Mediterranean Observer
The Malta Hotels and Restaurants Association (MHRA) recognises the importance of responsible economic management, particularly at a time of growing international economic and geopolitical uncertainty. MHRA supports Finance Minister Clyde Caruana’s call for greater financial discipline and acknowledges that safeguarding Malta’s economic stability requires difficult but necessary decisions. However, such responsibility must be shared fairly, with Government leading by example.
MHRA is concerned that tourism is being asked to shoulder a significant share of the financial burden arising from the latest Budget measures, while Government’s recurrent expenditure continues to increase. It is difficult to reconcile calls for greater financial discipline from productive economic sectors with the continued growth in the cost of running the public sector. Government must demonstrate the same determination to control its expenditure as it expects from businesses and taxpayers.
MHRA recognises that a reasonable increase in eco-contribution could be justified to help sustain Government support in containing energy costs. However, the announced increase to €8 per person per night is too sharp, even by Mediterranean and European standards, raising legitimate concerns about Malta’s competitiveness.
This is not the only additional burden facing the industry. Rising costs associated with the employment of third-country nationals (TCNs), which industry relies on, alongside other operating expenses, are placing further pressure on tourism businesses and this is bound to exacerbate the challenges that already exist in the labour market. Hotels, restaurants and other hospitality operators depend significantly on international workers to sustain their operations and maintain service standards. While MHRA supports effective regulation and responsible recruitment, the announced additional employment-related costs risk eroding Malta’s competitiveness at a time when our main source markets are facing economic challenges and declining disposal capital.
The combined impact of these measures extends beyond price-sensitive visitors. Higher-spending tourists also assess the overall cost of their holiday against the quality of the destination experience. Malta cannot assume that its ambition to attract higher-value tourism makes it immune to price competition.
This has also to be considered in the background of progressive increases in the bed supply and relentless applications for more tourist accommodation planned over the coming years. This makes controlling the continued expansion of tourist accommodation capacity more critical than ever
The more beds Malta adds, the greater the pressure to attract visitors to fill them, increasing dependence on price-sensitive mass tourism. With purchasing power weakening in key source markets, even modest increases in holiday costs can affect demand.
Yet Government continues to incentivize further accommodation development, adding to an already expanding supply of tourist beds. This contradictory approach must stop. Malta cannot continue encouraging the development of additional accommodation capacity while increasing the cost of visiting the destination and expecting a shift towards higher-value tourism
A credible tourism strategy must manage supply as well as demand. MHRA therefore calls for an immediate reassessment of policies and incentives encouraging further accommodation development, with priority given to economic returns, infrastructure capacity, destination quality and community wellbeing rather than visitor numbers.
The higher eco-contribution applicable to short-term rentals must also be accompanied by stronger regulation, enforcement and appropriate zoning to prevent excessive concentration in residential areas and address noise, unruly behaviour and other disturbances affecting communities.
The Association is also requesting assurances that a meaningful portion of the eco-contribution remains ring-fenced for improving Malta’s tourism offering, consistent with its original purpose. Visitors and residents must see tangible improvements in destination quality rather than the contribution becoming another source of general revenue.
