MHRA calls for a reduction in VAT tariffs

MHRA president Paul Bugeja called on the government to review the VAT rate and turn it once again to 5% in the tourism sector.

Addressing a conference in which MHRA presented the results for the first quarter of the year, Bugeja said that in order to ensure sustainability of the tourism sector, bureaucratic procedures that restrain productivity  and innovation should be removed.

"We should also review how to reduce the financial burden on hotels and restaurants such as taxation and energy costs, including a review of the VAT rate, which is supported by EU directives as an exception for our industry," Bugeja said.

The MHRA president also spared a thought for the situation of Air Malta, saying it was time to take key decisions as soon as possible.

"This means being realistic and taking tough decisions today. In terms of ownership structure, one such model which has worked for Malta is the one similar to BOV. It is clear that Air Malta's  model needs to change to meet today's market challenges."

Positive results in the first quarter
During the first quarter of 2014, Malta's tourism sector continued to report improvements over the corresponding period last year on most key performance indicators.

A survey conducted on behalf of the Malta Hotels & Restaurants Association shows that overall, tourist arrivals increased by 7.9% when compared to the first quarter of 2013. Hotels registered a slightly higher increase of 8.1% when compared with the 7.2% increase by private accomodation.

In the first quarter, guest nights also went up by 4.3%, even though only private accomodation registered an increase (+16.4%) since hotels registered a minimal reduction (-0.5%). The average bed nights spent in hotels during the first quarter went down to 6.59 from the 7.15 rate of last year.

5-star hotels registered a 11.9% increase in occupancy rates. 4-star hotels registered a 1% loss while 3-star hotels increased their occupancy rates by 9.4% when dompared to 2013.

All sectors managed to reduce their low-season gross operating losses. In the 5-star sector, the gross operating loss per room decreased by almost half, primarily as a result of improved rates and occupancy, notwithstanding an increase in the cost base.

The improvement in the 4-star sector was less significant at 16.6%, with the overall cost base remaining relatively in line with the same period last year. Losses in the 3-star sector were cut by slightly more than 26%, but reported a decline in non-accomodation income and in the average achieved room rate.

Payroll costs increased in all sectors, most notably in the 5-star (+7.9%) and the 3-star (+5.8%), while the increase in 4-star was less significant (+2.2%).

Meanwhile, according to a separate study by Curmi & Partners, Malta placed eighth in the cheapest destinations in the EU, with rising operating costs offseting revenue gains to a large extent. Portugal was the cheapest destination.

Helena Egan from TripAdvisor said there were around 175,000 reviews related to Malta, but only 31% received a reply from a management when a complaint was filed about accommodation.

She noted that 35% of those who searched about Malta were from the United Kingdom, followed by users from Italy and France. Those who searched for Malta also searched about London (UK), Rome (Italy), Barcelona (Spain), Marrakech (Morocco) and Paris (France).

The highest share of views from mobile or tablet came from the US market, followed by Japan, UK, Singapore and Mexico.

Tourism: not just about numbers
Tourism Minister Edward Zammit Lewis welcomed the positive results achieved in the first quarter but said that tourism is not just about numbers.

"We have to keep on striving in giving added value to our islands. There's no room for mediocre quality in order to offer the best product possible," Zammit Lewis noted.

He mentioned several government measures aimed to help the touristic sector, such as the reduction in the utility tariffs and the relaxation of height limits for hotels.

Zammit Lewis added that connectivity remained a key issue, and the government had to ensure that adequate and efficient infrastructure is in place.

"But you also have a crucial role to play, you need to ensure that the visitors' expectations are met and even exceeded. Only in this way can we collectively reap the benefits that our national product has to offer," Zammit Lewis told MHRA members.