Hotels are predicting their revenue this year will be €54 million lower than last year's, as they brace themselves for a further blow with the increase in energy prices.

With a 30 per cent average increase in water and energy prices, the Malta Hotels and Restaurants Association (MHRA) has asked for an urgent Council for Economic and Social Development (MCESD) meeting to discuss the matter.

MHRA president George Micallef warned that with falling revenues and rising costs, including the cost-of-living adjustment of €5.82 a week per employee, further increases in operating costs "are simply unsustainable... and the first thing that will be put at risk is employment".

The rise in energy costs also featured in the results of the July to September survey on how the hotel industry had fared. According to the Deloitte report, summer 2009 was yet another uphill struggle for the tourism sector. Deloitte's Raphael Aloisio said the overall occupancy across all hotel categories in summer had increased by a few percentage points but room rates were slashed, resulting in a significant drop in earnings.

Throughout the year, occupancy levels had dropped by eight per cent in the five-star category, by nine per cent in the four-star and by a staggering 23 per cent in the three-star.

For the summer period, five-star hotels slashed their room rates by 16 per cent because of uncertainty in their markets. This policy gained them volumes over other hotel categories.

Four-star hotels also reduced their rates by 13 per cent but these did not get the volume increases like the five-star hotels, and thus suffered a double blow. Three-star hotels, whose prices are already very low, dropped their room rates by two per cent.

Five-star hotels reported an increase of one per cent in energy costs and several cost cutting exercises such as a 12 per cent cut in administration expenses and a 10 per cent cut in marketing. Mr Aloisio said, however, that "aggressive cost cutting is not sustainable in the long term".

Mr Aloisio said hoteliers, big and small, were gloomy about occupancy prospects. However, there was still an improvement on the predictions made during the second quarter.

In his address, the first since he was elected MHRA president, Mr Micallef followed in the footsteps of his predecessors and called for a better upkeep of the country, especially in tourism zones.

He also expressed hope that the 50c tax on every hotel bed, which the government has already postponed to April 2010, would be postponed again.

Mr Micallef said that for hotels to at least break even, Malta has to target seat capacity of 2008 levels. Although seat capacity "is critical", efforts had to be made to fill these seats.

The MHRA's request for an urgent MCESD meeting was immediately endorsed by the Chamber of Small Businesses (GRTU), which was represented by its president, Paul Abela.

GRTU leisure sector president Philip Fenech added that while retailers were struggling to pay their pending bills, they were faced with more increases, which led to a situation of "economies of despair".