Hoteliers were yesterday strongly urged not to panic and lower their room rates in challenging times, despite the decline in arrivals in the first quarter of this year due to a drop in seat capacity.

Do not crucify us, because there won’t be a tourism industry

The Deloitte Bank of Valletta Quarter 1 results highlighted that accessibility was the key to success, said Malta Hotels and Restaurants Association president Tony Zahra, warning that profitability would drop if rates were reduced.

Speaking at the Corinthia Palace Hotel, Mr Zahra advised hoteliers to use their heads and regain control over their properties, instead of succumbing to the pressure from tour operators.

The good news was that seat capacity from April to October would be the same as 2011 and the summer was expected to be on par with last year.

The load factor for April and May also surpassed 2011, so lost ground in the first quarter was being compensated for, he pointed out.

Losses in the first quarter have been experienced in arrivals (10.9 per cent), guest nights (eight per cent) and tourism spend (2.5 per cent), while occupancy in each hotel category was down by between seven and eight per cent, according to the report.

On the other hand, average achieved room rates (AARR) grew by 2.2 per cent for five-star hotels, and 5.5 per cent for both four- and three-star properties.

The presentation, dubbed “a slow start” by Nick Captur from Deloitte, showed the figures for the first quarter were worse than last year but an improvement on two years ago.

The MHRA’s objectives for the coming months include sustainability, the industry having experienced a net profit loss of about €10 million over the past five years.

The association has, therefore, set up a group to look at the issue, particularly in view of the fact that hotels would need refurbishment and would need money to fund this.

The MHRA has raised the “unacceptable” issue of energy costs with the government, questioning why Enemalta Corporation’s inefficiencies were being passed on to tourism operators, making the country uncompetitive.

“The new power station should increase efficiency by 40 per cent in July 2013 and we want to benefit from the full cost recovery,” Mr Zahra insisted, expecting €6 million to go back into the pockets of hoteliers.

“Do not crucify us because there won’t be a tourism industry. The hotels are its backbone,” he said.

Mr Zahra also took aim at the roads, saying the fact that maintenance works went on forever was also “unacceptable”.

But he thanked Arriva for the improved service and Air Malta for understanding the need for accessibility.

“If the airline does not provide the seats, we will have to ask someone else to do so,” he warned.

The association also urged the authorities to take stock of the issue of unlicensed accommodation and use August to get to the root of the problem.

It was “completely unfair” on the operators, who paid their taxes, the MHRA said, estimating that private accommodation resulted in a loss of €24 million to the industry and €1.7 million in taxes.

The number of unlicensed beds has been increasing year on year and stood at 4,000 in 2011.

Why cheap deals are not smart

The way forward in challenging times was to avoid across-the-board discounting of room rates, which would result in lower volume, according to Raphael Aloisio from Deloitte.

He urged hoteliers to be strategic, to avoid undercutting direct competition and to step up their marketing budget, rather than cut it.

The natural instinct to go for widespread discounting was not necessary – a price reduction in hotels did not lead to a rise in demand – and the focus should be on increased and innovative marketing initiatives, Mr Aloisio said.

“While an element of occupancy is lost if they hold on to their rates, ultimately, they would end up with a better revenue per average room and gross operating profit.”

Mr Aloisio advised hoteliers to go for “rate-obscuring, value-added messages”, which meant taking initiatives that made it more difficult for consumers to focus solely on the cost of the room. The idea was to include additional value added products in the package.