Population growth killing Maltese tourism is an actual financial risk

High population density and burgeoning tourism numbers are being viewed as a risk by financial advisors penning prospectuses for bond issues in the tourism industry.

In one recent bond issue for the nascent Gillieru hotel group, the investment advisors warn against Malta’s tourism product being undermined by rising population numbers.

With Malta’s population now at 460,000, the island’s population ratio is already significantly higher than the European average.

“The progressive increases in tourist arrivals registered in Malta over recent years are contributing to higher influxes of tourists in relation to resident population [so] the relationship between volume growth and value growth is becoming increasingly important in Malta, particularly as Malta’s tourism performance has been on the high side when compared to other European destinations,” one of Malta’s top financial advisors warns.

“The size of our islands puts us at a greater risk if not managed well. The smallness of our islands and our very high-density levels constitute several challenges, which must be well managed. There is a risk that government’s policies and allocation of funds will fail to successfully mitigate the issues emanating from these challenges. This would adversely affect tourism performance, especially the hotel sector.”

The advisors also warn that labour force supply is posing a major challenge for the tourism sector. As the Maltese economy continues to expand and diversify, native workers are encountering “expanding employment options” which has left the tourism industry losing out.

“A career in tourism seems to be losing popularity to alternative employment options. The hospitality sector is not always considered as providing attractive career opportunities, especially as more lucrative and financially rewarding sectors have developed in recent years, that are more appealing than tourism and hospitality.

“As a result, it is becoming increasingly difficult to engage personnel when and as required and this may erode revenues because of lost business and hampered growth. The lack of human resource supply could also fuel unsustainable increases in pay, which would affect the industry’s profits and erode Malta’s overall competitiveness.”

And with Brexit now becoming a more tangible reality, hotels may be affected by a weak sterling due to Maltese operator business in the winter, which is a particular important season for hotels in the north of the island.

“The ramifications affecting the tourism sector following Brexit are still relatively unknown. Issues affecting British travelling to Malta, such as the open skies policy which represents one of the most significant benefits for the tourism sector, are amongst the important matters… A negative outcome can adversely affect the local tourism sector, given that the British market remains one of the most important source markets.”