Cabinet rejects MHRA proposal to ban new hotels building

The cabinet has turned down a recommendation by the hoteliers' association to impose a moratorium on new hotel building applications.

The cabinet, however, agreed to clamp down on long-pending applications and that it would monitor the bed stock situation closely, according to Tourism Minister Francis Zammit Dimech.

A position paper on tourism drawn up recently by the Malta Hotels and Restaurants Association showed that a number of hotels could be driven out of business if the bed stock kept increasing.

There are an estimated 39,000 licensed hotel beds, but if the applications in the pipeline all come to fruition, there would be up to 45,000 beds within the coming four years.

Contacted yesterday, Dr Zammit Dimech said the cabinet felt the recommendation to restrict new bed stock was seen as a drastic measure at this point in time, which could hamper development of new markets.

However, the government insisted that the respective authorities would monitor each case individually.

In its document on accommodation, the Malta Tourism Authority recommends that any new hotel accommodation should be of a standard which reflects the trends in the hotel accommodation industry and wherever possible provide a competitive edge over other resorts in the Mediterranean.

In line with another recommendation given by the MHRA, Dr Zammit Dimech said it was decided that, should a developer fail to start or complete works by a stipulated date, then the permit would automatically lapse.

Operators will be asked to submit an execution and completion plan and strictly to stick to the deadlines given. This also applies to hotel development currently in progress.

"Situations where operators obtain a permit and sit on it will not be accepted," Dr Zammit Dimech stressed.

The cabinet also agreed to extend an incentive scheme for three star hotels to upgrade their product.

The current subsidy of bank loans for refurbishment for the addition of facilities and for small extensions has been extended from December 2003 to December 2005.

The Tourism Ministry would subsidise up to two percentage points of the interest on the sum agreed between lending banks and the owners of three star properties which have fewer than 100 beds.

In his reaction, MHRA president Winston Zahra said the association was not surprised that the government has not accepted the association's proposals in full.

"We never expected the government to impose a moratorium on development After all, the financial institutions have done this indirectly by being much more cautious on which projects they lend money to."

He said the MHRA appreciated the speed at which the cabinet discussed its position, however it now expected the government immediately to address the situation by allocating sufficient funds for the much needed international marketing.

"We need to invest enough money into our marketing machine, backed by a focused marketing strategy, to ensure that we increase our tourism arrivals to 1.5 million people a year, spread over the full year, in the shortest time possible," Mr Zahra said.

He said the position paper made it very clear that Malta needed to attract 1.5 million tourists in order to keep the existing bed stock viable.

The MHRA's suggestion was also environmentally driven as the association felt that further development of virgin land would be detrimental.

For the existing 39,000 beds, Malta needs 1.1 million tourists staying an average of nine nights each at decent rates to simply keep the hotels at break even point, Mr Zahra said.

To ensure the rate of return is "decent", this number needs to increase to at least 1.3 million tourists a year.

Once this number is reached, for every 1,000 new beds, Malta would need to attract 30,000 additional visitors.