by Dr. Paul Felice LL.D
For the past fifty years or so, Malta has been a popular destination for millions of holiday makers from around the world. With its rich history, raw coastline laced with golden beaches, and refreshing sense of metropolitan lifestyle, Malta is special indeed.
Situated in the centre of the Mediterranean basin, sixty miles south of Sicily, and a member of the European Union since 2004, Malta’s infrastructure is seeing constant improvement driven by the need to keep up with both its growing population and tourism industry. The island is well connected with most major countries by means of a national airline and low-cost airlines. As a result travel by air accounts for about 98% of all travel to and from Malta.
With an estimated population of more than 430,000 and over 2.2M tourist arrivals in 2017, the current administration is investing heavily in new road networks and other infrastructural changes and improvements. Much has been done in the capital city, Valletta, especially in view of it having recently closed celebrations as the European Capital Of Culture in 2018.
Malta is also a new brave location for all things digital, particularly the igaming, crypto-currency and blockchain industries. These all have a direct connection with the hospitality industry for a number of reasons, accommodation and catering being at the forefront. There are now several recurring conferences, expos and other related events being held in Malta, including the Sigma gaming conference and various government and privately sponsored blockchain summits.
The Tourism Sector
Tourism statistics continue to improve year on year. The highlights of direct relevance for the year 2017 are outlined below:
Total tourist expenditure: EUR1.95BN
Tourist expenditure per capita: +EUR850
Top inbound source markets: United Kingdom, Italy, Germany, France
Total inbound tourists: +2.27M
Total guest nights: +16.5M
Average stay: +7 nights
April to September: healthiest period
5 star accommodation: +420,000 guests / +1.7M nights
4 star accommodation: +780,000 guests / +4.5M nights
3 star accommodation: +480,000 guests / +2.4M nights
Age Demographics: 25-44: +860,000 (best) followed by 45-64: +720,000
Criteria influencing choice of destination: digital media, personal recommendation, new destination, good flight connections.
*See the official Malta Tourism Authority Facts & Figures report for 2017 here.
It goes without saying that running a hospitality business involves several overhead costs. These can include general employee payroll, product and service purchasing, maintenance, operational annual or term licensing, destination management services, and more. In Malta, many costs will be largely determined by the operator’s ability to negotiate the best possible rates in order to allow adequate profit margins.
Malta prides itself with a motivated and dedicated workforce. For the past fifty years, Malta has been a holiday destination for millions around the World, and with a hospitality industry in constant growth, the development of the required workforce over the years was only natural. A more focused approach occurred in 1987, with the establishment of the Institute of Tourism Studies. Its main objective is to provide the tourism sector with professional personnel who are trained to provide an excellent standard of service in the industry.
The horse is only as good as its jockey, and with the current administration now in its second consecutive term, tourism figures are higher than ever. There has been exponential growth with tourism related services in general, and the establishment of new tourist accommodation. All indicators point to further growth, with Malta positioning itself as a destination rich in culture and history and a cosmopolitan way of life. The industry has responded to the current market boom with vigour and now comprises over 350 licensed hotels, guest houses, hostels and a tourist village.
Now is the right time to invest. Official figures show that the hospitality industry is alight with a consistent turn-over, even in what was once considered to be the off-peak season. It can only be concluded that hospitality operators, even from other jurisdictions, should investigate the market in Malta and make serious considerations for relocation or expansion.
Today, Malta is also an attractive location for expats looking to start a new life, and therefore thousands of non-Maltese individuals are employed in various sectors of the industry.
Purchasing Commercial Property in Malta
The process of acquiring a hospitality asset can be complex. However, the general process is that once the purchaser and vendor agree on a price, the parties will proceed to enter into a promise of sale (konvenju in Maltese) which binds the parties by terms of reference so that a final deed of sale can be published within a stipulated time. In between the preliminary agreement of sale and the final deed, the notary public appointed by the purchaser will usually carry out complex searches to establish title, together with other searches required by Law.
Once the notary establishes that all is in order, the parties can sign the final deed and ownership is transferred to the purchaser. Of course, with assets of this nature, many other factors may need to be examined and ascertained, including the existence and validity of planning permission, operational licenses, and so on. It is always recommended that you also appoint competent and experienced legal counsel to advise you every step of the way. Appointing architects and other professionals may also be required to safeguard your commercial and other related interests.
For obvious reasons, it is important that the asset you are planning to acquire is built in accordance with planning legislation. Illegalities can of course affect the value of the asset – however, in some cases these can be sanctioned and regularised. In other cases, it may be commercially wise to enquire as to whether an existing development could be extended in the future. This can lead to a better acquisition and longer-term investment.
As in several similar jurisdictions, the predominant vehicle with which to acquire immovable assets of this nature is usually a limited liability company. As is also common, purchasers may require complex corporate structuring in order to carry out their commercial operations. The process is usually straightforward in principle, however we do recommend that you consult with professionals who are experienced in the field. With our experience of the real estate market, we are regularly in touch with various leading professionals, including legal advisors, architects, notaries public and accounting professionals. We have developed relationships of immense value with people who know the mechanics of the system well, evidencing that buying through us can translate into an acquisition made with peace of mind.
With investments of this nature, it is common for purchasers to require financing solutions in the acquisition of hotels and other similar assets. Malta is home to well established banking institutions which offer a wealth of financial services and financing solutions. By Law, these institutions are required to ascertain the good standing of investors, by implementing general KYC* (Know Your Customer) and other due diligence processes. This is an obligatory requirement of the European Union and also many other jurisdictions. However, once the bank has vetted the information required it can be a practical solution for your financial exigencies.
77 Great Estates - Specialised Brokerage & Conveyancing Expertise
The local real estate market is served by a number of agencies - most are general in their approach to immovable property marketing. We believe we’re different. Our team consists of specialised brokers. With hospitality assets in particular, we know that you would expect your broker to have in-depth knowledge of the industry, the asset on offer, and also extensive experience with acquisition transactions of the same nature.
We currently offer a selection of hotels that we believe can be an excellent opportunity for the right investor. For more information please contact Dr. Paul Felice LL.D. on (00356) 99617777 or by email on firstname.lastname@example.org.
We look forward to being of service to you.
While every effort has been made to reproduce precise industry statistics and information, any error or omission is regretted. All information contained herein shall not be construed as advice, legal or otherwise, and is subject to change without notice. Copyright Dr. Paul Felice 2018.