Salient Features of the Tourism Industry in Malta
August 2013
Economic Policy Department
Ministry for Finance
Introduction
This report is aimed to illustrate the salient elements of Malta’s tourism industry for potential
investors. Section one of the report provides a background on the tourism industry in Malta,
followed by an insight in Malta’s population. Subsequently, trends in tourist departures are
provided, as well as a profile of the tourist visiting Malta. Section four provides an overview
of Government’s policy whilst section five outlines Malta’s attractiveness for tourism foreign
direct investment (FDI).
1. Background on tourism in Malta
The tourism industry is a major contributor to employment for the Maltese labour market and
an important source of income for the local economy. This industry has faced a challenging
environment for a number of years but has proved to be very resilient in spite of its exposure
to external conditions over which operators have no control. Tourism in Malta is
characterised by increased market segmentation and is facing an increasing number of
competing emerging destinations. Despite these external influences, over a five-year span
(2007-2012), data from the National Statistics Office (NSO) indicates that tourist departures
in Malta registered an average annual growth rate of 3.3 per cent. Rapid changes in
technology, shifting economic realities and ever evolving consumer demands have
substantially altered the present tourism landscape, when compared to the situation in 2006.
A number of changes that occurred in the past years in the tourism sector in Malta are
noteworthy, in particular, the facilitation of low-cost travel to Malta and the widespread use
of internet technology as a means of promoting and booking holidays to Malta.
Malta was traditionally viewed as a mass market tourism destination. However, in recent
years Malta has shifted away from this model in the direction of the more lucrative and high
value quality-of-life-oriented tourism. Consequently, Malta offers a diverse product, with the
main attractions being its rich culture and history, sea and nightlife, diving, conference and
incentives venues and language schools. For those interested in archaeological structures,
Malta possesses numerous sites of national heritage, including the hypogeum and seven
megalithic temples that are listed as World Heritage sites. Malta features a number of tourism
attractions encompassing elements of the island's rich history and culture, as well as aquatic
activities associated with the Mediterranean Sea. In addition, medical tourism has become
popular in Malta in recent years, especially in light of Government efforts to market the
practice to medical tourists in the United Kingdom. Furthermore, it is interesting to note that
Malta rates as one of the best climates worldwide by the International Living Magazine. In
addition, Malta has high quality bathing water and placed third in its overall ranking in the
2011 Quality of Life Index.
Persons entering Malta require a passport but an identity card is sufficient in light of
agreements with certain countries. Following accession to the EU, Malta is bound to the EU
rules in respect of immigration. Malta also forms part of the Schengen area and is therefore
subject to the Schengen rules. However, Nationals travelling into Malta from certain
countries may require a visa. Tourists may extend their stay in Malta for more than 90 days
subject to the approval of the immigration authorities. Persons wishing to reside regularly in
Malta may apply for a residence permit, which will be subject to a number of conditions.
Value Added Tax (VAT) was introduced into Malta with effect from 1 January 1995,
replaced by a customs and excise tax in July 1997 and re-introduced with effect from 1
January 1999. With effect from 1 May 2004, the date of Malta’s accession to the EU, the
Maltese VAT system became fully harmonised with the EU VAT regime, other than where
derogations were negotiated and which are included in the Treaty of Accession. VAT is
imposed on importation of goods into Malta, on every intra-Community acquisition into
Malta and on every supply of goods and services made in Malta for a consideration in the
course of business. VAT is charged at a standard rate of 18 per cent but a reduced rate of 5
per cent is charged in respect of certain supplies. These include the supply of electricity,
certain confectionery items, certain medical accessories, printed matter, the importation of
certain items for the exclusive use of the disabled, domestic care services, works of art,
collectors’ items and antiques, certain labour intensive services and admission to museums,
art exhibitions, concerts and theatres. The supply of accommodation in hotels and holiday
premises is subject to a reduced rate of 7 per cent.
The tourism industry in Malta is promoted and regulated by the Malta Tourism Authority
(MTA), which in turn falls under the responsibility of the Ministry for Tourism. MTA was set
up in 1999 by the Malta Travel and Tourism Service Act. It advises government on tourism
operations, on the planning and development of the tourism industry, on the infrastructure
supporting the industry and it also issues licenses under the Act. MTA is responsible for
regulating and motivating the tourism industry in Malta. It is practically its business partner
and the country’s brand promoter. Its role is to form, maintain and manage meaningful
partnerships with all tourism stakeholders. The Authority works closely alongside its private
sector partners. It works hard to strengthen the industry’s human resources, ensure the highest
standards and quality of Malta’s tourism product and foster relations with local and
international media. The MTA’s marketing focus is discarding the longstanding tag line of
Malta being a “sun and sea destination” and is branding Malta as a holiday destination all
year round concentrating on attracting tourists for the islands’ culture and history. Malta is
also increasing in popularity for Meetings, Incentives, Conferences and Events (MICE)
facilities and enjoying increases in various niche markets such as religious, sports, English
Language tuition and medical tourism.
