COVID-19-hit tourism SMEs appeal for specialised relief

• ASMET says most destination management companies unable to get working capital loans as not asset-based
• Appeals for grants from SLTDA for basics such as salaries and office rentals for 6 months  
• Recommends soft loan option with 2-year grace period and 6-year repayment

The Association of Small and Medium Entrepreneurs in Tourism (ASMET) yesterday called for greater recognition of their role in the industry and urged support to overcome the crisis caused by the COVID-19 pandemic.

ASMET President Rohan Abeywickrama said its members who go as Destination Management Companies (DMCs) were thankful to the Government for offering working capital loan at 4% interest but regretted that most DMCs were not asset-based, hence unable to provide collateral insisted upon by banks. 

As an alternative ASMET is seeking urgent grants and concessions for its industry. 

One appeal is a grant from the Sri Lanka Tourism Development Authority to cover the basic expenses of staff salaries and office rentals for the next six months which will also help the experienced staff to be retained without terminating their services. This grant can be decided based on annual turnover of 2018/2019 as it was the best time for tourism until the Easter Sunday attacks. 

The other recommendation is a soft loan from commercial banks with a two-year grace period to be paid back in six years based on annual turnover of 2018/2019.

Abeywickrama said the Sri Lanka Tourism Development Authority could give a guarantee to the banks as most of the DMCs were not asset based. 

“They cannot provide securities. Even companies which have securities have already mortgaged them after the Easter Sunday attacks,” the ASMET President added.

According to ASMET, as per the Tourism Act, DMCs are entitled to a grant drawn from SLTDA given the current crisis.

Citing the relevant sections of the SLTDA, he said whereas Sec.3 of the said SLTDA Act provides the objectives of the SLTDA and according to the Sec. 3 sub-section (f), keeping sustainability of the industry is one of the main objectives of the SLTDA and Sec.6 of the Act provides that the SLTDA present a four-year Tourism Development Plan to the Minister and in turn it is stated that the Cabinet of Ministers may approve the same; whereas Sec.12 provides the powers and functions of the authority and inter-alia it was stated in sub-section (i) It is the duty of the SLTDA to promote and assist in the development of support industries and services.

Accordingly, ASMET is of the view that if any industry in tourism sector is affected by the recent current pandemic situation, they may appeal to the Minister of Tourism to consider some benefits [financial or otherwise] in order to keep sustainability in the respective tourism industry and the aforementioned provisions of the Act support such a move.

Abeywickrama said if urgent assistance did not reach DMCs soon all the tour agencies would be forced to shut down. “If this happens the much-discussed post-COVID-19 revival will not be an easy task and valuable foreign exchange will be lost to the country in the process of the time needed for the reactivation and rehabilitation of the tourism industry,” the ASMET Chief warned.

“All our businesses in the service sector are depending on employees. Majority of them are paid around Rs. 40,000 per month. We have invested millions in them over the years to create quality service providers. If we have to lose them, that is our biggest defeat at the moment,” ASMET said.

These agencies are the front-end of the tourism value chain, as 60% of total travel comes through them. In addition to the capital loans taken by many of them in the previous years, they have also received working capital loans for maintenance and workers’ wages post the Easter Sunday attacks.

Although they could cover about three months’ expenses using the existing deposits, it is not feasible for nine months. Many believe that if the subsidy is paid at least to manage a few months’ salaries, their businesses can be secured to save the tourism industry, ASMET emphasised.

ASMET also opined that since there was no definitive conceptual analysis about the tourism value chain in Sri Lanka, the focus of the State and other organisations was often only on key sectors such as hotels. “There is only minor focus on other key players and sectors in the value chain. As a result, it is sad to say that many people who are active in the tourism value chain have been ignored,” ASMET claimed.

ASEMT said all service providers, ranging from pavement vendors to retailers, homestay lodging to hoteliers, aviation, land, water-based tourism transporters, food and beverage, Ayurveda to cultural performance artists, facilitators of tourism activities in and around wildlife parks and beaches, travel agents, guides and travel information providers belong to these six sectors in tourism value chain.

“All sectors have to equally contribute across the value chain to create a satisfied tourist. The small and medium enterprises in the tourism industry provide sustainable solutions for poverty alleviation, income distribution inequality and unemployment,” Abeywickrama pointed out.

“Although the authorities are increasingly focusing on large-scale service providers such as luxury hotels, international level travel agents and tour operators, most of the categories of tourism entrepreneurs have not been paid much attention. Lack of understanding about them is one of the main challenges in creating a quality tourism industry,” he added.

Established in 2005 with the vision of becoming the united voice of empowered SMEs in Sri Lanka, ASMET is the only organisation that represents tourism SMEs in Sri Lanka. At present, the association is actively involved with the Ministry of Tourism and the statutory bodies set up under the ministry taking the responsibility of upliftment of tourism entrepreneurs.

Its General Secretary Rasika Rajapaksa said the association would extend its fullest support to the Government for the development of the tourism industry at this time when the local economy was in a state of shock.

He said most of these SMEs were registered under the Companies Act, but less than 30% of them were registered with the Tourist Board. Problems with submission of documents, lack of awareness of the registration process and lack of guidance have become the reasons for the majority of over 70% informal entrepreneurs in the industry.

Most of the benefits provided by the Government to tourism entrepreneurs are often lost for these informal sectors and it is common for them to leave the industry and move on to other industries without any incentive.