Hotel lobby insists EU push on aviation fuel tax would destroy the industry

Malta Hotels and Restaurants Association President Tony Zahra said that the EU’s insistence on charging fuel taxes on flight tickets, pushing up prices by an average €60, would "destroy" the hotel industry. 

“Going forward we shall be facing huge taxes given the EU’s insistence on cutting fossil fuels by charging huge taxes on fuel which given Malta’s peripheral location could mean an extra 60 euros per passenger tax. This would destroy your business,” Zahra told hoteliers.

Airline tickets will increase substantially in the near future as Europe prepares to legislate necessary rules to replace polluting, fossil jet fuel with SAF – sustainable aviation fuel. MEPs adopted a position on the draft EU rules, that will force EU airports to have flights uplifting a minimum share of SAF, starting from just 2% in 2025, right up to 85% by 2050.

On Friday the Malta Hotels and Restaurants Association (MHRA) presented the Performance Review for Q1 and Q2 of 2022.

Raphael Aloisio, Financial Advisory Leader for Deloitte Malta said that the industry saw “massive increases” in activity, in comparison to 2021, with 2019 remaining the benchmark.  

Tourist arrivals for the first six months of the year reached 75% of that of 2019, but they were up to 86% in Q2 alone.  

“Although the gap has been narrowed down, the forecast is that 2024 will be the time when flights and tourist movements will reach 2019 levels,” Aloisio said.  

The length of an average hotel stay in 2022 was marginally higher than that of 2019, with cumulative guest nights reaching 78% of 2019 levels.  

Tourist average daily spend reached €109, which was 2.5% below the level of spending registered in 2019.  The expenditure in the first six months of 2022 reached 76% of that in 2019.  

Occupancy levels for the first half of the year reached 67% of 2019 levels. “People’s intentions to book flights and holidays is slowly but steadily increasing,” Aloisio said.  

The average room rate in Q2 for five-star hotels was up by 12.1% since 2019 but was down by 7% in the four-star category.  

Aloisio said that the recovery in hotel accommodation was better than that in private accommodation. “The hotels took safety seriously during the pandemic fared better than others,” Aloisio said. 

Despite the significant drop in occupancy, operators managed to contain the drop in total revenue to less than the decline on occupancy – primarily as a result of improved rate and higher non-accommodation income. 

Aloisio said that the COVID wage supplement and the reduced employee headcount, contributed to lower payroll across all hotel categories up until May 2022, when the supplement was discontinued and payroll costs increased. 

“The occupancy for July and August is very strong, projected to be on average even higher than 2019, but the rates for September and Q4 appear to be sluggish,” Aloisio said. 

Recent disruptions in major airports and Malta's connectivity

The recent disruptions in major airports in Europe like London Heathrow and Amsterdam Schiphol, were also affecting the industry. 

Aloisio said that the majority of hotels were experiencing up to 10% of cancellations and experiencing a fairly slow pick-up rate for July and August. 

Zahra stated that despite the economic recovery from the pandemic for the hospitality sector was now gaining momentum, other challenges were emerging, amongst other those related to climate change, the war, global inflation and shortage of skilled staff.   

He specifically referred to connectivity and the challenges that the aviation industry is facing right now, the chaos at all airports and the inability of the airline industry to ramp up staffing levels to meet the strong demand.  

“Connectivity is the name of the game for Malta, it always was and always will be. Last year Air Malta kept flying empty in order to keep the connectivity going. It is of utmost importance that the national airline keeps flying, as without it the problems would be grossly worse.”  

Zahra asserted that the hospitality industry had to be innovative.  “Indeed, we need to train people to be innovative and smart - that will define our industry for the future”.