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Delays in Cyprus’ new hotel classification system

January 23, 2019 at 10:19am
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The right to hoteliers to outsource the operation of some departments to third parties continues to be the reason for the delay in the approval of new legislation on the simplification of the licensing and classification system for hotel establishments in Cyprus.

In fact, at the decision of the House plenum, the draft bill was back in House Commerce Committee for further review on Tuesday.

This is because trade unions representing hotel employees still oppose the outsourcing provision, arguing that their members could be negatively affected. And MPs have called on the Ministry of Commerce to carry out additional talks with trade unions in a bit to reach the best compromise solution on this issue.

However, the government does not appear willing to start a new round of negotiations since it considers that the essential dialogue has taken place. Nonetheless, opposition MPs have warned that if this issue remains unresolved, then they will table an amendment that will solve it.

The bill, which was tabled before the plenum for voting a year ago, is expected to be sent back to the plenary on Friday, February 1.

It also introduces the classification of hotel units as “Urban Hotels”, “Boutique Hotels” and “Suite Hotels”. In addition, stricter legislation is introduced on fines where lawlessness and delinquency is reported.

 

Read more: Cyprus banks are betting on hotels

Cyprus banks’ top priority for granting new loans in the wider field of land development are  hotel complexes and units, according to the Property Lending Barometer of KPMG.

The continuous record arrivals of tourists to Cyprus and future positive indications push the business lending departments towards that direction. With five being the highest percentage point, the lending priority given by Cypriot banks to hotel development is 4.5. This is the highest percentage point in comparison with other European countries, with the exception of Croatia’s which stands at 4.7%.

Other sectors that Cypriot banks focus on are – by priority – the following: office space 3,5, industrial / logistics 2,9, commercial 2 and, surprisingly enough, residential 1,8.

All in all, however, lending to the land development sector is no longer a priority for Cypriot banks. Indeed, it marks the second lowest priority level amongst European countries with 2.75 out of a maximum of 5. Only Croatia has a lower level, which is 2.67. A significant decline was recorded since 2017, when the priority level had reached a high of 3.48.

In addition to record tourist arrivals in recent years and the growth in revenue, an increase of 838% in square meters of new hotel units was also recorded in submitted applications. The increase is a comparison between the January-September 2018 period with the corresponding one of 2017. KPMG estimate that in the 2019-2020 period an additional 7,500 new beds will be added to the hotel industry, bringing their total to 92,000 from 2018’s 85,000 beds.

Although the small in comparison rise in tourism revenue is a matter of concern, it seems not to worry hoteliers as much as those in related tourism services. Hotels with all inclusive programs and exclusive partnerships with major foreign agents appear to have increased revenue without necessarily translating this into a corresponding increased profitability.

The improvement recorded in the economic data of companies in the tourism sector is obvious in data published by the Central Bank as well. At the end of June 2018, total loans to companies in the residential and catering sector amounted to 1.8 billion euros, of which only 295 million were non-performing. By contrast, at the beginning of 2014, the total loans amounted to 2.1 billion euros, of which 1.3 billion euros were non-performing.