1.1 Population in Malta
Ttotal population in Malta at the end of 2012 stood at 421,230, increasing by 0.9 per cent
over the previous year. Persons in the 0-17 age bracket made up 18 per cent of the total
population, while the share of persons aged 65 and over stood at 17 per cent. Malta’s
population similar to other developed and developing countries will undergo dramatic
changes in coming decades due to low fertility, continuous gains in life expectancy and
inward migration. The baby boom generation will gradually move into retirement, thus
swelling the ranks of the over-65s age bracket. Chart 1 shows the population pyramid for
Malta in 2012.
Chart 1: Population Pyramid - 2012
Source: National Statistics Office
2. Trends in Tourist Arrivals to Malta
Tourist arrivals in Malta have grown by around 16 per cent over the past five years, with
records surpassed across the board, including in expenditure, guest nights and hotel
performance. Tourist arrivals reached over 1.4 million in 2012 compared to 2007’s 1.24
million. These positive results can be attributable to three main factors. Most of the success is
attributed to an increase in scheduled air routes, from 57 in 2007 to 81 in 2012. Marketing
efforts have also become more strategic. Instead of two months of intensive advertising in
newspapers after Christmas, the MTA is now spending 25 per cent of its budget on online
marketing throughout the entire year. The third reason for the success in tourism is the
investment in embellishing the product, ranging from upgraded beaches to Valletta’s entire
facelift. Table 1 shows the main indicators for tourism for 2011 and 2012.
Table 1. Main Tourism Indicators
Tourist Departures
Nights spent
Average length of stay
Expenditure (€000s)
Expenditure per capita (€)
2011
2012
1,414,503
11,702,616
8.3 nights
1,233,851
872
1,443,973
12,618,372
8.7 nights
1,344,963
931
Absolute Change % Change
(2012/2011)
(2012/2011)
+29,471
+915,755
+0.4 of a night
+111,112
+59
+2.1%
+7.8%
+4.8%
+9.0%
+6.8%
Source: National Statistics Office
Hotels and restaurants in Malta are represented by the Malta Hotels and Restaurants
Association (MHRA), which has been established since 1958, collectively representing an
investment of over €1.5 billion and employing directly in excess of 17,000 people from an
estimated work force of around 40,000 that work in the industry directly and indirectly.
MHRA works closely with the MTA, Air Malta, the Malta International Airport (MIA) and
other stake holders so that accessibility keeps on improving and strengthened over the winter
and shoulder months. MHRA is also working with MTA to enable MHRA members to be
more proactive in marketing jointly Malta for niche tourism markets.
Hotel performance in terms of occupancy has recorded a positive performance in 2012. The
occupancy rate for the fourth quarter of 2012 was estimated at 46.9 per cent, ranging from
49.2 per cent in hotels to 34.0 per cent in 'Other collective accommodation' establishments.
There was an increase of 0.8 percentage points in the net occupancy rate when compared to
2011 levels. In December 2012, the net use of bed-places in collective accommodation
establishments stood at 33.6 per cent, up by 2.6 percentage points when compared to the
corresponding month in 2011. The occupancy rate in hotel accommodation and in ‘other
collective accommodation’’ stood at 35.3 and 23.4 per cent, respectively. Occupancy levels in
5-star and 3-star hotels increased by 2.8 and 7.9 percentage points respectively. In contrast, 4star and 2-star hotels registered drops in occupancy levels when compared to December 2011.
On a national level, the net number of bedrooms and bed-places stood at 16,407 and 35,892
respectively. Both figures increased when compared to 2011. The number of active
establishments in December amounted to 131, of which 90.8 per cent were in Malta. The
average number of beds per room stood at 2.2.
2. Profile of the Tourist Visiting Malta
This section presents a brief analysis of the profile of tourists visiting Malta during JanuaryDecember for 2007-2012 on the basis of data from the NSO and MTA.
