By Cheranka Mendis
Sri Lanka’s supposedly flourishing tourism industry has no time to sit back and relax as the industry has now hit a new hitch of assessing where the industry benefits are going.
Although there is a definite growth in the industry and the comment of a ‘flourishing tourism sector’ is an acceptable one, the question is how well the tourist resorts and operators are benefited and where the large portion of growth going to.
Sri Lanka Association of Inbound Tour Operators (SLAITO) President Nilmin Nanayakkara told the Daily FT that amidst all statistics showing increases, hotel companies still complain that the occupancy rate is at an average 35%.
“If you look at the resorts, 1,200 rooms were closed down during summer for refurbishment and renovations. Even with that, hoteliers have complained of a low occupancy rate. So where are the tourists going to?” Nanayakkara questioned.
He stated that it was likely that the majority of tourists, who are mostly Sri Lankans holding foreign passports, opt to go to apartments or unregistered boutique hotels or rent out houses for short stays. This would mean that the informal sector is thriving under the present situation.
“I do not know how much of the benefits of tourism are reaped by the Inland Revenue Department as it goes to the informal sector,” Nanayakkara said. “That sector is today competing with us.”
He added: “If all these villas and boutique hotels run by foreigners are getting business and not paying taxes proper, then that is another matter.”
He noted that this was not only unfair competition for the formal tourism industry but that if such events were taking place, it would mean less revenue collected by the Government. “The Government will have to look into this,” he said. “An increase in packaging income is not in line with the actual growth.”
Shedding light on yet another growing concern, Nanayakkara stated that the pricing structure of Sri Lanka on its tourism product was not valid and did not go along with the quality and standards offered. “I do not know if we are maintaining a good pricing structure. Just because we came out of a 30-year war does not mean we can just jack up the prices. Everything isn’t hunky-dory. We must assess quality against the price.”
He stated that, in his opinion, there was arbitrary jacking up of prices. On the minimum rate and its benefits, he stated that those who benefit were far in between and were the advocators and promoters of the plan. “I do not think everyone is benefited through this,” he asserted.
He admitted however that there was an increase in hotel revenues thanks to the increasing number of guests. The next question is if this growth is on par with national tourism growth, he noted.
When assessing the growth in the industry, Nanayakkara expressed that by percentage Sri Lanka should be very happy. “We cannot go beyond that. In terms of numbers, however, we are far below.”
Sri Lanka has been losing large groups to Malaysia and Thailand, he said. However, he added: “We are happy about the growth. After all Rome was not built in one day.”
He said the need of the hour was a change in pricing policies. He commented that pricing during the summer season this year was not “appropriate” and that due to this, the informal sector bagged most of the tourists.
When asked what should be done to rectify the mistakes, Nanayakkara stated that the advertising and promotion activities were poor and insufficient for the country. This has been taken care of and promotion has started now, he added.
He emphasised that quality levels should also be maintained. “Everyone wants to get into the travel and tourism industry today. We are happy about that. The more the merrier, there is good competition.”
The authorities however need to check if all operators coming into the business maintain quality and pay the same VAT component that the existing institutions pay.
“If they are paying on net income, it is not right – they have to pay on the turnover. Ensure that they pay the TBL proper and the taxes proper. When you look at some of their process, you know there is unfair competition and something is not right. I think it is time the Tax Department looks at such unscrupulous agents. It would benefit the country.”