NEWS | Wednesday, 04 June 2008

De Cesare breaks the ice

In his first interview after being elected president of the MHRA, leisure and hospitality tycoon Kevin De Cesare talks to David Darmanin about his views on the Maltese tourism product, noise in Paceville, golf courses and human resources in the tourism sector.

“Ian and I were not born with a silver spoon,” Kevin De Cesare pointed out as eavesdroppers at the Inter Continental lobby nodded sceptically. At age 20, Kevin couldn’t have possibly launched one of Malta’s largest nightclubs without any help from his family. That said, in his defence, the development of a 17-theatre cinema complex, nightclubs, a bowling alley, a radio station, a 452-room five star hotel, a massive events arena and a multi-storey car park in St George’s Bay, is mainly attributed to the courage and determination shown by the second generation De Cesares.
“My father always insisted we start working from the bottom. At age 15, I started working as a barman at a 41-room hotel my parents owned in Sliema. Before I started looking after my parents’ restaurant, I worked there as a waiter,” he said, as if to qualify his previous statement.
In 1966, Kevin’s father – a well-known paediatrician and sportsman bought a large house on Tower Road after his wife convinced him to get involved in the tourism business. “It was a huge risk, my parents had to pay the church a lot of money to claim ownership of the property,” De Cesare said.
However, it seems that it was a risk worth taking, as the Eden Rock operated lucratively enough to provide Ian and Kevin a solid education and enough capital to start working on achieving the status of hospitality and leisure kings of Malta.
1980 marked the first turning point for Eden. Shortly after returning from a six-month training stint at the Munich Hilton, a 20-year-old Kevin De Cesare sidelined from the family-run hotel operation, which he described as “tight”, once his parents and his brother were already fully immersed in its running. “I decided to sideline and open a nightclub, Styx, which was an instant success. It swiftly became one of the most famous entertainment landmarks in Malta.”
At the time, Kevin’s brother, Ian, had been working on the development of Eden Beach Hotel, a four-star 125-room property lying right across the road from Styx.
“Once we were done with the hotel it made sense for my brother to take charge of the hotel side and for me to take the entertainment side of the business.”
In a span of a few years, the Eden Leisure Group saw the launch of Stownes discotheque in Buġibba, Bay Radio, Eden Superbowl as well as the now historic cabaret-nightclub Palladium, which as Kevin admits, went belly-up after a few years.
“A few things worked, while others did not. The Palladium, for example, was making money, but as we worked with tour operators we found ourselves spending too much for the turnover generated. Profits weren’t good enough when compared to the investment made,” he said.
“In the tourism sector at the time, you had three options. You either opened a bar, a restaurant or a hotel,” he said, acknowledging his reputation of being a risk-taker. “I thought of doing things differently. As I travelled a lot, I saw how things were being done abroad. On a British Airways flight, I remember once reading a magazine article explaining how bowling had come out with computerised scoring, whereas before it was all hand-written. I remember being inspired to set a bowling centre up in this area. Luckily my brother backed me up on that.
“I was successful in 80 per cent of new initiatives,” he continued. The Eden Ice Skating Arena fell on the 20 per cent side, understandably.
“The ice arena made money the first year,” he said in his defence. “But by the second year the cost of electricity sky-rocketed. Unfortunately, also in the second year, a local newspaper had reported that 75 people were injured since the arena had opened. Since then, rumour had spread that people’s arms were being chopped off and what not… this is a country of rumours.”
Nowadays the Eden Ice Arena operates as a huge events venue, hosting a good number of conferences, product launches, dinners, concerts, staff partiers and in-house promoted music events. “When we made mistakes we quickly remedied or managed to change the situation to our favour,” he said.
Moving on to describe what was perhaps the boldest decision the De Cesares ever made, he said: “In 1999, the Eden Beach Hotel was tired, as it is bound to happen after 19 years of operation. We first thought of re-developing it into a four star hotel, without any plans to involve Inter Continental in a management agreement. At the same time the adjacent Ascot Hotel, went out on the market. We thought that if we were to buy it, it would have been a good idea to make use of a property built on two roads and with much more land, so we did, and went straight down the five star route. Needless to mention, our costs were sky-high, bearing in mind that at 452 rooms, we were building the largest five star hotel on the island. It was a major, major risk.”
