THASL’s ‘10 Commandments’ to Govt. for tourism survival

The Hotels Association (THASL) yesterday listed 10 recommendations for the consideration of the Government if it were to ensure survival and success of the crucial tourism industry. The

THASL President  Sanath Ukwatte

recommendations were further to the several measures the Government had already extended for the tourism industry, which have been commended by THASL. The tourism industry, by far the highest net foreign exchange earner and whose success hinges on the livelihood of two million people, is reeling from the novel coronavirus pandemic a blow hot on the heels of the Easter Sunday tragedy of April 2019.

THASL wants: 1) Continuous recognition of tourism industry; 2) Extension of the period of relief given soon after the Easter Sunday tragedy; 3) Request for a Government-backed wage support scheme; 4) Request for continuation of working capital loans at 4% interest with long-term payback; 5) EPF/ETF contribution penalties to be waived; 6) Waiver of electricity and water bills for a period of six months; 7) Municipality and Local Government taxes to be same as those charged from other industries; 8) Debt restructuring program and post-COVID19 domestic tourism rebound measures; 9) Government-supported discount schemes; and 10) domestic tourism tax relief.

Following is the full text of the statement issued by THASL President Sanath Ukwatte:

The Hotels Association of Sri Lanka (THASL) would like to thank the Government for helping the tourism industry and other stakeholders of the private sector during the evolving economic crisis as a result of the COVID-19 pandemic. THASL is especially grateful for the Government’s commitment to grant interim relief for all businesses including tourism businesses to stay afloat and help maintain livelihoods.

The Rs. 50 billion relief package released by the Central Bank on 27 March 2020, for all businesses including self-employed individuals, is timely, resourceful and commendable. This immediate action is greatly appreciated at a time when the Government is faced with a momentous task of battling a pandemic which has brought the entire world to its knees.

We are grateful for the swift and responsive leadership shown by the Government in battling both the health and economic costs of this virus. The debt moratoriums, support for non-performing loans and low interest working capital and refinancing facilities will greatly help keep business alive during this challenging time. 

On behalf of the tourism industry, THASL wishes to express their sincere thanks and gratitude to the President, the Prime Minister; Dr. P.B. Jayasundera, the Secretary to the President; the Central Bank, the Treasury; the Minister for Tourism; and the Chairperson of Sri Lanka Tourism, for all their support.

Importance of the tourism industry: We see the Government’s immediate action to expressly protect the tourism industry as their endorsement of the great importance of our industry to the economic wellbeing of Sri Lanka. Tourism is one of the fastest-growing industries in the world. One in 10 people across the world and one in five Sri Lankans are engaged in the tourism industry. 

We are the second highest net foreign exchange earner for Sri Lanka having brought in $ 4.5 billion in foreign exchange in 2018 and the potential of becoming a $ 10 billion industry in the next five years. 

Extension of relief period: Unfortunately, tourism has also been the most directly and immediately impacted industry since the outbreak of this pandemic. Tourism has been brought to a standstill, leading to the closure of businesses and the loss of livelihoods. This crisis comes at a time when the tourism industry had just started its recovery after the horrors of the Easter Sunday attacks last year. Therefore, we request that the agreed and ongoing moratorium for the tourism industry must be placed for a minimum two-year period until businesses can stabilise. 

Request for a Government-backed wage support scheme: We sincerely appreciate the multi-pronged relief strategies of the Government to avert the immediate collapse of business and the entire tourism sector. Having taken stock of the impact on this crisis on tourism and with no immediate recovery in sight, we wish to draw your attention once again to a crucial consideration from the urgent measures that we previously recommended – the introduction of a wage support scheme. 

Tourism-related businesses have entered an unprecedented period of zero revenues now. Our industry members no longer have any revenue to pay the salaries of their staff. THASL members have a payroll responsibility of Rs. 6 billion for the next six months. 

The industry is yet to recover from last year’s Easter attacks. Following the attacks, our members have become highly indebted. We have no more reserves in hand and limited capacity to take on more debt. 

A number of tourism-dependent countries have given relief packages that have included direct grants by the Government to pay the salaries of people working in hospitality. Without such support, these countries understand that closed tourism businesses will not be in a position to salvage the livelihoods of the very large segment of their population dependent on the tourism industry.

