New hotel investors should pull out while they still have a chance, MHRA president warns

A number of planned hotel developments risk bringing about a problem of overcapacity within Malta’s tourism accommodation sector, leading to a viscous cycle of hoteliers undercutting each other, according to Malta Hotels and Restaurants Association president Tony Zahra

Zahra was speaking at the presentation of the MHRA’s quarterly hotel occupancy survey, carried out by Deloitte, where he insisted that Malta was creating an “overcapacity of everything”, including rooms and accomodation. 

“There’s going to be overcapacity and everybody is just going to undercut each other,” he said, predicting a bloodbath if the industry were to continue growing as it presently is.

“Those who haven’t yet made the investment and who are still in time to pull out should do so and invest their money elsewhere.”

In addition to the hotels currently being developed, Zahra stressed that residential developments currently in the pipeline would also end up being used for tourist accommodation.

“All of these residential projects coming up, which will be second homes, will all end up in the short-let rental market.”

Airbnb continues to make inroads

The results for the second quarter of the year showed that while Malta registered an increase in the number tourists, as well as an increase in the number of guest nights on the islands, hotels registered declines across the board.

Between April and June, Malta registered a 4.6% increase in tourist arrivals and a 1.4% increase in guest nights.

“The trend here is consistently shifting more to the advantage of private accommodation at the expense of hotels,” Raphael Alessio from Deloitte said as he presented the results.

In fact, the number of tourists staying in private accommodation increased by 9.3%, with hotels registering a 2% increase.  

The increase in guest nights was similarly unevenly distributed, with hotels registering a 2.6% decrease compared to 6.7% increase in private accommodation guest nights.

Aloisio noted that since the start of the year, the decline in guest nights had leveled off, with strong rebounds registered in two months.

During the second quarter, tourist expenditure registered an increase greater than the increase in arrivals and guest nights. “This means that the spend per guest, which has been relatively static over the years, is starting to increase.”

Occupancy rates, room rates and gross operating profits all declined in the five and four-star market. Three-star hotels made big gains in each of the categories during the second quarter of the year. Five-star hotels’ losses accounted for the bulk of the losses registered by the hotel industry as a whole.

He said that the number of private accommodation units increasing by a rate equivalent to 10 medium-sized hotels every year.

Government to unveil tourism vision for 2025

Tourism Konrad Mizzi said that government had taken note of the latest figures, including the increase in tourist expenditure. He added that while Malta was seeing increases in tourist numbers, it needed to better understand how to boost hotel occupancy.

Private accommodation, he said, had changed the dynamics of the industry in both the high and low-end sectors.

“Now we need to take stock of the situation and look to the future,” he said.

Mizzi said the government was working on a tourism vision for 2025, which he said would help guide investors in the sector to make sure investment is funneled to areas where returns can be derived.

The country, he said, needed to attract better quality tourists, “who are interest in our offering”. The strategy would look to increase the spend per tourist who would ideally stay in Malta for a shorter period of time.

He said Malta was looking to consolidate its core markets and exploit untapped markets.

Mizzi also said that efforts were being made to improve Malta’s connectivity, by attracting more airlines and increasing the frequency of flights to profitable destinations.

The government’s vision for 2025, he said, would see the regeneration of areas like Sliema, St Julian’s, Valletta and the three cities, in order to better cater for the high-end market.  

A Paceville masterplan will also be proposed once again, he said.

He said that Malta needed to radically improve its tourism product, including maintenance and development of key tourist hotspots, including beach accessibility.

He said that in recent days, the Environment and Resources Authority had given the green light for wooden decking to be placed on rocky beaches in order to improve their accessibility.

Efforts are also underway to regenerate Marsaxlokk in a bit to bring back the fishing village’s charm. With this in mind, government will be embarking on a project through which it will be removing overhead cables so as to improve the village’s aesthetics. Birzebbuga will see a similar initiative implemented.

A number of promenades across Malta and Gozo, like the Strand in Sliema, which are currently in a state of disrepair, will also need to be regenerated in order to improve the tourism product.

‘Our minister is listening and is going to do things’ - Zahra

MHRA president Tony Zahra thanked Mizzi for “bringing vision to the industry”.

“At long last our message is starting to get through. We need to do things and our minister going to do the things. Our minister is listening and he is going to do things,” Zahra said.

Turning to the latest results, he said the reality of the business was that the increase in tourist arrivals and the dip in hotel occupancy meant hotels were “further from where we want to be”.

He reiterated his call on authorities to clamp down on unregistered private accommodation operators insisting that there were some 18,000 licensed beds. “With a 44% occupancy, it is clear that there must be another 18,000 beds that aren’t unlicensed.”

He said that Malta was currently facing the challenge of having to manage success.

“We must have a vision and it must start off with sustainability,” Zahra insisted.

He said that looking at the projections for next year, it was clear that Malta would need some 15,000 additional workers to fill the job vacancies being created.

“Can you imagine what this is going to do to our infrastructure, to our hospitals? Let’s talk about whether this is sustainable.”  

He expressed his satisfaction at plans for a tourism masterplan, recalling that the last time such a masterplan had been drawn up was in 1989. Despite the fact that this was 30 years ago, many of points mentioned in the masterplan have still not been implemented, Zahra said.