Hoteliers call for reduction of 7% VAT rate

Hotels want a 7% VAT rate on refurbishment of their premises notched down to 5% to take back an estimated €10 million in taxes paid to the state, a hotel industry survey commissioned by the Malta Hotels and Restaurants Association says.

MHRA president Tony Zahra said that over the past decade, 11 hotels with an average 200 rooms each had undertaken refurbishments costing close to €25,000 per room. "This is only one of the benefits that can be gained by taking the rate down from the hiked-up 7% to the original 5%," Zahra said in a comment on Deloitte's hotel survey for the first quarter of 2013.

Zahra said that the government was on track with energy plans that would give businesses a 25% reduction in utility bills by 2015, saying this would lower rates by 5c per kilowatt-hour.

The survey presented today showed a 12.3% increase in tourist arrivals for the first quarter of 2013, compared to the same period in 2012, and an 8% increase in nights spent in hotels and a 4.2% increase in tourist expenditure.

The cost of food and beverages over the revenue of 5 star hotels åfrom the same sector went up by 2.4% while payroll costs per available room increased by 3.6% and the total overheads for the first quarter went up by 0.3%. The higher staff costs coupled with the decrease in food and beverage sales contributed to gross operating losses of €97 per room when compared to 2012.

4 Star Hotels registered a significant increase of 9.1% in non-accommodation income per occupied room which compensated for the lower occupancy rate and helped increase the total revenue per occupied room by 2.2%. Higher consumption of food and beverages and a slight decrease in payroll costs led 4 Star hotels to run lower operating costs and register a €49 euro profit per available room.

Room rates at 3 Star hotels declined for the first time after three successive quarters. Occupancy levels improved by 12.4%. This was the third time occupancy levels in 3 star hotels increased since the beginning of 2012. This was the primary factor behind marginally lower operating costs which led to a profit of  €29 per available room.

"The hotel industry remains a winning industry and we are confident for the summer. But we have repeatedly rapped the government on ensuring the sector's sustainability," Zahra said.

He joked with hoteliers that discounting their room rates and cutting down on their profits would only make it harder for the MHRA to argue its position that the government must support the industry.