Tourism improving but full recovery still elusive

Hotel industry trends were improving, but performance was still below pre-September 11 levels, according to a survey on the fourth quarter of 2002.

The results of the survey, carried out by Deloitte & Touche, were issued by the Malta Hotels and Restaurants Association yesterday.

Hotel performance in the last quarter was found to have improved compared with the same quarter the previous year, with stable occupancy and higher room rates and, consequently, an improvement of overall turnover levels.

Tourist arrivals were higher, but had not yet recovered to their pre-September 11 levels.

The survey shows a stable aggregate occupancy of 57.6 per cent against 57.5 per cent in the last quarter of the previous year, with a growth in average room rate of 8.7 per cent from Lm14.64 to Lm15.92.

Over the whole of 2002, the five, four and three-star categories registered a 3.5 per cent drop in occupancy - from 69.3 per cent in 2001 to 65.8 per cent. The decline was, however, slightly offset by an increase of 3.3 per cent in average achieved room rate (AARR).

For 2002, while lower tourist volumes led to lower occupancy levels, average room rates rose. However, the improvement in rate was generally not enough to compensate for the fall in volume, so that overall revenues fell in the three- and four-star sectors and increased slightly in the five-star sector.

A similar differentiation between the three- and four-star sectors compared to the five-star sector was also seen in terms of profitability, which only improved in the five-star sector.

The report shows that the five-star market registered the healthiest performance in 2002, with an eight per cent growth in occupancy and a 1.5 per cent growth in average rate.

The four-star markets registered a one per cent drop in occupancy, which was countered by a 1.8 per cent increase in average room rate, while the three-star market marked a two-per-cent drop in occupancy, but experienced a healthy growth of 8.4 per cent in average room rate.

The three-star market registered a significant drop of five per cent in occupancy from 71 per cent in 2001 to 66 per cent in 2002, although it was countered by a growth in average room rate of 4.2 per cent from Lm9.05 to Lm9.43.

The four-star market registered a four per cent drop in occupancy from 69 per cent to 65 per cent, which was slightly softened by a growth in average room rate of 2.3 per cent from Lm16.08 to Lm16.45.

The five-star market marked a one per cent growth in occupancy, matched by an almost identical average room rate of Lm35.33 in 2002, against Lm35.34 in 2001.

Commenting on the findings, MHRA president Winston J Zahra described the situation as "not healthy" and underlined the need to continue focusing on the industry collectively to ensure that the best possible results were achieved.

The preliminary results of a telephone survey for the first quarter of 2003 showed occupancy rates to be at the same level as the same quarter last year, which had not been good, Mr Zahra said. The survey indicated that the average room rate was being depleted over last year's figure, particularly in the four- and five-star categories, which he warned would not result in more business or higher occupancy.

Malta International Airport statistics indicate that arrivals in November and December increased by approximately five per cent and 10 per cent respectively, suggesting that tourist arrivals for the last quarter of 2002 increased by seven per cent over the relative 2001 figure.

Estimated tourist arrivals for 2002 are 1.13 million - a decline of four per cent over 2001 and of almost seven per cent over 2000. The decline was, however, far less than what was originally predicted at the beginning of the year, showing that damage limitation was successful, but also indicating that the total recovery still has some way to go.

The survey shows that the major concerns of MHRA members were the breakout of war in Iraq and the uncertainty over the issue of Malta's EU membership.

He reiterated the MHRA's stand in favour of EU membership, stressing that "the best way forward for the tourism industry is for Malta to join the EU".

For the MHRA, "Malta's accession to the EU has been unequivocally sanctioned by the electorate in the referendum and the ratification of the decision would be a critical factor in the future viability and success of the tourism industry".

The next step for the MHRA would be to lobby to ensure that EU funds would be channelled into the right projects to support the tourism industry.

Mr Zahra said the MHRA had commissioned a Malta Tourism Authority-funded survey which would involve interviewing 1,500 tourists on their way out to understand what their experience was like. The study would be completed by September and would gather valuable information regarding projects that needed to be embarked on.

As regards the outbreak of the war, Mr Zahra said the industry could only augur that the conflict would be as short as possible and that the least amount of countries would get involved.

There was no doubt that it would have an impact on tourism, he said.

Summer bookings were not flowing in at the rate they normally would, the main reasons, according to the major tour operators, being uncertainty and the lack of comfort in travel. However, Malta seemed to be doing better than competing destinations.

Tourism Minister Michael Refalo, who broke with tradition and accepted the invitation to attend the MHRA conference because the current legislature was coming to an end, confirmed that summer bookings were reflecting the tension that prevailed in the travelling public.

However, Dr Refalo's gut feeling was that tourism to Malta would follow the same pattern it had experienced in 1991 when, after a short war and a brief lull, bookings began to pick up, more custom was attracted and Eastern Mediterranean business redirected to Malta.

Dr Refalo said the key to concerns on the environment and infrastructure would best be addressed when Malta joined the EU.

It would be folly to put at risk investment of millions of liri, Dr Refalo said.

Tourism industry workers should understand that when hotel owners and leisure facility operators say EU membership is good for tourism, it is an unequivocal confirmation that accession benefits workers and provides them with long-term job security and the best social and labour legislation.

A total of 57 properties, representing 9,944 rooms, participated in the MHRA Hotel Survey, covering 100 per cent of the five-star room-stock, 68 per cent of the four-star and 47 per cent of the three-star. During 2002, the hotels participating in the survey generated over Lm79 million in revenue and employed over 5,300 personnel.

The deadline for the completion of the next survey, covering January to March, is April 25. Data can be sent to mhrasurvey@deloitte.com.mt.