MHRA sees both positive and negative in the budget from the Tourism Industry perspective
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The Malta Hotel and Restaurant Association has stated that it is pleased with some of the budget measures announced yesterday in relation to the tourism industry. At the same time the MHRA expressed caution about the current international situation, the effect of the electricity tariffs and fuel, and the introduction of a € 0.50 tax on the number of bed nights.
From a tourism perspective, the MHRA would like to state that the government has once again given a very clear signal that it is looking at this industry as a vital tool to drive Malta’s economy in the coming year. The allocation of further funds to the MTA to help market the island particularly in the prevailing difficult market conditions, shows that government has understood that investing in marketing the Island reaps the desired returns within a very short time frame. The MHRA has concurrently encouraged its members to bolster their own individual marketing budgets so as to compliment expenditure by the MTA and ensure that Malta gets the best possible coverage in our core markets over the coming months.
The MHRA is obviously very conscious of the economic uncertainty in all of the Island’s core markets however the association remains cautiously optimistic that if we all pull the same rope, then we might be able to retain this year’s figures . The MHRA gave concrete and constructive proposals to the government prior to the budget in this regard and it is very pleased to see that a number of its proposals have been included in the budget measures announced. This will now enable the MHRA to continue to work hard side by side with the Ministry and MTA to ensure that as an Island we derive the required results for the good of all concerned.
Furthermore the MHRA very much welcomes the statement made by the Minister of Finance during his budget speech about the positive effect that low cost airlines have had on the tourism industry. The government has now clearly understood the effect of the low cost airline phenomena and seems to be ready to take further advantage of the opportunities available to the Island in this area. The MHRA encourages the MTA to reach a conclusion on current negotiations with major airlines so as to ensure that we take advantage of the benefits of the introduction of new services in the shortest time possible and even as soon as the end of this current year. Under the current scenario it is extremely urgent that new routes are introduced without delay.
The MHRA once again welcomed the retention of the 5% VAT rate on accommodation, the removal of which would have been catastrophic on the industry as a whole due to the negative price elasticity of the Maltese tourism product, especially at a time when demand for international travel is so volatile. Unfortunately despite the MHRA’s recommendation for VAT rates to be reduced on restaurants, the rate has remained the same. The MHRA once again states that a reduction on the VAT rate on the restaurant industry could help improve our competitivity in this sector, generate a higher level of demand as well as increase employment numbers.
The MHRA also welcomed the confirmation of the availability of funds for the continued improvement of Product Malta. The fund being made available for the upgrading of various areas in the main tourism zones as well as the substantial funds being put towards our unique cultural and heritage sites is very welcome news for the tourism industry. Our culture and heritage are by far our most unique selling points and the more we can elevate these areas to sites of a world class standard the more people will want to come and see what we have to offer. MHRA hopes that the implementation of the projects as announced are executed expediently, in order that we can reap the benefits soonest, and strengthen the islands competiveness.
The measures announced to enhance the Gozo product are also welcomed by the MHRA and encourages the government to also undertake the projects mentioned in the shortest time possible.
The MHRA also sees positive the various initiatives regarded as ‘Green Measures’ within the budget. Our environment in general plays a substantial role in the attractiveness of our Islands and the more the government incentivise individuals and businesses to move towards cleaner practices the better, and encourages government to further reward those entrepreneurs who continue to invest in eco-friendly methods.
The Association also welcomes the measures on the changes in tax bands which will help somewhat in increasing disposable incomes although this may not have the desired effect on demand levels. In this respect MHRA encourages the government to consider a revision of the bands following quarter one in 2009.
In as far as the electricity tariff issue is concerned the MHRA is obviously worried that the cost base of the hotel and restaurant product will be negatively affected. The MHRA worked very hard in the past few weeks to convince government that the negative impact of the increase in tariffs and the consequential increases of the services and products to the industry could be substantial, and while the Association is pleased that following its intervention the increase in tariffs for hotels were reduced, it remains concerned that the timing of such increases is far from ideal. The MHRA has encouraged its members to continue to invest in more environmental technology that would enable them to reduce their consumption levels over time.
MHRA is also concerned about the announcement of the € 0.50 tax per bed night. Primarily the MHRA advises against any such tax that reduces the Island’s competitiveness. Secondly the MHRA would like to sit down with government to discuss if and how such a measure can be introduced with minimal impact if it is deemed to be an absolutely necessary measure. Thirdly the MHRA believes that if such a tax is imposed then it should be an Eco based contribution directed towards environmental initiatives as the Association believes that visitors would find it easier to pay such a contribution than any other form of tax. Finally the MHRA believes that if such an Eco contribution is eventually introduced then this should be payable on departure from the Island as opposed to being loaded onto hotel bills. In this way the contribution would be as an Island wide initiative in the same way that the benefits of the revenues derived from the tourism industry are also Island wide.
As in previous years the MHRA augurs that the measures announced will be implemented in the shortest time possible so that the relative benefits will be derived as soon as possible. The MHRA further commits itself to working with government and all other socio economic partners to ensure that every effort is made over the coming months in order to ensure that the Island meets the challenges brought about by the international economic turmoil head on.