Travel agents hail move to abolish minimum rates

  Nalin Jayasundera 

Managing Director 

Aitken Spence Travels Ltd

Q: How will the abolishment of the minimum room rate affect MICE movements?

A: The abolishment of minimum rates in Colombo city hotels will encourage MICE operators to divert more business to the destination and Sri Lanka will be attractive price-wise compared to our competition in the region.  We have to take into consideration the fact that Colombo is the only city where a minimum rate has been imposed and it is on a year round basis and irrespective of the size of the business.  This is definitely against the fundamentals of demand and supply.  Once the minimum rate is removed, not only the hoteliers, all other stakeholders involved in tourism will have the opportunity of benefiting as the demand will grow.

Harith Perera

Managing Director

Diethelm Travel Sri Lanka

Q: What are your thoughts on the abolishment of the minimum room rate in city hotels? 

A: We whole heartedly welcome this move. We always felt the demand/supply mechanism should decide the pricing of the property. Colombo city was a rare (if not the only) destination that practised this pricing policy. 

I think we lost many business opportunities due to this and in turn the country and the tourism stakeholders suffered too. 

Creating demand through strategic marketing campaigns, establishing unique hotels, raising service levels and delivering the promise to the right market segment will increase the price in a more sustainable way.  I can quote many such examples of Resorts and Hotels doing same outside of Colombo.  

Nilmin Nanayakkara 

Managing Director

NKAR Travels & Tours Ltd

Q: How will the abolishment of minimum room rate affect government & destination revenue? 

A: We believe that the Industry and the country as a whole are not reaping potential benefits due to the practice of the minimum rates structure in city hotels.  Instead it has created a platform for unfair competition, has closed windows for new job opportunities and reduced business opportunities for hotel suppliers, whilst the country is losing out on Meetings and Conference business to competing destinations, especially from India and Pakistan.

We reliably understand some of the hotels maintain their corporate offers much lower than the minimum rates and also have offers on loyalty cards which in turn undermines the minimum rates.

If the average occupancy of all the city hotels put together can be pushed up at competitive rates, then the consumption of food and other commodities will also increase thus giving greater supplier opportunities for hotel suppliers.

As per our understanding the yearly average occupancy in all city hotels put together in Colombo is approximately 65% .  In our view with the national growth which worked out to approximately 19.8% in the year 2014 and 17.8% in the year 2015, Colombo occupancy should reach an average of 75% - 85%.  This can be well achieved if the minimum rate structure is not enforced and by attracting new MICE business that we lose out to other countries from Pakistan, India and many other countries in the region.  If 35% of rooms on an average are unutilised, we are sure you will accept that it is a huge non-productive capital tie up.

Maintaining higher occupancy in Colombo City Hotels is definitely advantageous not only to the hotels but to a cross section of the society from the 3-wheel driver to the shopping centres, museum, and to a larger extent of new restaurants, bars, shops and many other.  This will also help to create greater job opportunities in the Colombo City.  This high volume of tourists in the city will support the backward integration that is required in a developing market. This also will extend additional opportunities, whilst the Government would also benefit out of taxes due to the increase in revenue.  Further, it will result in creating additional jobs across the board in the city of Colombo and will extend greater opportunities for hotel suppliers with larger volumes and the impact will go down to all consumer products and service suppliers.  

As a result of the promotions done by the Sri Lanka Convention Bureau prior to the introduction of the minimum rates in Colombo city hotels, the country enjoyed large numbers of meetings and incentive groups from India, Pakistan and other countries in the region.  

We are of the view that those opportunities have moved to other destinations like Malaysia and Thailand due to Colombo hotels not being competitive.  As the Sri Lanka Conventions Bureau is the authority to certify our statement of losing out MICE groups to other destinations, we kindly invite all concerned to cross check this with them.

Devindre Senaratne

Managing Director

JourneyScapes Travel

Q: Is price control the right strategy for Sri Lanka tourism when the momentum is positive? 

A: SLAITO advocates an open economy for rates in Colombo as it will pave the way to benefit all stakeholders. MICE industry is almost non-existent due to high minimum prices. Tour operators exclude Colombo in promoting International markets thereby loose opportunities to brand &make awareness Colombo.   One flat rate for the entire year and the minimum rates have discouraged marketing and adding value. Minimum rates   have come to effect many years ago and   the rates have not increased since then & occupancies have increased marginally comparing to other cities due to demand   . Staff service charge have risen 250% IN SRILANKA outside Colombo since2009 in all outside hotels where 4 stars earn over: Rs 40,000/-in the high demand months.  The higher Demand due to the minimum price structure is for 4 stars & 3 stars which has a very limited inventory

Maahen Kariyawasan

Andrew the Travel Company Ltd

Q: Is price control the right strategy for Sri Lanka tourism when competing with other destinations like Thailand, Malaysia and the Maldives? 

A: In a free market economy there should be no price controls on hotel rates! It should be on a supply and demand basis

If we look at our competitive destinations in Asia there is no one country that has price controls on hotel prices!