Incoming Malta Hotels and Restaurants Association president Paul Bugeja speaking yesterday. Photo: Chris Sant Fournier

Four and five-star hotels registered increases in occupancy levels and profits this summer but the three-star category continued to suffer, seeing costs spiralling and profits go down, a quarterly survey has revealed.

Profits in the first two categories increased by six per cent compared with the summer of 2012, according to a survey commissioned by the Malta Hotels and Restaurants Association and carried out by audit firm Deloitte.

However, the gross operating profit of three-star hotels declined marginally.

With these results in hand, these hotels are not at all positive about their prospects, with only a third saying their rates could improve.

This is in contrast to five-star hotels: although seeing a marginal decline in occupancy, 60 per cent of them are expecting both their rates and occupancy levels to improve.

Between July and September, hotels collectively reported a 1.4 per cent increase in occupancy over the summer of last year. The average room rate improved across all hotel groups.

Total tourist arrivals increased by nearly 40,000 over the corresponding quarter in 2012.

The UK remained Malta’s main market, accounting for 27 per cent of tourists in the three months under review. Nearly 11,400 more tourists arrived from Italy and 3,000 more from Germany, while the number of tourists from Spain went down by just over 2,000.

Although the general results for the tourism industry were positive, incoming MHRA president Paul Bugeja warned that long-term sustainability for the hospitality industry was a challenge.

“We are closing the year in celebration because we had yet another record year, but we need the government to help us restore sustainability by increasing tourist arrivals in the shoulder months, reducing our water and electricity tariffs and reducing VAT on accommodation back to five per cent.

“We will not give up on our insistence because it will make a big difference,” he said.

He said 40 per cent of tourist arrivals were in the summer months and more had to be done to address the seasonality factor.

A drop in the VAT rate would help hotels invest in upgrading their facilities, he said, adding: “We need to invest in the present to safeguard the future.”

Deloitte partner Raphael Aloisio said while costs had increased by seven per cent since the beginning of the year, hotels were becoming increasingly cost-conscious.

Three-star hotels were worst off because while they repor-ted the lowest increase in revenue, they were hit by the highest rise in costs.