Survey shows sharp drops in operating profit

The hotel industry failed to reverse the decline in tourism during the summer months, as evidenced by the findings of a survey published yesterday showing a reduction in occupancy levels and sharp drops in operating profit.

Over July, August and September, both hotel occupancy levels and average achieved room rates were lower than last year, the worrying quarterly Malta Hotels and Restaurants Association survey has shown.

And to top it off, the survey also found that hoteliers' prospects for winter were generally pessimistic, with few hotels expecting an improvement in either rates or occupancy.

"Let's stop kidding ourselves and continue denying that we have a problem on our hands," MHRA president Winston Zahra warned during the survey presentation held at the Westin Dragonara.

Three fourths of all hotels surveyed suffered a fall in either rate or occupancy.

Hotel room occupancy in the third quarter fell by a remarkable eight per cent in the five-star sector to reach a five year low, notwithstanding an increase in the number of room-nights sold.

An extra 32,000 five-star room nights were sold, compared to the third quarter last year but supply increased by 41 per cent and this overwhelmed the results of this sector.

Occupancy fell by one per cent and two per cent in the three and four-star category respectively.

As predicted, average achieved room rates also fell, with the biggest slump taking place in the four-star sector (a decline of almost 10 per cent) which is where the majority of the room-stock lies.

This meant that four-star room rates this summer were at their lowest level in five years, Deloitte partner Nick Captur, who drew up the survey, said.

Operating profit per room for the first nine months this year is substantially lower than the level seen two years ago. Suffice to say that the cut in profits for the five-star category was of 26 per cent.

All major tourist markets to Malta, apart from the UK one, fell into decline, which meant that France, Italy and the Benelux countries are now added to Germany's falling arrivals.

A telephone survey for the fourth quarter does not give a rosier situation of the present. Occupancy levels for five-star hotels in October are expected to be down nine per cent in comparison to the same month last year, though four-star hotels are expected to see a minor increase for November and December.

Mr Captur explained that accommodation supply was still effectively increasing at a faster rate than demand in certain segments of the market.

For the first time, the survey also looked at staff movements within the industry and found that one in five individuals changed jobs in the last year, with some 200 a year leaving the industry completely.

Mr Zahra said it was worrying to note that international research suggests that Malta's trends were worse in comparison to Europe.

He said that the results for October were disheartening but not unexpected. Had the government heeded the MHRA's warnings back in June about the bleak prospects in winter the situation might have been different, he added.

Mr Zahra asked whether the Malta Tourism Authority had the right people to steer the country's marketing campaigns.

On a positive note, Mr Zahra said the association believed the medium term prospects were better and the situation could turn around by the second quarter of next year unless some unexpected event jolts the market.

He welcomed the support given by government through the retention of the five per cent VAT for the tourism sector and the introduction of a Lm10 million fund for product improvement.