[WATCH] Coronavirus: Hotels could face profits ‘wipeout’, tourism advisor warns

The drop in revenue due to the sharp decrease in guest booking because of the coronavirus might leave some hotels facing a wipe out when it comes to cash generation, Deloitte financial advisory director Raphael Aloisio has warned.

Aloisio said that Covid-19 effects on tourism and hotel bookings will have a very significant effect on the sector.

He emphasised that it was important that the right corrective action is taken to ensure the tourism industry is in a position to rebound when the pandemic is over.

Aloisio was speaking during a special edition of the Malta Hotels and Restaurants Association quarterly review, which was being transmitted online due to the coronavirus outbreak.

He emphasised that hotels’ drops in room revenue would have a disproportionate impact on gross operating profit per available room (GOPPAR).

“A 40% drop in revenue would caused an 80% drop in GOPPAR… a wipe out of the total cash generated by the hotel on average,” he said.

After ten years of sustained growth, the inevitable reality of a tourism industry slowdown has come from an unexpected source - the coronavirus - he said. “It is hitting hard and everybody is accepting the fact that it is going to be a very significant impact, no matter what happens. Hopefully, the duration won’t be very long,” he said.

“Tourism has always been at the heart of the economic barometer. Year after year, it has been shown that the tourism sector has always been in the top three drivers of economic growth. So, we have to be really careful to take all the corrective action necessary so when this passes the tourism industry will be strong and can help propel the local economy, as it has always done.”

He urged for stakeholders and the authorities to pull together to draw up a clear plan to ensure that when the end of the pandemic is close, the industry’s ability to kick start the economy is in place.

Aloisio’s comments come as hotels are facing an almost complete cancellation of group conferences until May and a vast decrease in the number of leisure bookings.

An extension of mandatory quarantine for all visitors coming to Malta, announced by Prime Minister Robert Abela earlier today, will significantly amplify the negative effects on tourism.

‘Together we can contain the damage’ - Tony Zahra

MHRA president Tony Zahra, speaking at the conference via video-conferencing, said that the current circumstances were “exceptional” and that an unseen viral enemy was bringing the world to its knees.

“We are looking at how we can move forward. There are no easy answers. Nobody has any magic formula. We are trying to contain the damage… together I think we can contain the damage,” Zahra said, highlighting that the MHRA would later today be meeting with the Prime Minister to continue a dialogue on what could be done to help the tourism industry.

“We need to face it together, and to see how best we can contain the damage… we must all understand the damage which will happen,” he said.

Zahra said the tourism sector had in the past gone through very difficult times, caused by both local and international events, such as wars and terrorist attacks. “We’ve always managed to come out of such periods stronger,” he said, noting that between 2011 to 2020 the industry enjoyed year after record year.

‘Tourism industry will return to record-breaking performances’ - Julia Farrugia Portelli

Tourism Minister Julia Farrugia Portelli, who joined the conference via video link from her ministry office, said that the government would shortly be announcing a set of measures to address the “hemorrhage” in the tourism sector.

“We are facing an unprecedented challenge, not only to tourism, but also to the whole global economy… it is like nothing we have faced before,” Farrugia Portelli said.

The government, she said, had set up a specific committee on Covid-19 mitigation and would be devising measures aimed at helping the industry. “We will be helping the industry with tangible actions,” she said.

“I firmly believe we shall win and pass through this together, bruised but not defeated. The tourism industry will return to record-breaking performances,” she added.