Government has so far promised SMEs nothing but a tough 2009, and small business owners seem to be resolute in fighting this year’s hurdles resiliently. But will it really be that bad?
Undoubtedly, the energy crisis, the world financial turmoil, the price of oil and the looming decline in British tourism are anything but good news for Malta. But could our fears be greater than the outcome? Would we be able to overcome challenges in 2009 if we weren’t concerned with what’s coming our way?
The energy saga
After months of strong opposition, government decided to publicly announce the price hike in electricity tariffs as initially planned – thus putting the operation of energy intensive outlets such as grocery shops, butchers, food stores, small hotels and catering establishments - in serious danger.
When the news came in November, there was no hint in the air that a good Christmas season would be forthcoming. Consumer confidence seemed to be at a low, while prospects of good revenues generated from tourism were at best bleak.
It turns out that Christmas was not that bad, and after all the energy issue does not seem to be affecting small businesses as bad as many would have thought.
As revealed by this newspaper recently, government succumbed to pressure by the Malta Hotels and Restaurants Association to not only forget any increases in tariffs for small hotels and restaurants, but also to give them a generous discount of up to 20 per cent on what was previously paid on utilities. The discrepancy will be made up for by the larger hotels.
The price of petrol has now gone down in Malta too, and this comes as a pleasant surprise to the many who noticed.
Until OPEC’s decision to cut down crude oil output is reflected in the end price of fuel oil, businesses are expected to benefit from cheaper transportation – after all indications pointed at higher costs for 2009 in this respect.
Better product, dearer salaries, higher prices
It seems that both the Prime Minister and the newly appointed Tourism Junior Minister Mario de Marco have understood that unless we get going on bettering our service to turn the over-all guest experience into a worthwhile holiday – there is no hope that Malta could overcome the looming slump from our UK market share.
If such government efforts turn out to be successful, the face of competition in tourism and services will certainly change. Whereas up until last summer competition may have been all about cost leadership, the tourism market may now turn into one rewarding service providers offering best value for money.
Many operators are sensing Malta’s tourism policy going down this route, and some have already started investing in getting their human resources in order – an arduous task in a culture where generally, hospitality is not seen as a profession or a career choice, but rather as a second job we would much rather not do had it not been for the pittance it pays to match home loan repayments.
With political will on improving service levels, a number of operators are anticipating that if they are to be truly competitive, their front-of-house standard must have edge.
The outlets that have been so far successful in this respect are mainly small family run operations whose human resources are often adaptable to new market dynamics. A handful of medium-sized and large luxurious outlets have also managed to retrain their staff at a considerable expense, and those hospitality operations opting to employ foreign professional staff have also been generally successful. Foreign staff has become very much in demand in the tourism industry, and some outlets are actually bidding on such professionals to outmatch salary packages offered to them by competitors.
With more investment in human resources, it is safe to expect an increment in restaurant and bar prices as well as in hotel room rate. This is generally welcomed by the many operators who have realised that we must operate with Northern European expenses and North African prices.
That said, government’s effort in getting Malta out of the service apathy rut is admirable as much as it is ambitious. Although the EU funds made available to train tourism operators is a positive development, unless the Institute of Tourism Services is given a good shake up and other key elements of the Maltese product, starting from our roads, are seen to – such sterling efforts will have little effect on the over-all picture.
Incidentally, it is easy to anticipate that many tourism operators, bar bus and taxi drivers, will be welcoming Austin Gatt’s transport reform with open arms.
The GRTU seems to be genuinely concerned with the fate of sub-lease commercial tenants once our archaic rent laws are revised. What will happen to those tenants who fail to reach an agreement with landlords is not known, and while one augurs government to introduce the proper safeguards, the healthy way with which businesses will now be at par in their rental rates is already a significant development. Furthermore, this new law will see numerous abandoned properties being put to good use, and when the consumer gets to benefit from more varied and improved services, it is only natural to expect competitors to put their product a notch up.
Invariably, with harder work and more competitive edge, most small businesses tend to do better – and this is what 2009 seems to be all about. Happy new year and good luck.