AX Hotels: ‘A hotel cannot survive on tourist growth alone’

As Malta prepares for one of the most significant overhauls of its hospitality framework in years, industry leaders are taking stock of a tourism landscape that is increasingly shaped by saturation concerns, regulatory tightening and shifting visitor expectations.

The Government has made its stance clear: Malta does not need more hotel rooms. Proposed rules tabled for consultation by Tourism Minister Ian Borg include a 200-room cap for new hotel developments, height limitations, and stricter controls on short-let properties. The reforms are intended to rebalance the market, reduce speculative pressure and improve overall quality. Yet they also introduce new complexities for operators across the sector.

For AX Hotels – one of the country’s largest hospitality groups – these changes are not a cause for alarm. They are a call for strategic recalibration.

Long-term viability in a capped market

With existing properties such as AX Odycy in Qawra exceeding 400 rooms, the new development cap has raised questions about long-term viability in an already saturated market. The AX Hotels management team, however, is unambiguous in its outlook.

They maintain that a large-scale property can remain competitive and resilient provided it evolves with shifting traveller expectations and continues to refine its product positioning. Distinctive concepts, operational optimisation and tapping emerging source markets are seen as essential.

“A property of this scale benefits from significant flexibility, economies of scale and the capacity to serve a broad range of segments,” the General Managers explain. The proposed limits on future developments may even reinforce the strategic position of existing hotels with large footprints.

Still, they emphasise that relevance cannot be taken for granted. “Sustained competitiveness will require continued investment in differentiation, innovation and sustainable value creation.”

Beyond tourist numbers: a diversification strategy

An MHRA study recently warned that Malta would require 4.8 million tourists annually to maintain an 80 per cent occupancy rate across existing and upcoming beds. For larger hotels, this raises the stakes.

AX Hotels’ position is that relying on sheer volume is neither realistic nor desirable.

“Our strategy is centred on sustaining occupancy through market diversification and an unwavering commitment to quality,” the management team explains. Rather than depending on government-driven tourist number increases, the group is focusing on higher-value guests, new markets and year-round revenue streams across accommodation, dining and events.

Crucially, the priority is maintaining exceptional guest satisfaction and consistently strong reviews – now central drivers of long-term competitiveness for any kind of tourist accomodation.

A two-tier market: unfair advantage or renewed responsibility?

With the proposed 200-room cap, Malta is effectively creating a two-tier market: legacy giants and leaner new entrants. AX Hotels rejects the notion that this gives established operators an unfair advantage.

“We view the new regulations as both an opportunity and a responsibility,” the GMs say. While the cap limits future large-scale competition, they expect smaller hotels to introduce fresh concepts and agility. Their own competitive edge, they argue, will depend on how effectively they continue innovating and elevating quality.

Interestingly, they also point out that almost all AX Hotels properties already fall under 200 rooms, except AX Odycy, offering a balanced portfolio across scales. Larger hotels, they acknowledge, “face larger losses in weaker months but bigger gains in stronger months”, while smaller properties benefit from easier mitigation during low demand periods.

Short-let reforms spark concern among small operators

While hoteliers broadly welcome a more controlled market, short-let operators and SMEs are raising red flags.

The Malta Chamber of SMEs has warned that the proposed requirement for a property to remain vacant for three months before being licensed for short-let use could “damage” small businesses. “Any idle time, barring businesses from operating is damaging,” says Deputy President Philip Fenech.

The measure aims to deter landlords from rapidly shifting properties out of the long-term rental market, but operators argue it is economically burdensome – and too easy to circumvent.

Casa Rooms: reforms “lack the teeth” for real impact

Casa Rooms Director Cecil McCarthy argues that the proposed reforms are not strong enough to meaningfully curb speculation or stabilise the rental market.

“Landlords could easily go around this measure by paying the €200 fine associated with late registration of long-term leases,” he says.

Instead, he suggests a more robust restriction: if a property is registered as an LTR, it should be prevented from re-entering the short-let market for at least twelve months. This, he says, would compel serious commitment to one rental strategy.

He also challenges the practical value of requiring contact details to be publicly displayed. Casa Rooms already provides emergency contacts to condominiums, but stresses that property managers lack the legal authority to enforce rules.

“We possess no legal authority to evict tenants or short-term guests,” Mr McCarthy notes, arguing that enforcement should remain firmly in the hands of the Police.

A sector facing workforce pressure and structural change

Tourism Minister Ian Borg has framed the reforms as essential for steering the sector towards a more sustainable future. He emphasised that the new framework aims for clearer, more balanced guidance for both traditional accommodations and short-lets, supported by pilot enforcement projects in Swieqi and Valletta.

He also warned that additional pressures such as a proposed four-day work week must be assessed carefully, noting that measures which increase strain on an already overstretched workforce could weaken a sector that remains “essential for the country”.

Malta’s hospitality market is shifting from rapid expansion to strategic consolidation. Between hotel regulation, short-let controls and emerging labour pressures, operators are navigating a more disciplined landscape.

For AX Hotels, this environment may ultimately reward long-term thinking over short-term growth.

As their GMs put it: the reforms do not create unfair advantages. They create obligations – to innovate, to differentiate and to lead through quality rather than quantity.

And as the country moves towards a more regulated tourism future, that mindset may prove decisive.