Tourist Expenditure: in line with the Tourstat data published by the NSO, €1.34 billion
worth of expenditure was generated by tourism activity in 2012. This represents an increase
of around 9 per cent or €111 million over year 2011. During January-December 2012, tourist
expenditure recorded increases throughout all categories of expenditure items, with the
highest percentage increase registered in the non-package expenditure on air/sea fares as
shown in Table 2. It is important to highlight the significant increase in non-package
expenditure from 2007 to 2012 in terms of air/sea fares and accommodation. This increase
indicates that independent travelling is becoming more popular with the consequence that
direct bookings and non-package stays are exhibiting an increasing trend.
Table 2: Tourist Expenditure (2007-2012)
Package
Non-package expenditure
Air/Sea
fares Accommodation
2007
440,297
141,510
2011
428,062
2012
% Change 2012/2007
% Change 2012/2011
458,220
4.1%
7.0%
Other
Expenditure
Total
101,215
375,047
1,058,069
171,982
149,166
484,641
1,233,851
199,042
40.7%
15.7%
165,666
63.7%
11.1%
522,034
39.2%
7.7%
1,344,963
27.1%
9.0%
Source: National Statistics Office
Purpose of Visit: As shown in Chart 2, the large majority of tourists (around 84 per cent
during 2007-2012) came to Malta for holiday purposes. On average, only around 9 per cent
of the inbound tourists visited Malta for business and professional reasons during 2007-2012
which is in part attributable to the fact that due to the international economic crisis there was
a decline in conference and business travel. This share has increased from around 8 per cent
in 2007 to around 9 per cent in 2009 but decreased slightly to around 8 per cent by 2012.
Chart 2: Percentage distribution of departing tourists, by purpose of visit (Jan-Dec)
Source: National Statistics Office
Frequency of Visit: On average, during 2007-2012, around 68 per cent of the inbound
tourists in Malta were first-time visitors while around 32 per cent were repeat tourists. As
shown in Chart 3, during this five-year period the share of first-time tourists remained almost
unchanged, increasing marginally from 67.8 per cent in 2007 to 68.7 per cent in 2012. The
share of repeat tourists declined marginally from 32.2 per cent in 2007 to 31.3 per cent in
2012.
Chart 3: Frequency of Visits to Malta
Source: National Statistics Office
Age Profile: During the period under review, on average, the largest age bracket comprised
tourists aged between 45 and 64 years, which represented around 36 per cent of the total
tourists, followed closely by the 25-44 age groups which accounted for around 34 per cent of
the inbound tourists. The age profile of tourists visiting Malta during 2007-2012 is illustrated
in Chart 4. It is interesting to note that in comparison to 2007, in 2012, tourists below the age
of 25 and those in the 65+ age brackets have gained in market share, while those of 25-44
years age bracket have reported a decline. The increase in the tourists aged 25 and under is
partly due to the increase of tourists visiting Malta to learn the English language.
Chart 4: Tourists by Age Group – Average Jan-Dec 2007/2012
Source: National Statistics Office
Nationality: As shown in Chart 5, during 2007-2012, the share of UK tourists has recorded a
decline while that of the French, Italian and Spanish market have recorded an increase. This
may be partly attributable to an increased accessibility to Malta by the low-cost airlines as a
result of expansion in routes in these countries.
Chart 5: Tourist Market Shares
Source: National Statistics Office
3. Segments of the Tourism Product
The emphasis in the local tourist market is on the diversification and improvement of the
tourist product. This trend is supported by the expansion of new luxury hotels and conference
facilities in recent years, the investment in the Grand Harbour cruise liner terminal project
and the large scale residential and commercial property development projects oriented
towards the luxury segment of the market including Portomaso, Tigne Point, Manoel Island
and Cottonera Waterfront. During recent years Malta has experienced a steep growth in the
on-line betting industry, serving foreign markets. Over 300 international remote gaming
companies have set up shop in Malta representing about 10 per cent of all online gaming
websites. As a result this has resulted in the development of a high-earning expatriate
community living in Malta. This section identifies specific segments of the tourism product
offered by Malta:
Medical tourism: Since 2010, the MTA has been marketing Malta as a medical
tourism destination. Focus areas for medical tourism include cosmetic surgery, orthopaedics,
ophthalmic, neurological, urological, ophthalmic, neurological, urological, oncology,
diagnostic, bariatric, and cardiac services. The focus target market for medical tourists in
Malta is the UK, followed by North Africa, the Middle East, Russia and North America. Part
of the reason for targeting the United Kingdom for medical tourists is that many members of
Malta's medical profession were trained in the United Kingdom, increasing the confidence of
British patients in those taking care of them. In addition, unlike some medical tourism
destinations, Malta has a stable political climate.
