About The Hotel Industry

Clearly, the past few years have been challenging for those in our industry.  The credit crunch had an immediate effect, as did subsequent global phenomenon including the ash cloud which hampered air traffic from our core northern European markets.  More recently, we have seen the geo-political situation in North Africa begin to have a bearing on the industry's outlook for the coming year. The hotel and hospitality industry is resilient though and has undoubtedly proved in Malta that it is for the long term, and well able to recover from such periodic set backs.  

With our hotels and resorts operating in the upper end of the market, offering four- and five-star accommodation, our portfolio did come under pressure. However, we took the opportunity to pare down without the need for attrition in our staff complement.  Our drive for efficiency in all areas of the business and in ensuring each staff member feels a sense of responsibility to the overall group performance has helped us through a testing period and will shore the Group up for the future.  

Driving rate growth will still remain challenging, in part because Malta had seen a seen a trend for shorter guest stays in recent years. There are several factors which impact our performance, and over which we have no specific control, albeit a strong, influential voice in our market as a leader in the hospitality sector.  These are:

Seat Capacity

In recent years, we have seen a significant increase in capacity. Despite the situation at the national carrier, Air Malta, which announced the withdrawal of some routes, and a reduction in frequency of flights on others, including to major cities, we believe that seat capacity to core markets will be secured. Increasingly, low-cost carriers are taking up some of the demand and potential for route growth. It is encouraging that the various stakeholders - from the Malta Tourism Authority (MTA), Ministry of Tourism and Malta International Airport to private sector players - have been collaborating to try and mitigate the outfall and to ensure Malta is well served by air capacity.  This unison of purpose and voice can only but encourage airlines to assess the demand from source markets and tap new ones as well as shore up established routes.  

Marketing

We have been encouraged by recent increases in the Malta Tourism Authority's (MTA's) budget devoted to the promotion of 'product Malta'.  Under an agreement with the Malta Hotels & Restaurants Association (MHRA) we have seen the MTA extend its Euro for Euro scheme for new marketing spend by properties.  This has given out the right signals. While it is not the sums themselves, but how they are spent that will determine the success of any marketing campaigns, all indications are that the MTA's recent campaigns have yielded positive results.   Certainly, private industry has been given a fillip and a financial incentive to keep up its own marketing drive. The MTA has also been instrumental in reassuring key source markets that Malta is open for business as normal despite the geo-political situation in North Africa remaining fluid. 

Fixed Costs & their Challenges

A major issue we have faced is in absorbing the country's electricity rate increases.  These have proved to be the single most significant rise in costs that management has had to deal with in recent times.  With increases of 55% on our second largest operating cost after wages, the rise has impinged considerably on our year-end figures. However, from this situation comes good news.  At IHG, we have always sought ways to mitigate our utilities costs, and have been exploring and implementing some of the most technologically-advanced environmental management (in water treatment and recycling for instance) as well as ensuring we carry out simple, but effective energy reduction in our day to day practices.  Overall, we are seeking to reduced our reliance on fossil fuels and the local energy provider.  Our innovation and efforts will reap benefits in years to come even if we are burdened for the immediate future by lock-in to a high-cost energy producer. 

Ad hoc Taxes

Thankfully, we have seen the removal of the proposed 'bed tax' which would hit hoteliers, and the introduction of an eco-contribution scheme which is far more equitable a fiscal move as it is placed on all visitors to the islands, not solely hotel guests.  This type of tax is now commonplace in many destinations.