Taking over from Josef Formosa Gauci, De Cesare has been recently elected President of the Malta Hotels and Restaurants Association (MHRA). Asked what he feels has contributed to his appointment he smiled and said: “Maybe because I’m known for being outspoken. Joking apart, I’ve been involved in the MHRA for the past two years now. My council has a very strong team which includes past-presidents and vice-presidents with years of experience in the industry. As to myself, after all these years in the industry, and after all the times I’ve criticised, but hopefully criticised constructively, I thought it was time for me to give the local industry a push, and saw the presidency of the MHRA as a good opportunity to do so. I believe the industry has a lot of potential but I also have a very firm belief that we have to work incredibly hard on our product.
“By ‘product’, I do not just mean the hotel or the quality of food and service. Product is all that has to do with what tourists experience starting from the airport or taking a trip to Valletta - where they see the Triton fountain, which unfortunately needs its water changed – and then proceed to walk through a disastrous main entrance to our capital city. As low cost carriers are flying to every single European destination, we need to understand that we are now competing with every other European country. We must get it into our heads that we have to be competitive and that we need to leverage our historic and cultural heritage. We have amazing historic sites in Malta but you cannot possibly expect anyone to visit them when the road leading there is in such a state, or that when you arrive on site you would have to withstand the scorching summer heat without the provision of shaded areas. Investment needs to be huge. We need to speculate to accumulate. Other countries are taking us on and, unless we seriously address our product, we will be facing harsh consequences.”
It was probably Winston J.Zahra who had started insisting on the product issue, which was only taken on by government after 10 years of serious arm-twisting and lobbying. De Cesare seems to be adamant on letting the ‘product’ issue grow within the MHRA in his term, but what new ideas are there? What will be his flagship issue to throw at government, perhaps to be taken up in 10 years time?
“It must be said that we’ve made great strides,” he started. “But there are things which we must look at. Concerned about the cost of fuel, Ryanair is now considering dropping winter routes in some European destinations, and Malta is no exception. So they are now asking airports and governments for help. Without going into the merits of whether this is wrong or right, if Ryanair see that keeping a plane aground is cheaper than flying it, they will simply not fly, that’s how it works. This needs to be taken into consideration. There is no doubt that with the advent of low cost carriers, arrivals have substantially increased, and Airmalta has done an incredible job in becoming more flexible and more competitive. But we mustn’t stop there. If Ryanair stop one or two flights a week there is no doubt that the local industry will become very nervous.
“Another point worth mentioning is the problem Malta faces on standards and enforcement. The laws here are not easy either. For instance, you walk through Paceville and the music is too loud. I am not saying there is no enforcement in Paceville, but there is no clear-cut standard defining what is allowed and what isn’t. How loud is loud? What decibel level disturbs people? How does the police interpret the law if a sound is too loud? I’ve always believed that if not a standards minister, there should be somebody who can define what is right and what is wrong. We already have a standards authority but there is a whole set of laws in Malta that need to be updated. You can’t keep 30-year-old laws that are not relevant today. Some might be too lax while some others may be too stringent, so we need to keep up with the times. For this to be done effectively we need the involvement of all social partners, along with the government in a discussion on how to keep up with the changing dynamics of the industry, because everything changes. Did you ever imagine 10 years ago, that there would be a time when you are fined for being caught smoking at a bar, or even at a restaurant? It was unheard of! Smoking is banned now. It’s become illegal and we’ve all accepted it. That’s it… we move on.”
So far so good. But moving on to hotter issues now, what is Kevin De Cesare’s position on golf courses?
“We, as MHRA, are in favour of golf courses and Malta needs them. I recommend the government takes a decision now that this has been going on for 14 years. Both parties have agreed on golf courses being needed and, as much as I am aware of environmentalists being against it, I think golf courses are very important for tourism. The Marsa golf course is completely full and high-spending tourists wanting to come to Malta to play golf are finding it impossible to find availability to play. If you fly over specifically to play golf you can’t have just one course. You will need at least two or possibly three courses. I don’t agree with allowing huge development to take place on golf courses but I also think you can’t have a course without some development – it just wouldn’t be commercially viable. I don’t believe such courses are at all possible – and this is not necessarily the MHRA’s opinion but my personal one,” he said.