Promotion of arts and crafts: Certain traditional arts and crafts of the Maltese Islands, such
as lace making and filigree work, have been revived because of demand from tourists.
Awareness of cultural heritage: Malta is renowned for its wealth of historical and
archaeological heritage, which, before the advent of large scale tourism, were probably not
appreciated enough. The places of cultural importance are, even now, more valued by tourists
than by the locals, probably because the local residents take this patrimony for granted.
Meetings, Incentives, Conferences and Events (MICE): Malta has an array of facilities that
makes capable of holding anything from small meetings to large conferences with over five
thousand delegates. Malta managed to attract a handful of large conferences. MICE tourists
have the highest daily average spending capacity making this sector a very competitive one.
(Tourism Policy for the Maltese Islands 2012-2016)
Socialising Tourism: The University of Malta Institute for Tourism, Travel and Culture is
involved in an EU-funded project entitled Socialising Tourism that is focusing on promoting
access to tourism for all and differentiating the local tourism product to attract new kinds of
tourists. Its activities include developing a training model involving both lectures and job
shadowing, creating a package of personalised services for tourists with new needs, and
developing a certification system in line with EU regulations to attest these new professional
skills.
It is interesting to note that the National Tourism Policy for 2012-2016 aims to establish a
policy for accommodation development, taking into account the type of accommodation
required, the optimum mix, market developments, the market segments, limiting factors and
environmental considerations. Furthermore, the MTA in conjunction with the relevant
stakeholders will: (i) undertake a review of the four-star accommodation to identify product
gaps; (ii) identify measures that need to be taken to upgrade the three-star hotel sector; (iii)
efforts will be undertaken to eradicate unlicensed accommodation.
4. The Attractiveness of Malta for Tourism FDI
Over the years, Malta has become attractive for multinationals exploring potential markets
and ways to reduce their costs of operation. Testimony to this achievement is the high ratio of
FDI to Malta’s Gross Domestic Product (GDP) which in 2012 stood at around 186 per cent
compared to 47 per cent for the average of the 27 EU Member States. Whilst the larger part
of this investment relates to financial and insurance activities, FDI in the accommodation
and food services sector amounts to around 5 per cent of GDP or €33 billion. Against
this background, this section provides the main arguments to why Malta is attractive for
tourism FDI.
First of all, it is interesting to note that Malta is host to some of the leading hotel brands. One
important investor is International Hotel Investments plc (IHI) which, to date, has acquired
and developed seven landmark hotel projects in London, Prague, Tripoli, Lisbon, Budapest,
St Petersburg and Malta. IHI is also the principal shareholder in CHI limited, a hotel
management company, alongside Wyndham Hotel Group International which acquired
30% of shareholding in CHI Ltd in 2006. As a result of this alliance, CHI now acts as the
exclusive licensee for the Corinthia, Wyndham and Ramada Plaza brands for hotel
management in Europe, the Middle East, the Russian Federation and Africa. Other world
renowned brands that have invested in Malta include Radisson Blu (which is part of the
Rezidor Hotel Group which currently operates more than 230 hotels worldwide), Westin and
Le Meridien (brands of the Starwood Hotels and Restaurants Worldwide Inc.), Kempinski
and Hilton Malta.
A study by Ernst & Young on host country characteristics reports that Malta’s stability and
social climate is often viewed as one of the main features underlying this success. This is
complemented by a highly skilled labour force which is increasingly becoming highly
educated and often thought to be extremely flexible with an excellent work ethic. In fact, the
same report of Ernst & Young also finds that local and foreign entrepreneurs rate the skills of
the Maltese labour force very highly. In part, this may reflect the language fluency of the
work force, the larger majority of which can speak not only Maltese and English but also
Italian. In fact, around 88 per cent of the population can speak English and 66 per cent can
speak Italian. Knowledge of French (17 per cent) and German (6 per cent) is also a common
trait.
Furthermore, it is pertinent to point out that Malta’s successful history in the world tourism
industry has only been possible because government and policy makers have over the years
consistently invested in one of its strongest assets: the labour force. The importance of the
tourism industry to the Maltese economy (which in 2012 was estimated to account for around
14 per cent of Malta’s total GDP) had made it possible to set up the Institute of Tourism
Studies (ITS) in 1987 which offers higher education aimed at meeting the changing needs of
the hospitality and tourism industry. Amongst other aspects, it includes the development of
specialised technical leadership and entrepreneurial skills and promotes awareness of cultural
diversity. In addition, the ITTC was established in 1995 at the University of Malta, the main
objective of which is to train people in tourism, heritage management, cultural issues and the
socio-economic impacts of tourism.
