The five-star segment may not be expecting a record-breaking high season this year but Westin Dragonara General Manager Michael C.Kamsky is revved up anyway as he prepares to weather the looming August storm. Interview by DAVID DARMANIN
Many locals have a special rapport with the Westin Dragonara. The property served as a five star resort throughout the past five decades, and many return-tourists and locals still remember when the Dragonara Hotel was state-owned, as its facilities were (and still are) popular among hundreds of Maltese families.
“If you come over on Sunday lunch now, you’ll find that the hotel retained its trend of hosting many local patrons,” Westin Dragonara General Manager Michael C.Kamsky starts. “Some of our regulars have been coming to the Reef Club for over 30 years.”
Not long after opening its doors under the Sheraton brand in 1967, the Dragonara was passed on to the now defunct Kursaal Company. Like many other businesses in Malta, in the 1970s the Dragonara became state-owned and was passed on to the Malta Development Corporation.
In 1993, the Gaucis of Big Bon Investments, the Portellis of Virtu Ferries and the Polidano brothers joined forces in a consortium operating under the name Peninsula Investments Ltd. This new company bought the land and got the Westin brand to run the facility after it demolished the 1960s structure to rebuild a new luxury resort.
“Westin is one of the nine brands of Starwood,” Kamsky said. “the hotel is now in its 13th year of operation.”
And Kamsky has been serving as General Manager for the past two years, after joining Westin six years ago as Director of Sales and Marketing.
He is not to be blamed for feeling so proud of the property and its unique location.
“Our location cannot be matched, I personally believe no other five-star hotel in Malta is located in such a good location as ours,” he said.
If only the building was not so close to the hustle and bustle of Paceville. But Kamsky begs to differ.
“We are located on a peninsula,” he explained. “Although we are really into the Paceville area, we are isolated at the same time. Once you walk into the hotel, you are in a completely different world and because of the fact that the property enjoys segregation, our patrons do not even hear any of the Paceville noise and night.”
When the GRTU had so emphatically pushed for a ban on the carrying of any glass container and the consumption of alcoholic drinks in the streets of Paceville, they had done their utmost to avoid mentioning the possible motivation of ousting bottle shops from the area – which had extensively proliferated to the detriment of Paceville’s bars and clubs. Instead, the GRTU had blamed it on the degradation of an area in which five-star hotels were based as binge drinking in public worked against such hospitality establishments. As much as this theory may have held water, Westin had nothing do to with it.
“This issue does not affect us in any way,” Kamsky said. “Because of our positioning, we enjoy the benefits of being close to Paceville, while also those of being cut off.”
The Dragonara Casino is placed strategically as it lies in proximity to a hotel whose guests are likely to be casino punters. But it also works the other way round as Westin management cannot deny that the Casino itself adds value to their own property.
“The Casino is definitely a selling point,” Kamsky said. “It is a private business within a private property, but it happens to be located within the boundary walls of the hotel. This is a highlight and an added advantage – which is why we co-operate.”
If Westin Dragonara is proud of its positioning, it will soon become prouder as works on the golden mile promenade connecting Corinthia San Gorg to the Sliema promenade are underway. “The promenade should give the area outside the hotels a five star environment feeling,” he said.
The location will never work against them, but not the same can be said about the recession.
Since when Kamsky was taken on board, the hotel scored better year after and year and season after season. “There has been a gradual increase in turnover,” he said. “Up till last year we always ranked very high in occupancy levels and revpar compared to the rest of the five-star category establishments. However this year, like all other hotels on the island, we are experiencing a drop in both occupancy and revenues. Notwithstanding, I still believe that Malta is getting the tail-end of the storm. What we are experiencing is not a hurricane. In any situation in life, you have to convert threats into opportunities as you learn to become leaner and even more efficient.”
Before the economic situation went haywire, commentators contended that five-star tourism would be the last to suffer because its market base seems to enjoy better affordability. Have such commentators been proven right?
“In reality yes, we were the last to be affected by the economic downturn,” he said. “Last year was the best we ever had, and in spite of a slight drop in figures over November 2008, December broke all records. We also had a very good January, and it was only in February when we started feeling the pinch. Since then, we saw a drop in both occupancy as well as revenue.”
The delay in feeling the pinch however may not necessarily be in line with the trends of the tourism sector. Kamsky said they only started adjusting their pricing when most of their competitors started “dumping their rates”, with the possible consequence of threatening the market. It seems Westin had no other option but to follow suit.
Sadly however, room rates in Malta were already way too cheap when compared to the expense it entails to keep up to a five-star level here.
Shortly after hotelier Kevin de Cesare had been elected MHRA President, he told this newspaper that “in Malta we find ourselves offering a European standard at North African prices”. He seemed to have propagated the idea of increasing room rates enough to succeed. But the economic downturn provoked the market to naturally take back the pricing to where it previously was, if not lower.
“We cannot possibly go any lower with our room rates,” he said. “Competing with Tunisia is not an option. When a waiter in North Africa is paid $80 per month, very little can be done to compete.”
Westin Dragonara’s counterpart in Rome on the other hand “operates at a similar cost base to ours, but the cheapest room available would be at €400 a night there, “a far cry from our most expensive rate”.
“All efforts and progress that have been done collectively over the years have been diluted. When the economy recovers it is going to be rather difficult to go back to our 2008 performance. In other words it would take us some time. It is important to note that we need to maintain and continue growing revenues to maintain the five-star service, luxury and comfort that a client expects.”
