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ECONOMYNEXT – Sri Lanka will remove controversial minimum room rates imposed on hotels from May 2024, and allow competition to return to the industry, Tourism Minister Harin Fernando said.
“There is good news, we are taking out the minimum room rate from the 30th of this month,” Minister Fernando told reporters in Colombo Friday.
“I think the market forces have to run. That’s what we believe in also, but there was a reason that this was. Even if we put the minimum room rate, Shangri-La and all sell for much higher rates – they go 180-200.With ITC coming they have lifted the benchmark.
“So it is up to the hotels also to do their own marketing and they also have to go out there , do their marketing, get their promotions done.”
“Because we are the tourism ministry, we are responsible for this, but it is also the responsibility of the tourism agencies who also work on their own marketing campaigns.”
Other hoteliers also echoed Minister Fernando’s words.
Angeline Ondaatjie, Chairperson of several Tangerine group hotels told reporters in Colombo, that as a hotelier she naturally wanted the highest price but it was not possible to get the highest price from all properties at all locations just because the owner wanted it.
Grand Hotel in Nuwara Eliya for example was marketed at a high rate, but the same could not be done at a hotel in the Southern Beach strip.
Because prices were dynamic it also could not be done all year around.
“People think that just increasing your price is a marketing tool,” Ondaatjie said. ‘It is not. If you want to sell a hotel, it has to be competitive, within the region, within the country as well within the whole of South East Asia.
“People say we are cheaper than Maldives. And everyone will come here. It does not work like that.”
Bobby Hansen from the Sri Lanka Association of Inbound Tour Operators said market forces had to operate as large groups in particular expected lower prices.
Priyantha Fernando said the agency had achieved its objective of pushing up incomes of city hotels.
“We achieved the objectives, city hotels occupancy went up to 70 percent-71 per cent from around 46 percent over the last 6 months,” he said.
“Also the income generated increased by 33 percent within the city of colombo so dollar earning terms we have achieved our objectives and its up to the hoteliers to continue with the demand for the policy.”
Paddy Paul who had been in the MICE tourism industry for several decades said the Indian market was particularly hit due to the minimum room rate.
Rooms in Dubai were going at 90 dollars, she said. In Sri Lanka authorities were auditing hotels and no sweetners could be offered.
“They cannot give an extra night, they cannot give anything FOC,” Paul said. “So where is the market dynamics?”
The minimum room rate had also come with breakfast controls.
“If you are a five star you cannot sell your room with breakfast below a certain price. This is the absurdity of the price control,” Ondaatjie said.
Though hoteliers owned the hotel, their hands were tied in not only in selling the room but also for breakfast.
The minimum room may have done some damage already for 2024.
A European operator, who was running summer charters to Sri Lanka last year, had decided to bypass Sri Lanka this year as costs were suddenly higher, Ondaatjie said.
On inquiry she found that informally some hotels in the area had decided to follow high prices, after a good winter season on top of higher airport charges, which made Sri Lanka no longer viable.
Now prices are coming down due to lost customers to levels where they would not have gone away, she said.
Paul said all this was projected by Advocata Institute, a think tank, which said the price controls was a overreach of the state.
IVS-GBS-VFS Global high-priced visa crisis, which replaced the quick and easy, electronic visa by the Department of Immigration had come on top of the minimum room rates, just as the lean season hit. (Colombo/May03/2024)
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