Certain five-star hotels managed to fill just a third of their rooms last month. Although occupancy is expected to improve in March, many will still be half empty, The Sunday Times has learnt.

According to industry sources, occupancy levels in five-star hotels were between 30 and 35 per cent, though they are expected to climb up to 40 per cent this month.

This is a sharp drop from the 48 per cent occupancy rate in February 2007 and 2008.

Figures compiled by the Malta Hotels and Restaurants Association show that five-star hotels are projecting a drop of almost 22 per cent in their occupancy levels for the past month, compared to the same period last year. This is in line with the 19.1 per cent drop in inbound tourists for January announced by the National Statistics Office last week.

The MHRA figures show that the five-star category suffered the sharpest drop last month, followed by a 13.5 per cent drop among three-star hotels and a drop of almost nine per cent in the four-star category. Asked why five-star hotels were worst hit, MHRA vice president Winston Zahra said a substantial amount of their business came from corporate clients and conference and incentive groups, which were suffering due to the international economic downturn.

"Companies are cutting budgets and spending less on business travel and on conferences and incentives outside of their own country. This obviously has a negative impact on the five-star hotel segment which generates a large amount of revenue from this type of business," he said.

Mr Zahra said the "significant majority" of hoteliers were concerned about the situation, which was made worse by falling room rates.

International travel website Expedia costs a two-night stay for two people in local five-star hotels next weekend at between €121.68 and €285.59, with the Phoenicia being the most expensive.

Mr Zahra said the cost base of a hotel was generally fixed and the industry was labour intensive, which meant businesses could face cash flow problems very quickly unless they were solid when revenues fell at the current rate.

He said private industry was working closely with the authorities to try and implement action that could help keep the tourism sector healthy over the coming months.

"The main focus of the strategy being used is to do all that is possible to maintain the number of arrivals to the island as this is ultimately what will make the difference. As always with our industry we have to continue to focus on increasing seat capacity into the island, ensuring we get as much mileage as possible out of marketing funds spent by private industry and the Malta Tourism Authority and improving our overall product to ensure we deliver value to those people who ultimately choose to visit our islands," he said.

The recession in the UK and the plummeting sterling are being blamed for the situation. "It is very difficult to forecast how the year is going to pan out," he said, adding that the rest of 2009 would depend on how fast the economies in core markets recovered and on how sterling performed against the euro.