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Air Malta rising costs overshadow tourism

Air Malta rising costs overshadow tourism

Air Malta, rising costs spoil the party for tourism industry

» Tourism | Thursday, June 23, 2011 • Air News Times
There was good news coupled with uncertainty for the tourism industry yesterday, as figures showed a sharp rise in arrivals in the first quarter while the situation at Air Malta and rising costs cast a shadow over future prospects.

Welcoming a 23 per cent increase in tourism compared to the first three months last year, Malta Hotels and Restaurants Association president George Micallef said there had also been an increase in occupancy and revenue.

He thanked the Malta Tourism Authority for its efforts and said the rise was mostly due to increased seat capacity brought about by the Ryanair base in Malta and more flights by Easy Jet.

However, due to the uncertainty at Air Malta, operators were finding it difficult to plan for the winter months.

Also, “spiralling costs”, such as water and electricity rates, were still eroding the hard earned profits of hotels and resulting in an “extremely negative trend” in terms of profits, since most of the costs could not be passed on to clients.

While the increase in arrivals made up for the declining rates of bed nights and increased use of private accommodation, there was nothing offsetting the costs hoteliers were facing. Only five-star hotels reduced their winter losses.

“The hotel industry is not thriving as some may think. The government does not seem to appreciate enough the impact of rising costs, even though it has firsthand experience of this,” Mr Micallef said, referring to the government’s struggle to sell Selmun Palace on its own terms.

“We understand that the Air Malta process is a delicate one, and that we are now at a very important juncture, but the clock is ticking and has been ticking for a while now. It is imperative that negotiations with the European Commission are concluded as soon as possible.”

He added that the government could not afford to cut back on seat capacity.

“A significant drop in seat capacity could have very serious consequences,” Mr Micallef said, adding that hotels might have to close down in the winter months.

While the government was focusing on Air Malta, it should not hold back from any other opportunities, he said.

Opposition tourism spokesman Gavin Gulia praised the efforts of the Tourism Parliamentary Secretary Mario de Marco to increase the number of tourist arrivals.

But he added that Dr de Marco should also focus on the long-term sustainability of the industry by influencing fiscal and financial policy in a way that did not impact tourism negatively.

Dr Gulia said there was a “paradox” at the moment, where arrivals were increasing but profitability was declining.

“The government is one entity, it is not an archipelago of islands,” he said, stressing that Dr de Marco should work to reduce government induced costs.

According to the first quarter survey, carried out by Deloitte, arrivals have increased from the UK, Italy, Scandinavia, Spain, Russia and Austria/Switzerland, but particularly from France and the Benelux countries (where arrivals almost doubled). But tourists from Germany and Ireland continued to drop.
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