We appreciate the restrictive fiscal situation of the Government. Therefore, we plead with you to consider a six-month, Government-sponsored, wage support scheme to those earning a monthly wage of Rs. 40,000 or less. This forms the majority of our workforce. 

The wage support scheme will be in the form of direct grants by the Government to pay for the salaries of employees in tourism earning a monthly wage of Rs. 40,000 or less. The grant can be made directly to the employer based on submission of payroll. 

Further measures: In line with the global response by Governments to support critical industries following the COVID-19 pandemic, we press on the Government to strongly consider the proposed measures below.

Request for continuation of working capital loans at 4% interest with long-term payback: At the expiry of the six-month wage-support scheme, we propose to expand the time period of the current Rs. 50 billion re-financing facility until tourism rebounds. We propose for tourism businesses to continue to have access to low-interest working capital loans to pay the salaries of employees until tourism rebounds. We also propose that the repayment period for these loans to be long-term (i.e. between five to 10 years) in order to reduce the impact on business. 

EPF/ETF contribution penalties to be waived: The liquidity position of tourism businesses is fast eroding. We therefore request the Government to waive all EPF/ETF penalties until April 2021.

Waiver of electricity and water bills for a period of six months: Although currently most hotels are experiencing zero occupancy, hotels are still incurring heavy utility costs to maintain their facilities. Therefore, we request the Government to waive all electricity and water charges for the next six months.

Municipality and Local Government taxes to be same as those charged from other industries: Since 2008, hotels in Sri Lanka have been subject to a discriminatory 1% tax on turnover by municipalities and local governments. This tax is only apply applicable to hotels and is in addition to the rates, taxes and service fees that are already charged by and paid to local authorities by hotels. All other businesses pay a flat Rs. 6,000 for trade licenses. Hotels have been in court since 2008. We therefore request the Government to help us resolve this long term dispute by taxing hotels in line with other businesses. 

Debt restructuring program: Tourism is a capital intensive industry. We are therefore very appreciative of the six-month moratorium on capital and interest payments on debt.  Since the Easter Sunday attacks, the industry has been surviving on high levels of debt, hoping that 2020 would bring with it a recovery that can help sustain itself. However, 2020 has brought tourism in Sri Lanka an economic fate that is unprecedented in modern times. With airport closures and no arrivals, tourism has died. 

We are confident that should the Government implement our proposed relief package, this will support the industry to keep it temporarily alive. But, it will not address the problem of high, unsustainable long term debt that the industry has been burdened with due to repeated crises.

We therefore propose for the Government to assist the tourism industry with a debt restructuring program. We propose to restructure all debt undertaken by the tourism industry and bring all such debt (excluding soft loans) into a 7% low interest, long term facility with a two-year repayment holiday. 

Post-COVID19 domestic tourism rebound measures: We are conscious that international tourism will take several months to rebound. However, we are confident that measures taken by the Government and our healthcare professionals can ensure a quicker return to normalcy in Sri Lanka for Sri Lankans. We are hoping that a return to normalcy will lead to a rebound in domestic tourism. However, we are conscious that the economic depression resulting from this crisis will mean that disposable incomes will be low and domestic tourism will not be affordable to many.

Some tourism dependent countries have introduced several measures such as Government-supported discount schemes and domestic tourism tax relief to encourage their nationals to spend at tourism-related businesses. We encourage the Government to adopt similar measures. This includes the following:

1. A nationwide discount voucher scheme supported by the Government entitling holders to various discounts at tourism businesses (including hotels and restaurants), national parks and historic sites.

2. Tax relief – Allow up to Rs. 30,000 of spending in SLTDA registered businesses (including hotels and restaurants) to be set off against individual income tax payments. This will encourage spending at these establishments, helping their recovery.

We once again thank the Government, our healthcare professionals and security forces for their relentless effort in protecting Sri Lankans in this extraordinary time of crisis. THASL and our members are fully supportive of the ongoing measures being adopted by the Government. 

We are appreciative of the health and economic battles being fought by the Government on several fronts. We wish to reiterate our full support during this difficult time in the history of our world and remain fully committed to join forces in this effort and in rebuilding our country afterwards.