New hotels to affect room rates: Regional expert

By Charumini de Silva

With over 40% of new hotel projects in the pipeline to cater to increasing tourist demand, industry experts warn that this will create pressure on the country’s room rates in years to come.

“Sri Lanka will probably be one of the worst-hit destinations, with an expected increase in the supply of rooms in the years to come,” STR Business Development Manager Jasmita Banga said at the Hospitality Investment Conference in the Indian Ocean held in Colombo.

Despite the Government’s floor rate rule for Colombo city hotels helping keep room rates in check, the new supply will always have an impact on the developing market, she stated at a two-day conference organised by Sphere Conferences, the conference arm of Singapore Press Holdings Ltd. Noting that it was not an unusual situation to see rate wars, Banga insisted that it was imperative for hotels to maintain a long-term perspective without undervaluing or diluting the product to obtain a short-term advantage.  

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STR Area Director Asia Pacific Jesper Palmqvist said Sri Lanka was experiencing growth not just through increased arrivals, occupancy levels, performance and uniqueness but through overall development. 

“Demand has gone through the roof and arrivals are increasing steadily to two million tourists,” he revealed. 

However, he pointed out that the country now needed to move to the next level of decision-making in terms of diversification, perception, logistics and the MICE sector as other source markets were also picking up at a swift pace. 

With rapid growth in arrivals, he suggested an increase in investment in Sri Lankan hotels.