The dangerous trend of reducing hotel rates

By Marika Azzopardi

Hotels are reducing their rates in a dangerous venture meant to attract more tourists, whatever their category. Alarm bells are ringing in the five, four and three star sectors which have registered a critical downward trend in rates and revenues.

Whilst there are still people harping on about the ill-effects being suffered by the tourism trade following 11 September, 2001, it is still evident from statistics that the tourism sector is suffering a downfall. This can be seen in arrivals, occupancy and length of stay opted for by tourists in Malta.

Whilst tourist arrivals stood at 107,799 during April 2001, these dropped to 91,141 in April 2002. However going back to the figures one immediately notes that in 2000, tourist arrivals for the same month had been an al time high of 117,640. And there were no 11 September incidents in 2000 to alter the fate of tourist arrivals last year.

However, resorting to reducing prices and accommodating English language students in hotels is not the answer. Speaking to The Financial and Business Times, Karmenu Vella, Labour spokesman for Tourism commented thus, "The English language sector is a very important sector in addition and not as an alternative to the other main sectors. English language students are coming in large volumes but with a low spending power. Furthermore, most of the business is not going to the hotels but to host families – which is also a good thing in itself. But I would say that this sector is being attracted by the lower rates on the market and its volume is giving a false sense of achievement."

He referred to the fact that whilst there are some factors on which we have absolutely no control, there do exist other damaging issued on which we can exercise control. "These include competitiveness, how we market the product, and the product itself. It is our responsibility to act and remedy the negative issues on which we have control. I feel we’re always discussing the previous and disregarding the latter."

Regarding the viability of lowering rates, Mr Vella noted that, "The industry is attempting to increase occupancy by continuously reducing rates. This is dangerous and the final effect would be worse because it will then take much longer to build up the rates again. This trend is not particular to any specific market but it typical of all our core markets."

Whilst hotels which are dependent on meetings and conferences were not as badly hit as those relying only on tour operations, the only sector which registered a non-decline was the 4-star category. This actually saw an increment in the number of tourists from last year as well as an increment in the number of days which they spent here [28,824 (April 2001) to 28,753 (April 2002)]. The most drastic fall was experienced by holiday complexes [23,492 (2001) to 8,728 2002)]