Kamsky is also worried that room rates in Malta may affect the product of the entire five-star segment on the island, which the national strategy expects to be improved.
“We must keep our Return on Investment in mind. We can only invest and improve when there is enough profit to do so. Lower room rates are equal to lower profits, and therefore less investment.”
Not all is doom and gloom though, as the hotel looks at the future with a very positive outlook.
“The fate of the five-star segment will surely continue growing in Malta as the corporate segment is growing at an encouraging pace even during these tough times and this also applies to the conferences market. The latter has an enormous potential to grow as I believe that Malta is a perfect destination for conferences with excellent facilities that can compete with any other major European city. Malta also offers far more attractive rates.”
Notwithstanding Kamsky’s position in the regard, the Westin Dragonara was not the exception in witnessing cancellations of conference and incentive events lined up for this year.
“Certainly, like all of our competitors, we had a number of bookings for conference and incentive events drop out because of the recession. Our strength in the regard however, lied in negotiating postponement for many of the events that dropped.”
But in spite of a dull upcoming season for conferences, the end-of-year figures will not look as bad as one may think because of their outstanding performance in conference bookings throughout January. Q1 saves the year.
Asked to provide his forecast for the upcoming season, Kamsky said: “this is the most difficult question of the year.”
“Forecasting is one of the dilemmas that we are going through at present. The indications are that we will experience a drop in occupancies and also in revenues of roughly 15 to 20 per cent in occupancy and a slighter higher drop in revenues due to the decrease of rates.”
No wonder then that Kamsky did not mince his words on the VAT rate applied at Maltese restaurants. The European Commission recently gave Malta the flexibility to allow a low rate of 5 per cent on labour intensive services, such as restaurants. With the Finance Minister being adamant on 2009 budgetary targets however, government ruled out the move happening prior to the 2010 budget, irrespective of the impending summer of horrors.
Asked when he would like to see the VAT reduction, Kamsky unhesitantly replies: “Immediately.”
At least, hotel restaurants are already allowed to impose a low rate on pre-booked accommodation.
“But research shows that people mainly book on bed and breakfast basis,” he retorted.
At PN’s EP manifesto launch event last Saturday, Prime Minister Gonzi said “it is unacceptable that restaurant prices in Malta are so high when compared to abroad.”
Does this carry the implication that restaurants in Malta are money-spinning businesses? Are they exploiting patrons with exaggerated profit margins?
“It is true that while room rates at hotels are far cheaper here than in many other EU countries, restaurants in Malta are on the high side. But when compared to many other competing destinations, there is no dramatic price gap and in many cases we are still cheaper when it comes to fine dining. If we are to retain the same product at the current profit margins, there is no way we can decrease our prices. This is why some leverage on VAT would help so much.”
Whereas ingredients purchased at restaurants carry a VAT exemption, food and beverage operators must apply a full VAT rate on the finished product – meaning that no tax recovery on the cost of raw materials is made. A 13 per cent drop in VAT, would for the operator mean a full 13 per cent drop in the cost of the finished product.
Food and beverage at the Westin Dragonara constitutes 35 per cent of their annual turnover, an ease-up on VAT would mean a lot.
With regard to the way things are going at the MTA, Kamsky seems to be satisfied with the direction government is taking vis-à-vis tourism – if only “they could dig deeper into their pockets”.
“While every effort is being made in all our major feeder markets, I believe that in the current situation of global recession we have to be even more aggressive to retain Malta’s rightful market share. The only way that this can be achieved is by digging in deeper in our pockets and investing in the right media. I believe that once the current situation picks up, Malta will have a competitive advantage as everyone has to start from the same level.
“Malta should be present on prime-time national TV and such campaigns must to supported with systematic campaigns on other media - mainly print, outdoor and internet. Our history and culture product is the backbone of our marketing however, we have to be more capable in promoting actual sites and places - and making these places desirable. The Hypogeum and the temples, the only signed Caravaggio painting in the world, St John’s co-cathedral, the Valletta Port are but a few.
“ It is to be also noted that the affluent traveller who visits Malta goes back and very often says that Malta is the Mediterranean’s best kept secret.”
Kamsky may have been smiling, but he was not joking when he said: “I honestly believe we have the best management team on the island.”
He implies that with a strong team, middle-men costs may be kept at bay since “in this business nowadays, service providers have become easily accessible, so we have to be equipped with a good sales and marketing team to respond to customer demands directly.”
Kamsky however qualifies that their business still heavily relies on agencies and destination management companies. “We get a lot of direct bookings, but also a lot of other bookings from third party companies. Both are equally important,” he stressed.
When divers across Europe discovered Malta’s potential as a holiday destination, the proliferation of diving schools around the island quickly followed. Diving schools have now become standard in any seaside hotel worth its salt.
The Maltese government now seems to be taking a proactive approach in attracting niche groups to Malta – be it for religious purposes, medical tourism, cultural tourism or other.
In the same way hotels responded to new trends with diving schools, the five-star segment seems to be preparing for such new niches. How is the Dragonara reacting?
“We have a project for medical tourism in place,” Kamsky replied. “We understand that it will take time until we start reaping results, but the idea is to offer attractive 10-day packages to families and friends of patients who come to Malta for cosmetic surgery throughout the period of operation and recovery.”