Balanced policy key to putting tourism growth on the right track

By Nilmin Nanayakkara

I am writing this in my personal capacity and not representing Sri Lanka Association of Inbound Tour Operators’ (SLAITO) views officially. However, I strongly believe a large majority of our members would carry the same sentiments. 

As the new regime took over, all indications were there that the government was looking at tourism as one of the key industries that is already and continue to contribute well towards Sri Lanka’s economy. We truly appreciated that thought, not in a selfish manner, but acknowledging the fact that it was intelligent thinking in the interest of the country. 

It must be said that this industry suffered for more than 30 years due to the internal conflict. It is also appreciated that all successive governments did whatever they can for the tourism industry whilst investing so much to hold the country’s unitary status. 

However no one can challenge the fact that the tourism industry was able to give an imminent comeback immediately after the war ended in 2009, mainly because of the courage and strength of the industry members who fought their own battles to keep the country’s tourism image going, whilst the successive governments were fighting the internal conflict for a period well over 30 years.

Unlike those who have now come and planted themselves in the industry to get the maximum from the existing demand, and undoubtedly who will close shop in no time in the unlikely event of the industry taking a down turn, but those born to or the sons of the industry that kept it going for the passion they had for tourism which resulted in most of us going in to large amounts in debt to the banks. 

Besides the large conglomerates, there were some individually owned companies that kept on investing and managing their properties effectively that helped the Sri Lanka tourism industry to keep its momentum going during that period and tribute to such hoteliers must be expressed. Similarly most of the individually owned local tour operating companies and the large conglomerates undoubtedly jointly invested over a billion rupees per year on overseas business promotions. No one really seems to understand and have an idea of the important role played by the Sri Lanka tour operating community. 

Today there are many who have got their hands on industry investments knowing the opportunities, which we very well welcome, as that’s the way forward for a rapidly growing market. It is evident all these investors are benefiting from the sacrifices made by the traditional hoteliers and the tour operators that kept the tourism industry of Sri Lanka going for over 30 bad years. We are not perturbed by this. 

However the least what we expect from authorities is not to allow all those who reap benefits from this growing industry, left to be parasites. 

Why I say that is, how-many who even don’t live in this country own villas, boutique properties, apartments and so on? How many on line booking engines not based in Sri Lanka are gaining from the Sri Lanka tourism industry growth. Where were these individuals or companies when the industry was suffering? How many of these are paying Tourism Development levy (TDL) that amounts to Rs. 1.5 billion per year and also value added taxes and income tax of which an absolutely large component is invested on country’s promotions.

Our concern is that a large majority of new comers looking for opportunities are on a piggy back ride whilst those who have been traditionally in the business have not only accumulated losses in that past but also paying all relevant taxes. Here we are not talking of the small investor who is just managing a business with a home stay or similar.

May this not be looked at as fault finding but I invite all concerned to look at it as constructive criticism. However if one doesn’t have a back bone to stand up and talk of industry issues when you see what’s going to happen, life is not worth. I would rather say what I have to say before it is too late and sincerely hope no one would take this personal but appreciate it as a straight forward and an honest expression of mine in good spirit.

I believe without sulking someone has to bring it out. Eventually I am not talking for my personal gains or am I wanting to disrupt anything, but expressing industry frustrations and hope this will be looked at in that spirit. Eventually the benefits will go to the country. 

We reliably understand that in the new budget lots of taxes are going to be loaded on the tourism industry. Fine, if and when we earn and when an industry is thriving, you need to expect it. But sadly if this happens in this year, I don’t think it’s fair as either it’s too early or not the right timing. 

Hope one would realise that most hotels would have cleared up their cumulated losses during only the last two years or so, perhaps some are yet continuing to clear losses, in spite of having gone in for further loans to refurbish and upgrade their properties in order to be competitive in the international arena. So is the case with the tour operators looking at the investments made over a period of the last 15 to 20 years on promotions was huge and we haven’t even recovered 50% of it. In a situation like this if a government would look at imposing further taxes on us, what confidence would we have. 

Yes at the same time we understand to manage the country’s debts and additional expenditure you require extra revenue to the government and when most other traditional industries are not doing all that well, yes looking at tourism is fine but don’t kill the goose that lays the golden eggs. Instead how the government can benefit from tourism is by having to look at taxation from unregulated tourism related business like what has been mentioned at the very outset.

Further, sadly in the year 2015, the Sri Lanka Tourism Promotions Board has hardly done any promotions, meaning advertising or consumer marketing that awakens the legitimate traveller as in my view that is what is needed to be done. 

Hence is it fair to burden companies that have suffered for well over 30 years and who are yet in large amounts of debt, when there is a way of earning revenue from the unregulated sector in tourism. I would also wish to state in confidence that if one would analyse there is a much higher growth factor from the unregulated segment rather than in others. Therefore why should, in an industry, those who pay taxes be further burdened when a large segment is going scot-free and have become parasites to an industry expanding their horizons with the promotions done by individual tax payers money. One has to appreciate the kind of disturbance in our minds having to pay TDL and not getting the expected country’s promotional support in Tourism. The need is having to set a game plan to cope in the unregulated segment in tourism by ways of introducing taxes that could be passed on.

It is said, from these investors hardly any remittances comes to the country other than from a few and the hotels have to compete with them paying fees for bar licenses, TDL, VAT and many other taxes. In the same way paying all the taxes! VAT, TDL, etc., the local tour operating companies are not on a equal platform with overseas end based booking engines as well some foreigners who have planted themselves in Sri Lanka running unlicensed tour operating services.

So having fought our own battle for 30 years what fairness do we have when it comes to competing in a rapidly growing market without an equal platform for all? In my view what is required are promotions rather than investing large sums of hard earned industry tax payers money with large foreign tour operators for joint promotions that will eventually enhance the consolidation of those operators which will result in them showing their volumes with Sri Lanka Tourism Promotion Board’s investment and will in turn negotiate with our own national carrier and hotels as well as local tour operating companies to squeeze prices, What is appropriate is to embark on advertising, mass consumer promotions and follow the thumb rule of divide and rule and not allow consolidation so that we could pitch into the high pricing levels for the national carrier, hotels and local tour operating companies.

My message for the relevant authorities is, yes we need to build this industry and the country together, we will support and have a fair understanding of whom and when to load taxes on. Do not delay in promotions and if that happens by the next budget we will have even more further issues to talk of.

With much confidence as a Past President of the Sri Lanka Association of Inbound Tour Operators I would like to express that all our members would rally round and support the government and authorities if good leadership is given to support and take the industry to the next level.