Fewer tourists, more beds cause headaches for hotels

Negative trends have persisted for hotels in the second quarter of 2006, according to the quarterly hotel survey by Deloitte, which revealed "extremely worrying" figures.

The general outlook for the future is bleak too, with some 80 per cent of respondents in the five- and three-star categories and 70 per cent in the four-star sector expecting occupancy levels to be the same, or worse, than last year.

Deloitte's Raphael Aloisio blamed the continued decline in occupancy levels on the combined effect of the drop in tourist arrivals and the increase in bed stock.

The three-star sector reported the sharpest fall of 14.4 per cent compared to the second quarter last year, with drops in the five-star and four-star properties hitting 3.3 and 3.2 per cent respectively, notwithstanding the increase in guest night generation.

"The drops in occupancy are even more alarming when considering that this year had a late Easter which was expected to boost the levels hotels would achieve in the second quarter to compensate for the lower occupancy levels achieved in the first three months," Mr Aloisio said.

Tourist arrivals were down by 1.7 per cent for the second quarter and 2.4 per cent for the first six months, the survey showed. Malta performed worse than the four other destinations it was normally benchmarked against.

The downward trend in conference and incentive travel business, which experienced an absolute drop of seven per cent in what was meant to be its best period, was also "worrying".

The survey showed that Gozo was also suffering insufficient volumes and registered poorer results than the same period last year, the Average Achieved Room Rate (AARR) of its five-star hotels being eight per cent lower than those in Malta.

Flight accessibility and more airlines, improved infrastructure and promotion were considered important to reverse the trends, the survey showed.

On a more positive note, every hotel category reported an increase in the AARR, which to some extent mitigated the negative impact of the lower occupancy levels, Mr Aloisio said.

Overall, hotels in the three- and five-star categories registered declining gross operating profits, while those in the four-star were marginally improved.

Commenting on the results, MHRA president Justin Zammit Tabona said the losses registered from Malta's core UK, German and French markets had reached alarming levels.

The close correlation between the decline in tourist arrivals and the reduced number of aircraft movements was becoming increasingly evident, he said, adding that tourist numbers could not increase if the number of flights decreased.

However, Air Malta chief executive officer Joe Cappello, speaking from the floor, pointed out that it was not necessarily a drop in aircraft movements that led to fewer tourist arrivals, but a drop in the number of people holidaying in Malta.

Notwithstanding its support for low-cost carriers, the MHRA acknowledged that Air Malta still had a pivotal role to play in the tourism industry.

"Malta desperately needs a focused tourism strategy and action plan, which should lead to coordinated strategic initiatives by Air Malta, Malta International Airport and the Malta Tourism Authority," Mr Zammit Tabona said.

"Given the high degree of interdependence, the authorities should seriously consider bringing these entities under the same ministerial responsibility."

The tourism plan must lay down definitive product improvement initiatives and a clear marketing strategy, Mr Zammit Tabona said, adding that it should also offer a clear vision for increased air traffic to Malta.

In an earlier presentation on the adoption of the euro, National Euro Changeover Committee chairman Joseph F.X. Zahra said the industry would be affected positively by the changeover. Since its major market was Europe, it would mean a "seamless" process for tourists, who would also be able to avoid the cost of exchanging their money.