Tourism gaining momentum but hotels worried about profits

Tourism is “gaining momentum” but hotels are still worried about their profitability, according to the Malta Hotels and Restaurants Association.

Association president George Micallef praised the government’s “decisive decisions” which increased tourism arrivals by almost 13 per cent in the second quarter of this year compared to the same period last year.

Arrivals have now almost reached the levels of 2008, a record year.

Tourism expenditure has increased by just under €50 million in the first six months of the year.

“These results continue to reaffirm the positive trend registered in the first quarter, which could have been even better had it not been for the volcanic ash disruption in April,” Mr Micallef said.

He pointed out, however, that hotels were still burdened by expenses, high energy costs and payrolls and operators were still worried about their profitability.

“Up to this June, notwithstanding the improved revenue trends, profits remained 25 per cent below the average levels between 2006 and 2008 and up to 45 per cent lower than the best results.”

He said hotels had to see healthier profits to survive and invest in their product. “The hotels and restaurants sector, which is a key component of tourism, has to be assisted to remain sustainable in the long run,” he said.

Now that arrivals have recovered, the industry must push for more increases to make up for the “unavoidable” decline in average length of stay, which continued to recover at a slower pace than arrivals.

Mr Micallef said the majority of hoteliers were very positive in their projections of the coming months, with none of the five star hotels saying they expected things to get worse, according to a survey by Deloitte.

He criticised the government for taking its time to announce the energy-saving scheme and a three-per-cent subsidy on interest for refurbishment of tourism properties, as was agreed in March, to help mitigate the impact of utility rate increases.

Mr Micallef pointed out the need to make Air Malta more sustainable, an issue of concern for the government, which is holding talks on the national airline’s future.

“We are, of course, aware and concerned about Air Malta as we eagerly await the decisions that need to be taken on the future of this indispensable partner of the tourism industry... We are also concerned about the economic scenario and austerity measures affecting our main source markets, particular in the UK,” Mr Micallef said.

Arrivals from the UK increased over last year but have not yet reached 2008 levels. On the other hand, arrivals from star performer Italy have surpassed previous records.

The MHRA said there would soon be developments following ongoing talks with UK tour operator Thomas Cook, which recently told hoteliers in Greece, Spain and Malta it would have to cut contracted rates by five per cent due to a difficult summer and the ash crisis.

The association has instructed hoteliers not to do anything that confirmed agreement to the cut and to “stick to their guns” and demand payment in full.

Developments should be announced today.