 20 - 26 December 2000 |
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Hoteliers call for reversal of tourism trends
Worrying trends in tourism that were evident last year have once again shown up in the Malta Hotels and Restaurants Association’s survey for July to September 2000. Highlighting the need for the trends to be reversed, newly-elected MHRA President, Anthony Chircop said data showed that tourists were shortening their stays in Malta and lower profits and higher losses were being registered. There was, however, some confusion over the fact that data from the Central Office of Statistics did not produce the same results as the MHRA’s own information. The survey, which indicated that 5-star hoteliers were struggling less than their 4 and 3 star counterparts, concluded that a number of hotels must have registered deteriorating results, and were striving to cope with the increasing pressures of competition and the strong negotiating position of tour operators. The Report The survey, by Deloitte and Touche, is conducted every three months and collates information on over 9,665 hotel rooms, covering 95 per cent of the 5-star sector, 69 per cent of the 4-star sector and 48 per cent of the 3-star sector. The survey reported that the tourist arrivals for the three month period were very similar to last year, with a marginal 1 per cent increase overall. However, from information published by the Central Office of Statistics, it would appear that, when compared to the same period last year, this year generated a lower number of bed-nights. Hotels participating in the MHRA survey reported, though that, on average, room occupancy for the peak summer months remained stable. The majority of participating 3 and 4 star hotels reported a relatively stable average-achieved room rate, which the Association said, was encouraging to note. The 5 star sector managed to register a significant 18 per cent increase in rates over the previous year, notwithstanding the opening of a new property. This trend was consistent with what was registered in the first six months of the year. Slightly over 50 per cent of the participating hotels reported an improvement in occupancy levels, while for the others this summer was worse than last year. The Association was encouraged to see a large majority of participating hotels reporting improved room rate and revenue per occupied room. The report showed that labour costs (as a percentage of revenue) have fallen in the 4 star and 3 star segments, while remaining constant at 30 per cent of total revenue, in the 5 star sector. The lower categories also registered a decline in overheads. Raphael Aloisio, Partner at Deloitte and Touche, commented that the survey showed that in all three categories there were more participating properties which reported improved performance indicators, than those which registered declining trends. The trend was strongest in the 5 and 3 star category. He explained that following the reported decline in bed-nights, a number of hotels which do not participate in the survey, must have registered deteriorating results, and are striving to cope with the increasing pressures of competition and the strong negotiating position of tour operators. When speaking about the impact of the Budget on the hotel industry, the MHRA President said that the Association, together with Deloitte and Touche, undertook an exercise to evaluate the theoretical impact on the hotel industry if VAT were to be increased from 5 per cent to a higher rate. He said that the exercise, revealed that the price-sensitivity of the market would not allow hotels to increase their prices accordingly. "For every one per cent VAT increase above the current rate of 5 per cent, hotels’ profitability would be reduced by around 3 to 4 per cent," he explained. The Association expressed satisfaction that the 5 per cent rate of VAT had been maintained. Mr Aloisio said that in the 3 star sector, the Gross Operating Profit was increasing and rates had gone up, but the labour cost was decreasing. Administration and maintenance expenses were also decreasing, and the revenue was rising, "but hotels are being more careful in their labour cost – basically, the pay roll". He said that this reduction could be attributed to a reduction in staff, and a shift among full-time and part-time employment. He added that this margin of reduction was widespread across the board. Summer, as expected, was determined as being more critical to the 3 and 4 star than the 5 star categories. Although the trend is understandable, he added, it was still not expected. Only the 5 star category has shown an actual increase, and hotels have not been reputed to be very profitable, when it comes to the bottom line. On the Frosch issue, Mr Caruana, one of the Association’s members, warned that this situation will affect all hotels ands those which register declines will be put under pressure to lower the rates, while others will be undercut. The Association’s quarterly meeting was intended to look back at the past quarter and envisage the prospects for the future. A non scientific MHRA telephone survey detected that though not a sharp one, there has been a decrease in business for the hotels surveyed. Discussion The problem of seasonality was also brought up in the quarterly meeting, where Mr Chircop said that the MHRA had contacted the Malta Tourism Authority, who in turn set up a task force and produced a report about this problem. However, he added, there have been no plans to implement the recommendations. He warned that if the situation is not drastically improved, the local tourism industry would be at the mercy of the tour operators, who demand lower rates. He also mentioned that the Finance Minister John Dalli had highlighted the issue during the Budget Speech, and called for concrete action. | |||||||
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