Four more hotels to 'close down'

The Malta Hotels and Restaurants Association is "aware" of another four hotels that are expected to close down in the coming months, association president Winston Zahra said yesterday. He would not give further details at this stage to avoid fuelling further "undue speculation".

"New names come up every day and one has to be careful about how such information is used. The reality is that there are definitely other hoteliers who are re-assessing the viability of their operation and unfortunately more closures are expected within the coming months," Mr Zahra told The Times.

Recently, Island International, a four-star hotel hotel in Bugibba, and the Galaxy, a Sliema hotel, were among those that announced they were ceasing operations. The Les Lapins in Ta' Xbiex said it was closing its doors in order to upgrade the hotel, which will be much smaller than the present size.

The General Workers' Union has claimed that seven hotels in the three and four-star category will be closing down shortly.

In an interview last Monday, Tourism Minister Francis Zammit Dimech denied that the hotel industry was facing a crisis, dismissing comments that a number of establishments were closing down as mere speculation.

Mr Zahra said the MHRA had contacted both the GWU and the Union Haddiema Maghqudin and offered to give the names of all those who had been made redundant to the associations' members with a view to filling any vacancies.

Mr Zahra described the situation as very worrying but fell short of calling it a crisis.

Due to a combination of international factors out of the industry's control, as well as a number of local factors that were letting operators down, the performance of the market had been very poor, he said.

The issue did not solely concern the number of visitors but the length of stay and how much they spent on their visit.

Today, on average, hotels were registering half the profits they were making two years ago - and even then the results that had been achieved were considerably lower than acceptable international industry standards, Mr Zahra noted.

This situation had led a number of investors to re-asses their investment in the industry and pull out altogether.

Some of the hotels that had shut down had not done so because they were past their "sell by date", Mr Zahra said. Some of them were in fact good properties enjoying above average results.

Last year, the MHRA highlighted the issue of excessive bed stock (around 39,000 licensed hotel beds in June) and argued that Malta needed to attract 1.5 million tourists to fill the number of beds.

The association had recommended that the government place a moratorium on new bed stock coming on the market until the factors suppressing demand were properly tackled. This request was given the thumbs down.

However, the reduction of bed stock will offer little reprieve to the hotels remaining open, according to Mr Zahra. "We cannot afford to start taking this issue lightly by assuming that this is a natural process of the survival of the fittest.

"There are large investments and thousands of jobs at stake and we have to accept that we have a collective responsibility to raise demand to the levels that we need, not only for hotels, but for Malta as a whole."

Echoing comments made by Dr Zammit Dimech, Mr Zahra said the MHRA believed operators should resist discounting.

"The reality, however is that when an operator is looking at a very low occupancy situation he will take anything - at least to scrape in some revenue to meet his fixed costs.

"Hotel prices in Malta are ridiculously low when compared to properties in other markets of the same level. Concurrently we have a very high cost base."

When times were tough, the easiest and most common tool used to entice tourists was by offering discounted prices.

The problem was exacerbated when properties started trying to outdo each other to win the small amount of business available. It was a very unhealthy practice but also a very common one, Mr Zahra noted.

"The MHRA has been warning since last June about what could happen this winter. If more action had been taken to fund marketing, some of the current problems could have been avoided - or at least would not be as bad."