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Challenging times for hotel industry amid labour tensions

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Labour unions rejected the mediation proposal by the Cyprus labour minister, aimed at avoiding an all-out conflict in the hotel sector, citing that the collective agreement should have a more solid legal effect and be applicable to the entire industry.

This means that, according to labour groups, even workers who are not unionised should be covered by the collective agreement.

However, the hoteliers’ association, PASYXE, dismisses this demand citing legal challenges and conflict with the law, since many workers have signed or are able to sign agreements directly with a hotel company under their own terms.

Although 2024 has been a good year for incoming tourism and the hotel business, the bottom line of many hotels has been anaemic, despite increasing their prices by 5% to 8%.

Labour and energy costs continue to pose a challenge for the hotels’ operations, however, lending rates as high as 7% have devastated earnings before interest, taxes, depreciation and amortisation known as EBITDA.

No debt

Only hotel groups with low or no debt have made a decent profit, but these are the exceptions.

According to hotel insiders, demand for the next year remains strong, with major tour operators requesting more rooms and hoteliers looking to strike deals at higher prices with a minimum 5% increase.

Although the industry appears to enjoy a growing demand, geopolitical risks are growing in the region, forcing some tour operators to secure fewer rooms for the next year, but pay a higher price when demand materialises in order to avoid risk taking.

Similarly, some hoteliers with market power are handpicking tour operators who offer them low risk payment terms and avoid providing much credit.

The labour minister is now facing another stalemate in the negotiations, but he still has time to reach an agreement, since unions have not threatened with a strike, yet.

 

Michael Olympios is a regular columnist and Editorial Consultant for the Financial Mirror