“There was a time, not that very long ago, when it was said that Malta’s optimum capacity was 1.5 million tourists a year; speculatively, today we would need 1.7 million because the length of stay has reduced”

To use a biblical analogy, the Eden Leisure Group was built on a rock – the Eden Rock Hotel in Sliema, which opened in 1967.

Today the Eden Rock does not exist anymore, but it was the foundation stone for the Eden Leisure Group that owns the five star InterContinental Malta, Eden Cinemas, the Eden Super Bowl, Bay Radio, Cynergi health and fitness club, Bay Arena, a multi-storey car park, and is a major shareholder in two leading discotheques – Axis in Paceville and Club Numero Uno at Ta’ Qali.

“We have zero tolerance on loss-making operations”, says Eden Leisure managing director Ian De Cesare.

This means any company in the group that is not profitable gets axed. The most high profile occurrences of this policy were the ice rink – converted into the multi-purpose, 4,500 capacity Bay Arena – and the Palladium nightclub, now six cinemas including the flagship Cinema 16.

“The Palladium always made a profit”, explains De Cesare, “but never sufficiently to cover the investment”.

Another closure was the short-lived Bay Mobile telecoms company. “We could not go head-on with the three major national providers throwing out price offers that we couldn’t compete with”, says De Cesare, adding: “I thought we could access the youth market, but it was a miscalculation and we closed Bay Mobile after nine months. Fortunately, there was minimal capital investment in that venture.

“We made a mistake, as it did not succeed; but the only way to succeed is if you try”, he adds.

These things happen, explains De Cesare, “and the last thing I want to do is get attached to a business that is bleeding me. If it does not work, close it”.

Surely, however, he must have a soft spot for a particular operation.

“I’m a hotelier by profession, so I naturally have a soft spot for the hotel and the tourism industry, and I love movies”, replies De Cesare. “And having my own theatres is great, because I can walk into any cinema and watch a movie for free – that’s one of the perks of the job”, he says with a smile.

“Every single one of our operations is profitable. The cinemas do well. The Super Bowl has been steady throughout the 22 years it’s been open, and every year we see a small increase. The car park, the most unglamorous part of our operation, does a lot of business. And Bay Radio – constantly rated as having the largest number of listeners in the Broadcasting Authority’s quarterly surveys – is very profitable”.

The Eden Leisure Group (ELG) comprises a hospitality and an entertainment division. The InterContinental Malta and the management of the timeshare units are part of the hospitality branch, while the other interests fall under the entertainment umbrella.

And whilst 2009 was a worldwide economic disaster, particularly for the tourism sector, ELG’s entertainment business “did better last year than in 2008”.

Meanwhile, according to De Cesare, the slide in the tourism business began in mid-2008. “We had very good results nationally and for the hotel in the first six months of 2008”, he explains, “we then saw a steep descent in MICE (meetings, incentives, conferences and events) and tour operator business”.

However, although 2009 was disastrous, “what is interesting is that Malta and our hotel were in recovery mode as of June of last year. We stopped losing occupancy from the mid-year”.

The InterContinental had a higher occupancy in 2009 than it did in 2008; “we ended up with a 60 per cent occupancy last year whilst the five-star average was 58 per cent. This is no mean feat when you consider we have 451 rooms”, De Cesare adds.

The hotel’s strategy of market penetration worked “as of the middle of last year and we began seeing better results, albeit, and like everyone else, at stressed average daily rates”.

This upward swing has continued into 2010, with both the InterContinental and Malta seeing improved numbers in arrivals, and “we are forecasting an increase of over 50 per cent in our gross operating profit over last year”, enthuses De Cesare.

For the first two quarters of 2010, the InterContinental has already reached budget, and he is confident that the rest of the year “will be very strong”.

De Cesare is quick to add that his forecasts are based on facts: “Data shows that Malta’s four major markets are improving. Statistics illustrate that arrival numbers from these sources started to recover from the middle of last year”.

He attributes the reason for this to be the increase in flight capacity. “We had a five per cent increase in seat capacity in the second half of last year. And this year, from the end of May, there will be 17 per cent more seats available. Potentially, we could have an increase of 120,000 arrivals this year”.

Arrivals are only part of the equation, says De Cesare, equally important is the length of stay, and for the last three years it’s been getting shorter “from just under 10 nights to seven point something today. And when you multiply that by the number of arrivals you might not be generating that much more business, so this is a factor to consider when studying trends.

“However, I am not really worried about length of stay as my business necessitates it to reduce because we handle a lot of conferences, and these are no longer than two to fours days. Additionally the people who come for short stays, or long weekends, have no problem in staying in five star hotels”.

There was a time, not that very long ago, when it was said that Malta’s optimum capacity was 1.5 million tourists a year; speculatively, today we would need 1.7 million because the length of stay has reduced, explains De Cesare.

“Previously we had one tourist that stayed for two weeks, now we have four tourists staying three or four days each. I suspect that four tourists staying three days spend more money than one tourist here for a fortnight, because there are four flights involved, there are four airport transfers, excursions, et cetera and if you are here for three days you are more likely to go to restaurants more often, and generally spend more than the visitor who’s here for a fortnight.

“As long as we manage the length of stay, I am not too concerned about it dropping”, emphasises ELG’s MD.

What he is concerned about are hotel rates. This is a matter of supply and demand, says De Cesare, “as arrivals increase, rates will naturally increase and will slowly start going back up again”.

He does qualify this by saying that although arrival numbers will increase this year, rates will not bounce back to their 2007 high. “The build up will be gradual, as we get busier the rate will go up”.

There are no longer such things as rack rates, a tariff sheet fixed for the whole season, De Cesare declares. “It doesn’t work that way any longer. The business model has changed, rates are now calculated on yield management and you yield upward as you get busier”.

At the InterContinental, MICE represents between 20 and 25 per cent of the hotel’s business. “That disappeared last year. It started to slip away from the middle of 2008 and we took an earlier hit than other hotels because we rely more heavily on this segment than other properties”.

Yet De Cesare is a great believer in figures, and the numbers he has for the InterContinental are promising. Conference business on the books for 2010 – that’s confirmed contracts – up to mid-April shows an increase of more than 400 per cent over the same period a year ago. And he expects it to be 600 per cent by year’s end.

And his reasoning for this astronomical increase is the fact that “conferences are back” and also because they are now booked a couple of months in advance, whereas previously they were booked two to three years in advance.

De Cesare is not upbeat over the InterContinental alone, but also about his radio station. In the next “couple of months” he plans to launch two new digital stations “aimed at specific niches”, but is reluctant to disclose details just yet.

What he is willing to discuss, however, is the latest bond issue.

Eden Finance plc, the fiscal arm of the group applied to the Malta Financial Services Authority (MFSA) and issued a €15 million bond redeemable in 2020.

The proceeds of this new issue will be used to finance a bond exchange programme for the €23 million bonds which are due for redemption on 12 October this year.