But what if government proposes development of stand-alones made feasible by private investment, perhaps involving 5-star hotels, as mentioned by the Labour Party a few months ago?
“In that case I would throw it back at government. I would ask government to invest in the development of golf courses itself, in order not to create over-development, and then get the private sector involved in its running. In that case the government could rent out the course to interested parties at say Lm50,000 or Lm100,000 per year, and everyone is happy.”
Perhaps everyone bar the environmental lobby. De Cesare may be still thinking of effective ways of dealing with the ones opposing his idea on the green side of the fence.
“I’ve always found it very difficult to look at golf courses as environmentally ugly. Have you ever passed a golf course and thought of it being ugly? On the contrary, I would say how lovely it looks because of its lush green grass,” he said.
Surely, the argument does not simply boil down to aesthetics. What about the flora, eco-systems, endemic species? How is he planning to confront opposing camps on this?
“If the government accepts setting up a golf course in a specific area with a simple club house and no other development on it, that in itself would be a guarantee that the area will not be over-developed, and hopefully that would create a compromise with environmentalists.
“I think there is space in Pembroke and Baħar iċ-Ċagħaq. There was Magħtab mentioned too but now there are other plans for the area. There were also applications for Rabat, and I’m not referring to Verdala. They were also trying to set one up in Gozo. What I’m saying is… let’s start with one golf course and we’ll see how it goes. Pembroke is a good site – it’s not like too many people go there for recreation anyway.”
As the discussion swiftly moved on to problems faced by the tourism industry on human resources, De Cesare admitted that the industry is facing considerable challenges in recruiting quality staff.
“We are finding problems at all levels, from waiters and chambermaids to accounts personnel,” he said, adding that IT, gaming companies and financial companies, among others, are offering white-collar workers above average packages.
Asked whether the MHRA could resolve the problem by pushing for better conditions within the industry, De Cesare commented: “It is a question of supply and demand. There is a huge wage inflation going on, and this happens automatically when there is such a scarcity of staff. The problem is that hotels in Malta have among the lowest room rate in Europe. We have a situation where, whereas our average room rate stands at €55 a night, the EU average is €113 a night. We operate at North African prices with European costs. Other inflationary costs, such as the cost of food and fuel, contribute to our biggest worries.”
Raising another issue of concern related to human resources in the industry, he pointed out that the Institute for Tourism Studies (ITS) needs to be given more attention.
“A lot of students take up courses at ITS. That’s not the problem. The problem is that they move to other industries after they qualify, when there’s a huge need for locally qualified people to join the industry. This is costing the government a lot of money. I also hope the ITS will strengthen its syllabus and that the government promotes tourism as being a worthy career. A lot of people think becoming a waiter for example, is demeaning. In Italy waiters are really proud of what they do. As a result, they’re good, they’re professional, they understand wines, they understand food and they understand people. In Malta we have a different culture and it needs changing.”
Commenting on the state of affairs in tourism businesses in the northern region, where the closure of three star hotels has resulted in a slump in restaurant and bar sales, De Cesare agreed that hotels in the area need help, and that any tax incentive intended to refurbish or improve hotels would be more than welcome. “The area suffers because a lot of establishments there were built in the 70s and the early 80s and the specification that was normal then has been totally surpassed by the specifications issued by the MTA for new hotels – this affects the size of rooms, open spaces etc. If a hotel decides that it would be more profitable to build a block of flats, what can one do? Order it to re-open? Any help from the government for these hotels is welcome, but realistically they can’t compete with new hotels. They therefore need government incentives.”
Hotel-owned restaurants charge less VAT than independent ones, causing some restaurateurs to accuse government of unfair treatment. Albeit owning a series of restaurant-linked hotels, in his capacity as MHRA president, De Cesare agrees on a level playing field.
“We would like to see the low-rate applicable to all restaurants,” he said. “Although I guess Tonio Fenech would be the right person to answer this question, I think the government should try lowering VAT to five per cent to both hotel-owned and independent restaurants, as I believe this will incentivise more people to eat out, therefore increasing VAT return. This way the government will still be receiving the same amount of money albeit from a lower rate.”
On a final note, De Cesare was asked if he holds any regrets whatsoever.
“No, I don’t think so,” he decided after half a minute of deliberation. “If I was born again I would repeat the same mistakes… except opening an ice-skating ring.”