Despite the increase in tourist numbers seen last year, hotel operators are still being squeezed on profit due to increased bed supply and high inflation, a new study commissioned by the hotel lobby has shown.
The Carrying Capacity Study for Tourism in the Maltese Islands, commissioned by the Malta Hotels and Restaurants Association and carried out by Deloitte, noted how in 2023, tourist guests nights were up 4.7% when compared to 2019- reflecting the recovery of the hospitality sector in Malta following the coronavirus pandemic.
While Malta hit a milestone last year by receiving over 3 million tourists in 2023, 8% higher than the previous record in 2019, increases in room supply and a high inflationary environment weighed down on hotel operators.
According to the report, 5-star hotel operators reported the same gross profit as the one in 2019, while 4-star operators reported gains of just 7%.
When comparing occupancy rates, the 4-star hotel rates in 2023 were comparable to 2019.
However, 5-star operators marked declines with average occupancy down by 7.6% since 2019.
This is not the first Carrying Capacity Study, but a follow-up to MHRA’s first one published in 2022.
At the time, it was reported Malta needed 4.7 million tourists to achieve 80% year-long occupancy, with 2019 data being used for the study.
The ‘new’ study, published on Friday during an MHRA press conference, focuses on data provided until the end of 2023.
The study was delivered by Deloitte Malta’s Transportation, Hospitality and Service Leader, David Delicata.
Pipeline projects will see 70% increase in hotel rooms if realised
Between 2019 and 2023, collective accommodation (hotel) room stock increased by 6.2% an increase of over 1,115 rooms. The increase is attributed to the growth in room stock in 5-star hotels and other collective accommodations.
The report noted how the MTA approved 13,543 new rooms which will be added through extensions of existing collective accommodations or through new developments.
“Should all these new rooms materialise, the collective accommodation room stock would increase by 70%,” the report read.
“Total annual tourist arrivals would need to read 4.4 million if all the pipeline properties are developed while also assuming that 15% of the existing bed stock is retired.”
If no bed stock is retired, this means the tourist arrivals will need to increase by a further 338 thousand arrivals, requiring total arrivals to reach 4.8 million in 2025.
Regarding private rented accommodation, such as Airbnbs, the report noted the growing trend of booking such accommodation.
In 2023, such properties accounted for 32.4% of total guest nights, compared to 31.9% in 2019.
Despite this growing trend, the report noted how a significant proportion of the properties operated without a license.
HR challenges remain at the forefront
The report also noted how the growth in room stock adds additional pressure to the growing HR challenges operators face.
The report noted that nearly 60% of staff working in hotels and other hospitality fields are foreign nationals, and the growth in more hotels would lead to an increasing demand for foreign staff.
The report noted how the introduction of the Skills Pass has improved service quality in the sector, but it will require some fine-tuning.
“Permit authority, not Planning”
During his speech, MHRA president Tony Zahra said the local planning authority has become a ‘permit authority’ and called for there to be more strict rules on those who are planning to develop new hotels.
“We are not going to say no to all new applications, but we should question why certain applications should be provided a permit,” Zahra said.
“We should ask what speciality they will focus on, and more importantly, how will they get the staff they need.”
He said if the sector starts to lose occupancy and numbers, many will begin to face problems with their banks.