First quarter hotel occupancy three per cent down overall

Hotel occupancy during the first quarter of this year was three per cent down overall compared with the same period last year, a survey carried out by Deloitte and Touche for the Malta Hotels and Restaurants Association shows.

Mostly hit were five-star hotels which saw a reduction in occupancy from 53 to 48 per cent and a drop in revenue of up to 19 per cent.

This decrease, despite a good start to the year in January, was compounded by a fall in average room rates which led to a 10 per cent drop in revenue per available room.

Hotel occupancy was also five per cent lower in three-star hotels and one per cent higher in the four-star hotels.

This resulted in the hotel industry reporting a gross operating loss of 21 per cent compared with a loss of 13 per cent during the same period last year, and comes on top of 14 per cent losses during the last quarter of 2002.

The survey results were announced at the Waterfront Hotel in Sliema by Nick Captur, advisory partner at Deloitte & Touche.

MHRA president Winston J. Zahra expressed concern at the increase in year on year losses and warned against the lowering of hotel rates. He advised hoteliers "not to give in to pressure to reduce rates as this would lead to a dead end."

"We expected results for the first quarter to be worse than last year especially due to the rate dilution problem and unfortunately our concerns were justified," he said.

Mr Zahra said that provided that no further crises occurred overseas and the economic situation in core markets picked up, the number of visitors this year was likely to be on a par with last year. However, the revenues earned by hotels was expected to be lower.

He said the outlook for next year remained good and was expected to be influenced by Malta's entry into the EU in May.

According to the survey, arrivals fell by three per cent and the occupancy level dropped from 56 to 53 per cent.

Average room rates also fell, giving further momentum to the drop in revenue - down by up to 19 per cent in the luxury five-star end of the market and by five per cent in the budget three-star end of the market.

According to Deloitte & Touche, worst affected were the five-star hotels, which apart from the reduction in occupancy saw a seven per cent fall in average room rates from Lm26.45 to Lm24.52, with hotels in Malta suffering more than those in Gozo as a result of their exposure to corporate and conference business.

The survey shows that five-star operating margins fell sharply from a three per cent loss last year to a 25 per cent loss this year.

Mr Captur explained that despite the reduction in five-star occupancy, the number of five-star room nights sold during the period under review increased by 11 per cent as a result of additional capacity available on the market.

The survey among 61 properties representing 11,066 rooms and generating Lm12.2 million in revenue, showed that four-star hotels successfully held on to their occupancy levels and reported a marginal one per cent improvement over last year at 54 per cent occupancy, but at a price.

Average room rates in four-star hotels fell by over 15 per cent to Lm8.66, representing the lowest level in five years.

Three-star and budget hotels faced a decline in occupancy from 62 to 57 per cent, but balanced this with a seven per cent increase in average rates. Operating losses for that time of the year remained constant, at 17 per cent of revenue.

The survey covered only 50 per cent of 3-star hotels and the MHRA feels that if results from the remaining balance of hotels in this category were also forthcoming the picture in the market sector could even be worse than that reported by the survey. The survey covered 100 per cent of five-star hotels and 67 per cent of four-star hotels.

It also showed that hoteliers viewed short-term prospects with mixed results. While it was felt that volumes may recover, the outcome for 2003 remained uncertain due to considerable rate dilution and the relative impact on profitability, the survey said.

Conference and Incentive Travel was also running behind last year.

In his address the MHRA chairman stressed the critical importance of upgrading the local product and to the allocation of more money to the national marketing campaign.

"It is an unacceptable situation that the Malta Tourism Authority cannot plan its autumn campaign due to the non-availability of money," Mr Zahra said, as he appealed to the government to invest a further Lm1 million in MTA marketing.

Data for the second quarter survey will be collected throughout July for publication in late summer.

The MHRA is also holding a survey covering restaurants exclusively. Results of the first survey are expected after summer.

mhrasurvey@delioitte.com.mt