The announcement that the government plans to go ahead with the “bed tax”, a charge of 50c per night for each bed booked in local hotels has caused an uproar in the tourism sector. The Malta Hotels and Restaurants Association and the association of Incoming Tourism Agents and Destination Management Companies have both complained about the proposed measure and have pointed out that this is a very bad time to increase burdens on a sector that is currently going through a very rough patch.
The global financial crisis has led to fewer people going on holiday, and those that do decide to travel overseas are being much more careful with their money. Competition in the Mediterranean region is currently cut-throat. A quick search online for rates in April (which is when this tax will come into force) revealed that hotels in popular tourist destinations such as Larnaca in Cyprus are charging extremely low prices, starting at €23 per night for a 2-star, €31 per night for a 3-star and €67 per night for a 4-star. If one is willing to shop around there are even cheaper options in resorts such as Hammamet in Tunisia, where a 3-star hotel is going for €17 per night and a 4-star for €24 per night.
In Malta, hotels have had to respond in the same manner, slashing their prices to tempt potential holidaymakers to their doors. I found a wide range of local hotels offering ridiculously low prices, with the lowest being €12 per night for a 3-star hotel in Sliema. It was also possible to book a prominent 4-star hotel in the St Julian’s area for a paltry €35 per night.
It is clear that hoteliers are doing their best to adapt to the circumstances. Things were already difficult enough – as from 1 January, they have to contend with a higher salary bill (an additional €303 per employee due to the cost of living increment of €5.82 weekly) and also with a dramatic increase in their water and electricity costs. The last thing they needed was this added complication of collecting 50 cents per guest per night for the government!
It is normal business practice to raise prices when there are increases in the cost of inputs required for a product or service. Unfortunately at the moment local hotels simply do not have this option available to them. If they raise their rates more people will go to resorts such as Larnaca or Hammamet and less will come to Malta. There is no way around it.
Furthermore, in some cases raising the price is impossible because hotels have already committed to their pricing for the upcoming seasons. In fact I am curious as to what is going to happen in the case of those tourists who have already booked and paid for their holidays in Malta after 1 April.
I suppose that hoteliers will have two options open to them. The first is to ask their receptionists to notify the guests as soon as they arrive that a new levy has suddenly come into force (because we are a banana republic where new taxes are levied with just a few weeks’ notice) and hope that the tourist will accept to pay it. The second is to swallow the bullet and absorb the “bed tax” as an overhead, reducing their profits, if any. Taken in the context of hotels charging €12 per night, one must agree that 50 cents is not a negligible cost.
Some people may think that this problem does not concern them and that it is only hotel owners who should be worrying about the situation. However, that is a rather short-sighted and unrealistic view. Whether we like it or not, the number of tourists coming to Malta impacts each and every one of us, so we should all be interested in what is happening.
I will quote Helga Ellul, president of the Malta Chamber of Commerce, Enterprise and Industry, who described the situation in a very succinct manner – “Malta must realise once and for all that nobody owes the country a living. If we out-price ourselves, we lose business. And if we lose business we lose jobs. It is that simple.”
So what are we to make of the decision by the Ministry of Finance to ignore MHRA, FATTA and the legion of hoteliers who have made their voices heard?
The ministry’s attitude smacks of desperation. The country’s finances must be in a really bad shape if the Ministry of Finance has no option other than to introduce this tax at such a time. I get an image of a band of desperados scraping the bottom of a barrel – “hey guys, look here, I found another 50 cents!”
The ministry pointed out that the government was investing to improve seat capacity on air routes to Malta and spending more on overseas promotion. These are good initiatives and should be encouraged. But what’s the point of improving seat capacities to Malta if then tourists hop on a plane to Cyprus or Tunisia, where they can get cheaper deals?
Keeping Malta competitive is a key issue at the moment. Are we seriously going to risk this tax being the 50 cents that broke the industry’s back?
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