12 SEPTEMBER 2001

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MHRA calls for 5% VAT to remain unchanged

4-stars hit hardest hit, 5-stars faring well - survey

MHRA President Tony Chircop yesterday called for pricing stability and the five per cent VAT rate for hotels to remain in place, given the fact that the market is at present acutely price sensitive and vulnerable.

Mr Chircop, speaking at the publishing of the MHRA's survey for the year's second quarter, adds, "It appears that the short-term outlook for tourism is somewhat downbeat. The UK consumer market has yet to demonstrate its reaction to the removal of the exchange-rate subsidy and the increase in the brochure price of Malta holidays (post 1 November 2001).

"The repositioning of Malta in the German market could take time and the conference and incentive business is bracing itself for a potential contraction following a slowdown in the major world economies."

Meanwhile, the survey, published by Deloitte & Touche, found that operation performance this year's second quarter had improved over the same period last year, despite the sharp decline of arrivals in April and occupancy reductions across most of the country.

For the period, the average length of stay was found to have increased by one per cent. However, overall tourist arrivals for the year up to June were down by one per cent over arrivals in the same period last year, while this year's second quarter results show that tourist arrivals were down sharply in April, were slightly ahead in May and were constant in June.

The survey also reports that the trends of Malta's main source markets have been consistent with those registered earlier in the year - with German and Libyan traffic showing a decline while the UK, French and Italian markets performing well.

According to the survey, returns show that room occupancy levels achieved in the second quarter of 2001 were weaker in the 4-star and 3-star segments compared to last year. Almost two-thirds of participating 4-star properties reported a decline in their room occupancy relative to 2000, while hotels in the Bugibba area seem to have borne the brunt of this decline.

However, this hasn't been the case in the 5-star industry, as good improvements were seen in most 5-star hotels in both Malta and Gozo. In Gozo's case, this improved occupancy has been at the expense of lower rates.

Room occupancy reached 78 per cent in 5-star hotels (five per cent more than last year), 77 per cent in 4-star hotels (three per cent less than last year) and 69 per cent in participating 3-star properties (four per cent below last year’s levels).

"Given its size, the 4-star category continues to be the sector that has been hit most by the restructuring in the German market," commented Nick Captur, Consulting Partner at Deloitte & Touche.

He adds, "Furthermore, flash results covering the period July to September indicate that this will remain the case, with 4-star room occupancy levels forecast at around three percentage points lower than last year. In contrast, occupancy in 5-star hotels this summer appear to be ahead of last year."

The MHRA survey found that Average Achieved Room Rates improved in all categories, continuing a trend seen earlier this year. Average room rates are currently around Lm38 in the 5-star sector, Lm17 in the 4-star sector and Lm9 in the 3-star sector.

The survey also found that labour costs and overheads continue to be very tightly controlled and there is evidence that manning levels were cut back slightly as a result of lower occupancy - so as to control the cost base. Improvements in revenue are also responsible for the overall improvement in financial performance.



The Business Times, Network House, Vjal ir-Rihan San Gwann SGN 07
Tel: (356) 382741-3, 382745-6 | Fax: (356) 385075 | e-mail: editorial@networkpublications.com.mt