Maltese hotels in lowcostholidays.com bust still licking their wounds

A number of Maltese hotels were left reeling from the collapse last week of Low Cost Travel Group (LCTG) – one of Europe’s largest early bed-banks and a mid-level online travel agency – with the possible local financial fallout in the millions of euros. 

Over 450,000 British tourists visit Malta every year, and a good percentage of those are booked through agencies like Low Cost Travel.

In a statement uploaded on its website on 15 July, the company said that it had ended its activities following “exhaustive attempts by the group’s directors to rescue the group, which has been hampered by the recent and ongoing turbulent financial environment”.

All the beds and room reservations that Lowcostholidays and Lowcostbeds had pre-booked in Malta were invalidated following the collapse of the company, leaving the hotels scrambling to find fresh bookings to fill their rooms and beds.

Andrew Agius Muscat, CEO of the Malta Hotels and Restaurants Association (MHRA) told MaltaToday that a number of Maltese hotels had been hit by the collapse of LCTG.

He said that the association had invited hoteliers affected by the group’s collapse to a closed-door meeting on Friday to discuss the possible ramifications for Maltese hotels and the island’s tourism industry.

During the meeting, which saw a considerable turnout, it was agreed to gather all relevant data to be able to determine exactly how – and how much – Maltese hotels would be affected.

“While this data is still being collected, we are going to work with the members involved to decide on how to start addressing the issue and the local fallout,” Agius Muscat said.

Sources in the industry told MaltaToday that the biggest problem was not getting the beds and rooms filled in the peak season, as the bookings would probably still come in from other avenues.

The major concern for Maltese hotels would be selling the beds and rooms during the slow seasons, especially winter, since many of the hotels affected used to depend on LCTG pre-buying the beds in bulk, albeit at reduced rates, to sell on to its clients later.

There are quite a few Maltese hotels that were affiliated with Lowcostholidays, including: Sunny Coast Resort Club, Il-Palazzin Hotel, Qawra Point Holiday Complex and Clover Holiday Complex in Qawra; Gillieru Harbour Hotel and Ambassador Hotel in St Paul’s Bay; Pergola Club Hotel & Spa and Solana Hotel & Spa in Mellieha; Hotel Argento and St Julian’s Bay Hotel in St Julian’s; Bayview Hotel & Apartments and The Diplomat Hotel in Sliema; Sunseeker Holiday Complex and The Blue Sea Bugibba Hotel in Bugibba; and the Comino Hotel.

Administrators Smith & Williamson revealed that at the time of the company’s collapse, there were 27,000 Lowcostholidays customers currently on holiday and 110,000 who had booked trips but were yet to depart. About 55% of the group’s customers were British.

The administrators said that a bond in place for €1.3 million was enough to pay out only a few pounds to each customer in compensation.

Expecting “very substantial” claims from about 140,000 aggrieved holidaymakers, the administrators warned that pooled compensation was unlikely to be more than 1%-2% per claimant – potentially less than £10.

Among those stranded were scores of tourists who were already on holiday in Malta and who were left in the dark as to the state of their holidays.

The group’s collapse was being partly attributed to a lack of reserve funds and currency fluctuation, which causes huge difficulty for the travel industry. 

Hotels are usually not paid until pretty close to the arrival date of the party. So Low Cost Travel Group found itself in the nightmare scenario of having British clients who paid in full for their holidays in pound sterling back in January or February, but itself having to pay the hotels when the sterling had dropped 10% since the UK’s EU referendum on 23 June.

Many travel agencies hedge their bets a little in regard to guessing what the currency will be at when it is time to pay the hotel. 

That is one reason why one can get several different prices for the same hotel room when searching online; the different sites would each be guessing a different currency rate.

Agencies with enough reserves would be able to cover a loss such as that registered by sterling in the past month. Low Cost Travel Group obviously did not have enough reserves.

The UK’s Civil Aviation Authority (CAA) had already issued a warning back in 2013 advising holidaymakers to avoid booking with LCTG following its relocation to Spain.

The move meant that bookings with the group were no longer protected by the Air Travel Organisers’ Licensing (ATOL) scheme, which protected customers who purchased package holidays and flights from participating tour operators.

This protection ensures that customers are able to return home and receive a refund if a company does collapse.