Creating unnecessary obstacles for tourism industry

In a commendable move, the Government has decided to terminate the Minimum Room Rate (MRR) mechanism after 31 May. The controversial step was taken by the Sri Lanka Tourism Development Authority (SLTDA) last October with regard to the hotels based in Colombo city at the request of a selected group of hotel owners. 

Prior to the reintroduction of the short-sighted move, this column questioned its rationale and pointed out its inconsistency with President Ranil Wickremesinghe’s pro-market views apart from highlighting the resultant adverse ramifications on the tourism industry. At the Sri Lanka Economic Summit organised by the Ceylon Chamber of Commerce last December, the President firmly disapproved the price-control measure. He also expressed his displeasure about the MRR at the 2023 Annual General Meeting of the Hotels Association of Sri Lanka (THASL).

The decision to reintroduce the MRR one year ago was justified by its supporters based on the need to achieve financial stability in the wake of having undergone an extended period of misfortune from 2019 to 2022 when the tourism industry was going through bleak times due to the Easter Sunday attacks, COVID-19, as well as the political/economic crisis last year. However, those setbacks were experienced by hotels across the island, and therefore, why the stipulated rates applied only for hotels based in Colombo is baffling.

The Sri Lanka Inbound Tour Operators Association (SLAITO) vehemently opposed the unpopular decision on numerous occasions together with other industry stakeholders. The stakeholders often pointed out the MRR’s negative implications on Meetings, Incentives, Conferences and Exhibitions (MICE) business, which is a significant contributor to Colombo’s tourism traffic. Recently, First Capital Research pointed out that Colombo has become more expensive in terms of average cost per room when compared to regional rivals like Ho Chi Minh City, Bangkok, Jakarta, and Kuala Lumpur in terms of four-star and three-star room classifications subsequent to the introduction of the MRR.

Unfortunately, when one bottleneck goes out another one is immediately created for the detriment of not only the industry but for the whole country as well. The new system of issuing visas, which was introduced on 17 April, with the processing of documents being carried out by a private company-operated website has unsettled the entire tourism industry. Under the new system, the single-entry tourist visa with a 30-day validity period that was issued under the previous visa-issuing regime was not initially available. 

Many have also opined that the new web-based application process is quite complex and unfriendly as opposed to the convenient, user-friendly Electronic Travel Authorisation (ETA) system which was in place before. Some complaints have been shared in the social media that the fresh, web-based, mechanism which is handled by VFS Global is inconvenient towards non-English speaking tourists from countries like France and Germany.

It was only after the enormous pressure exerted by Tourism Minister Harin Fernando and the industry associations, the 30-day, single-entry, tourist visa for $ 50 was introduced, providing a great relief for the travel and leisure industry. Regrettably, the new visa regime had been introduced without obtaining the views of the Tourism Ministry. The country is targeting 2.3 to 2.5 million tourist arrivals in 2024 and the industry needs to be supported by conducive, business-friendly policy measures instead of being inhibited by unnecessary obstacles.

During the first quarter, the tourist earnings rose to $ 1,026 million from $ 504 million in the corresponding period of last year. The quarterly financial results published by listed leisure firms so far demonstrate that hotels have achieved elevated profits, which is not only a good sign for the industry, but for the banks to which hotels owe a considerable amount of outstanding debt. 

The island’s tourism industry has experienced enormous setbacks throughout history and it is incumbent upon the Government to ensure that the industry can perform to its potential without imposing burdensome procedures and regulations.