In addition, Chart 6 shows that the average annual gross earnings in the accommodation and
food services sector in Malta in 2011 stood at around EUR 15,000, which is well below that
of major EU economies. Together with the investment in tourism education, this ensures that
Malta continuously supplies human resources that can best meet the needs of the local
tourism industry at a relatively low cost.
Chart 5 – Earnings per Employee in Accommodation and Food Service Activities (2011)
Another major reason incentivising FDI in Malta is a favourable corporate tax rate.
Currently, the rate of corporate taxation stands at 35 per cent, but upon distribution of
dividends shareholders may qualify for a refund equivalent to 6/7th of the tax paid. This
results in an effective tax rate of around 5 per cent making Malta highly attractive for foreign
investors.
In addition, another aspect to be taken into consideration is the fact thatMalta Enterprise
(ME), the national development agency responsible for promoting and facilitating
international investment in the Maltese Islands offers an Interest Rate Subsidy Scheme
directed to support hotels, restaurants and holiday accommodation providers in upgrading
their operations and product offering so as to provide new and improved services. The
objectives of the incentive are:

To encourage holiday accommodation providers and restaurateurs to improve their
product through upgrades and extension works;

To support hotels and restaurants address the requirements of a wider client base
through the diversification of products and services offered;

To increase the competitiveness of the tourism sector, by increasing the number of
satisfied visitors through the provision of value added hospitality services.
Approved projects receive an interest rate subsidy of between 1 per cent and 3 per cent which
may be granted on interest payable to a bank during the first five years of a loan period. The
subsidy covers loans required for furbishing and upgrading of premises including extensions,
modifications and extensions to premises; and the acquisition of plant, machinery, apparatus
and instruments.
Furthermore, one should highlight that despite Malta’s small market size, Malta’s tourist
source market is certainly not constrained by the size of the domestic market. In fact,
hoteliers rely mostly – but not solely – on European markets, most notably the UK, Italy,
Germany, Italy and France. The size of the potential tourist source markets has been
increasing and is bound to continue increasing as Malta’s connectivity with other countries
continues to improve as the number of routes serviced by Low Cost Carriers (LCC) continues
to increase. This has been the case in the recent past as the number of routes offered increased
from 57 in 2007 to 81 in 2012. In addition, the MTA has been continuously working to
penetrate new source market through its dynamic marketing strategy to take advantage of
strategic opportunities. In fact, it is interesting to note that Malta’s success in attracting some
50,000 tourists from Israel over the past two years compared to 1,000 or so Israelis who used
to visit annually in 2007 is a case in point. It is not only the ability to take advantage of
strategic opportunities that has made Malta a success story in attracting tourists but also the
improvement of its marketing strategy in general, as argued above.
At the same time, it is important to highlight that over the past few years Malta has
experienced an increase in energy prices, in light of the significant increase in world oil
prices. As a consequence, the Maltese government is currently investing in a new power
generation plant (which relies on gas rather than fuel) and an electricity interconnector
between Malta and Sicily to reduce the country’s dependence on imported fuels. Government
has in fact pledged to reduce electricity prices for households and industrial users. Further
support in this regard takes the form of energy grant schemes which are regularly made
available by the Maltese government. Typically these take the form of subsidies to support
investment in energy saving measures and alternative energy sources, of which Maltese and
international hotels located in Malta have made great use in recent years.
Concluding Remarks
Over and above all of the above points, Malta offers a safe and pleasant lifestyle. In fact,
Malta has been consistently ranked amongst the top three countries in the world in the quality
of life index (which takes into consideration the cost of living, culture, the economy, the
environment, freedom, health, infrastructure, safety and climate). Travelling distances are
minimal, the healthcare facilities – which rank among the best in Europe – are first-class in
both public and private hospitals and the crime rate is very low. However, the biggest selling
point is undoubtedly the lifestyle that investors and their families enjoy in the country. The
combination of these characteristics and the government’s concerted efforts to ensure that the
tourism industry remains a major contributor to the Maltese economy surely augurs well for
the future of the tourism industry in Malta. It is thus no surprise that the World Travel and
Tourism Council (WTTC) forecasts that the Maltese tourism industry will grow by 3 per cent
per annum to €1.3 billion until 2023.