Issue link: https://maltatoday.uberflip.com/i/1529157
6 maltatoday | SUNDAY • 10 NOVEMBER 2024 NEWS JAMES DEBONO jdebono@mediatoday.com.mt THREE-STAR hotels in Malta, once the standard accommoda- tion in less prosperous years, have discovered a new formula for re- silience thanks to their appeal to budget-conscious and younger tourists. A Central Bank report finds a growing number of young visitors drawn by Malta's vibrant enter- tainment scene, show a marked preference for affordable three- star accommodations, particularly during peak summer months. While overall tourist expendi- ture has risen significantly – by 20.3% over the past four years and a notable 23.3% in 2024 alone – spending habits have shifted. Younger tourists, drawn to Malta for its entertainment options, typ- ically spend less per capita com- pared to affluent visitors, which impacts the profitability of luxury hotels. Although average per-night spending rose slightly to €141 in 2024 from €130 in 2023, operators in the five-star segment reported a noticeable decrease in tourist spending power. This trend has led many travelers to downgrade from five-star to four- and even three-star hotels, reshaping oc- cupancy patterns across all hotel classes. Competitive edge Three-star hotels have howev- er managed to maintain strong occupancy rates by appealing to younger, cost-sensitive tourists. Their competitive pricing, com- bined with a focus on high occu- pancy and lean operational costs, has allowed them to remain prof- itable despite rising costs in the hospitality industry. Unlike five-star establishments facing high wage demands and increasing maintenance costs, three-star hotels have navigated economic pressures more effec- tively. This segment saw a sub- stantial 34.7% growth in accom- modation capacity from 2020 to 2024, outpacing the moderate growth observed in the five-star category. In contrast, the five-star hotel segment is struggling with de- creased demand from travelers with limited disposable income, who are now opting for more af- fordable accommodations. Although five-star occupan- cy is stable during peak seasons, profitability has been affected by increased competition and high operational costs, forcing some hotels to adjust pricing. Lux- ury hotels, especially those in high-traffic areas like St Julian's, face added challenges due to lo- cal "sanitation and traffic" issues, which detract from their appeal. Four-star hotels are also feel- ing the impact, experiencing in- creased pressure from five-star hotels' competitive pricing. Many mid-tier establishments have had to invest in refurbishments and new facilities to remain competi- tive, although there are concerns about potential oversupply in the market. Increase in accommodation facilities The report shows a significant increase in Malta's accommoda- tion options, rising from 215 es- tablishments in January 2020, to 317 by June 2024, marking a 47.4% expansion. The strongest growth was in the "Other Collective Accommo- dation" category – mainly apart- ments – which grew by 84.4%, fol- lowed by the three-star segment at 34.7%. Bed and bedroom capacity also increased by 12.6% and 13.4% respectively, during this same pe- riod, in the collective accommo- dation and four-star hotels, with moderate growth in the five-star segment. Addressing seasonal fluctuations Higher room rates, especially during peak months, remai vital to offset elevated costs for hotels, but now competitive pressures and reduced tourist spending power are making it difficult to maintain profitability. The Central Bank's report in fact highlights potential growth areas, especially in mitigating win- ter season slowdowns. To com- bat seasonal drops in occupancy, stakeholders recommend pro- moting Malta as a destination for business and events, which would necessitate improved infrastruc- ture for hosting large gatherings. One of the options proposed is a public-private collaboration that wouldo enhance Malta's appeal as a winter destination through investments in eco-friendly and event-supportive infrastructure. Young holidaymakers keep Malta's 3-star hotels in the black Budget-conscious young people attracted to Malta's party scene seek three-star hotel accommodation, a Central Bank of Malta study shows Three-star hotels have shown resilience in Malta's hotel industry, combining lower costs and their appeal to budget-conscious tourists, as a way to remain profitable