Tourism growth benefits the economy

As tourist volumes continued to increase in Q1 of 2016 the hotel sector continued to report strong overall performance according to the BOV MHRA Hotel survey carried out by Deloitte for the first quarter of 2016.

As tourist volumes continued to increase in Q1 of 2016 the hotel sector continued to report strong overall performance according to the BOV MHRA Hotel survey carried out by Deloitte for the first quarter of 2016.

Improvements were recorded primarily in the five- and three-star sectors with the four-star sector reporting a relatively flat trend compared to the same quarter last year.

The five-star segment reported significant growth in room rates, while occupancy was relatively flat. The segment also reported increases in its cost base. Payroll costs increased primarily due to headcount. Administrative expenses and property maintenance costs were reported to have increased significantly in comparison to the same period last year. Such cost increases were partially offset by lower energy costs in line with the reduced tariff which kicked in early 2015. The net impact on the segment’s profitability was a positive increase in Gross Operating Profit per available room.

On the contrary, the four-star segment reported an overall decrease in occupancy compared to the first quarter of 2015. The segment also reported an increase in rates albeit marginal. Administrative and property operation and maintenance costs are reported to have increased although offset by significant reductions in energy costs. The overall reported cost reduction appears to have effectively compensated for the decrease in revenues and four-star Q1 profitability was reported at break-even levels, consistent with last year’s trend.

Participating hotels in the threestar segment reported significant volume and revenue growth with and increasing REVPAR. The increase in revenues and volumes was partially matched by increases in the cost base including staff headcount and payroll expenses, F&B cost, direct expenses and overheads. While the three-star segment continues to report losses in Q1, the survey reported a significant reduction of approximately 40% in Q1 losses for the three-star segment.

The results continue to affirm the trend towards a strengthening of the hotel sector on the back of consistent growth in Malta’s tourism numbers and increased investment in product and quality improvement by hoteliers.

In the light of such good results MHRA president Tony Zahra asserted that this is a great moment for our economy whose growth is being fuelled by the success being achieved year on year, month on month by the tourism sector. “It is now that we need to start polishing our rough diamond by embracing a vision that will set direction for a holistic plan. We cannot talk about transport issues, infrastructural development, environment, social challenges, AirMalta, recruitment gaps, education and the economy in isolation to each other. Our common aim must be that to improve the wellbeing of our people and the experience of the tourists visiting us.”

Mr Zahra stressed that one major challenge is to address the unlicensed accommodation as these are benefiting from the economic growth while contributing little back to the economy. This is creating an unfair playing field and also leading to unnecessary risks that jeopardise the standard of our tourism product. Government must take tougher action on those refusing to adhere to standards and regulations as millions of euros are being foregone as public income revenue. MHRA also reiterated its position in favour of the tourism eco-contribution which will be reinvested back into tourism product embellishment projects.

Mr Zahra asserted that on this matter MHRA has been consistent throughout the negotiations process with government and always represented the best interests of its members as the main collectors in this scheme and the tourists as whole.

Mr Zahra also noted MHRA’s satisfaction that the Minister of Tourism Dr Edward Zammit Lewis recognised the association’s constructive approach in representing the best interests of the licensed accommodation providers and appointed them as partners in managing the fund collected through this scheme.

About AirMalta, Mr Zahra stated that there will be a meeting with the Minister of Tourism to discuss in further detail the MOU signed with AirMalta and accordingly explore further avenues of how MHRA’s recommendations could be considered in the best interests of our national airline, the tourism sector and our economy as a whole.

During the seminar BOV renewed its sponsorship agreement with MHRA. In his intervention, Kenneth Farrugia, Chief Business Development officer at Bank of Valletta, expressed his satisfaction that the bank is renewing its collaboration with the MHRA.

"Over the past 10 years, Bank of Valletta's collaboration with the MHRA has led to the consolidation of the BOV MHRA Hotel survey that has become a benchmark for the industry in Malta."

Speaking of the tourism industry, Mr Farrugia recognised the important role of all stakeholders in the industry, whose concerted efforts are providing positive results in spite of the challenging times. "This is an industry that is very dynamic, where the visitor's experience is becoming increasingly more personal. At Bank of Valletta, we have always expressed our commitment towards the Maltese tourism enterprises and reiterate our efforts to support these key players so that they may continue generating new employment and contributing towards the sustained GDP growth of the Maltese economy.”

Mr Zahra thanked Mr Farrugia and BOV for their continued support and for being the key financial partners to MHRA and its members.