

Tourist Arrivals in 2015 and 2016: Indications of

Demand Potential

Main Determinants of International Tourist ArrivalsEconomic Growth/Spending Power in Source Countries

Price Competitiveness/Exchange Rates

Connectivity: availability of flights

Market specific conditions/actions of tour operators

International marketing/promotional efforts by Malta

Political developments in source countries

Perceptions regarding security in Mediterranean

Scenario Analyses

This factor is less relevant in the context of the weak euro

Arrivals from UK, FR, BE,NL and CH have a strong positive

correlation with economic growth

The Importance of Economic Growth in the Short Run

IT, ES, IE, AU, DE and Scandinavian arrivals show little or no correlation with

economic growthCorrelations show balance of probabilities regarding effects relevant in the short term

Weak correlations to economic growth indicate other more relevant factors in the short term

29%

12%

2%10%

20%

6%

4%

17%

Tourist Arrivals (2014)

UKFR, BE, NLSwitzAU, DEIT, ES, IEScandLB, RUOthers

2010 2011 2012 2013 20140

50,000

100,000

150,000

200,000

250,000

300,000

350,000

Libya, Russia and Other Markets

Libya Russia Others

Tourist Arrivals and Economic Growth

Arrivals from Libya, Russia and other markets cannot be correlated to economic growth in the short run

43% of arrivals have strong positive correlation with economic growth

Tourism from Libya and Russia is expected to be affected by political developments

Strong growth in other markets can continue due to economic, market and connectivity factors

36% are of arrivals are more strongly influenced by other factors in the short term

Outlook for Tourist Arrivals – 2015 and 2016Arrivals from UK, FR, BE, NL, CH are modelled on basis of economic growth forecasts

UK FR,BE,NL SWITZ0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

Projections for Economic Growth

2015 2016

Source: EU Commission

UK FR,BE,NL SWITZ0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

45,000

50,000

Projections for Growth in Tourist Arrivals

2015 2016

Arrivals from IT, ES, IE, DE, AU are prudently expected to remain at 2014 levels

2010 2011 2012 2013 2014 2015* 2016*0

50,000

100,000

150,000

200,000

250,000

300,000

350,000

400,000Tourist Arrivals

AU, DE IT ES IE

Arrivals from Libya and Russia are assumed at 5-year historic low of 29,000

Arrivals from Scandinavia and Other Markets are expected to maintain historic trend growth

2010 2011 2012 2013 2014 2015* 2016*0

50,000

100,000

150,000

200,000

250,000

300,000

350,000

400,000

Arrivals from Scandinavia, Other Markets

Other Markets Scandinavia

11%p.a.

4%p.a.

Bases of outlook are generally conservative but will require efforts to:• sustain expected growth in

Other Markets • consolidate growth in

shoulder months

2010 2011 2012 2013 2014 2015* 2016*0

200,000

400,000

600,000

800,000

1,000,000

1,200,000

1,400,000

1,600,000

1,800,000

2,000,000

Tourist Arrivals

Others

LB, RU

Scand

IT, ES, IE

AU, DE

Switz

FR, BE, NL

UK

Outlook for Potential Tourist Arrivals – 2015 and 2016

+70,000(4.1%)

+135,000(7.5%)

2010 2011 2012 2013 2014 2015* 2016*0

200,000

400,000

600,000

800,000

1,000,000

1,200,000

1,400,000

1,600,000

1,800,000

2,000,000

Tourist Arrivals

Others

LB, RU

Scand

IT, ES, IE

AU, DE

Switz

FR, BE, NL

UK

2013 2014 2015* 2016*0.0

2.0

4.0

6.0

8.0

10.0

12.0

International Tourism Growth Forecast

Southern/ Mediterranean

Malta

Perc

enta

ge (%

)

* Forecast

Oxford Tourism Economics estimate Mediterranean tourism to increase by 3.8% and 3.3% in 2015 and 2016

UNWTO estimates European tourism increase between 3% and 4% in 2015

Outlook for Potential Tourist Arrivals – 2015 and 2016

The outlook Malta for 2015 is comparable to these forecasts…the potential for demand may be even higher for 2016, everything else remaining unchanged

Risks to the OutlookUpside Risks Downside Risks

Increase in collective and other forms of good quality accommodation

Improvements in connectivity from established and new sources

Marketing activities by foreign tour operators

Perceived international security risks

Specific events in source markets and competitor destinations

Improved marketing and competiveness of competitors

Slowdown in growth of “Other Markets”Enhanced exposure on social media

Specific niches/events (business, gaming, medical, cruise, culture, etc..)

Short term disruption due to investment/refurbishment

Conclusions

Some Key Facts and Figures

27,800 jobs = 1 in every 7 in MALTA, 1 in every 5 in Gozo €1.5bn expenditure = €3,750 for every person in the Maltese population every year

Economic Importance

Nights up by 5% Total Expenditure up by 6%€88 million increase in expenditure generated 500 new jobs

PerformanceIn 2014

Arrivals up by 7% reaching 1.7 millionArrivals in Med Destinations up by 5.5% Departures from major source countries: flat

Gains in Market Share

UK/Italy (€750/person): 50% of growth Non-traditional markets (€1,030/person): 40%Top 15 airports account for 50% of all arrivals and 80% of 2014 increase

MarketDiversification

Some Key Facts and Figures

540,000 visitors in 2014 (+9%) 303 ship callsTotal spending at around €80 million

Cruise Visitors

944,000 international visitors, spending €158 million 377,000 Maltese visitors, spending €28 million

GozoTourism

Tourism sector absorbed for €120 million of 2007-2013 EU fundsInvestment largely used in product improvement

EU funding

Expenditure in off-peak season rose from 27.2% to 27.7% of year totalPer capita expenditure in off-peak season rose from €762 to €769

Tourism Sesonality

Maximising Economic Potential and ContributionIncreasing Arrivals (2015/16: +4%/+7.5%) Improving Expenditure per Arrival

Invest in quality and diversified collective and other accommodation

Increase Malta’s connectivity from established and new destinations

Focus growth on off-peak tourism based on niches/events

Invest in skilling, multi-skilling and re-skilling

Focus on markets with higher potentials and spending power (DE, Asia, etc)

Identify alternative methods of investment financing

Carefully diversify away from lower yielding activities

Sustain 3-star category as a quality product offering

Invest in distinct destinations to diversify product offer

Develop the potential of domestic tourism

Final Thoughts…

There is a tide in the affairs of men.Which, taken at the flood, leads on to fortune;

Shakespeare, Julius Caesar

An investment in knowledge pays the best interest.

Benjamin Franklin

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