THASL warns steep liquor licence fee hikes are hurting tourism competitiveness

The Hotels Association of Sri Lanka (THASL) raised fresh concerns over a sharp increase in liquor licence fees, warning that the higher charges are driving up operating costs, undermining competitiveness, and unintentionally encouraging the growth of the informal tourism sector.

Speaking at a media briefing, THASL President Asoka Hettigoda warned that the steep fee hikes risk pushing businesses toward informality, as unlicensed operators continue to function at significantly lower costs without facing the same regulatory scrutiny.

“We are effectively penalising the formal sector while encouraging the informal sector. Licensed hotels are heavily regulated, pay taxes, and contribute directly to Government revenue, yet illegal operators continue to function with little enforcement,” Hettigoda stressed.

THASL Member Sanjeewa Anthony said licence fees for key liquor permits used by hotels have surged dramatically from February this year, placing an additional financial burden on an industry already grappling with higher electricity, fuel, gas, and labour costs.

“The issue is not just the annual renewal fee. Hotels that have been operating legally for 10, 20, or even 30 years are now being asked to make additional deposits and comply with new charges, creating an unnecessary financial burden,” he said.

Anthony said the most commonly used tourism-related liquor licences, including FL7, FL8 and FL11 have seen fee revisions ranging from 80%-100%. “In addition to the higher annual fees, authorities have also introduced new deposit requirements and entry charges, significantly increasing upfront compliance costs for hotel operators,” he said.

“The annual liquor licence fees for some hotel categories have been increased from Rs. 500,000 to Rs. 1 million, while additional security deposits and entry fees have also been revised upward depending on the category and size of the property,” he added.

He argued that the new structure unfairly treats hotels in the same category as taverns and other liquor outlets, despite the formal hotel sector that has invested over $ 15 billion, providing direct employment to over 600,000 individuals and being one of Sri Lanka’s top foreign exchange earners and a critical driver of economic recovery.

They highlighted that many tourism establishments operating outside the formal system are neither registered with the Sri Lanka Tourism Development Authority (SLTDA) nor properly licensed, despite legal requirements. They warned that this not only results in lost Government revenue, but also raises concerns around tourist safety, service standards, and destination reputation.

“Every tourism establishment, including hotels and guesthouses, must be properly registered and regulated, not only to protect Government revenue, but to maintain quality standards and ensure visitor safety,” they added.

He argued that hotels catering to international tourists should not be regulated in the same way as taverns, noting that operators already face substantial costs through 18% VAT, 2.5% social security contributions levy (SSCL), 1% tourism development levy (TDL) and 10% service charges for the employees, resulting in nearly 35% of gross revenue being absorbed by taxes and labour-related costs.

He warned that the mounting cost pressures are forcing hotels to increase beverage prices, which could negatively impact visitor spending and Sri Lanka’s competitiveness against regional tourism destinations.

They claimed the steep licence costs and administrative hurdles are indirectly benefiting unregistered operators, who continue to run unauthorised establishments outside the formal tax and regulatory system, depriving the Government of tax revenue while creating an uneven playing field for licensed businesses.

Calling for urgent policy reforms, THASL urged authorities to treat tourism establishments separately when determining liquor licence fees and introduce a streamlined digital renewal process for registered tourism operators.

Drawing comparisons with regional competitors, Anthony pointed to countries such as Singapore, where liquor licence renewals can be completed online within 48 hours, and said Sri Lanka must modernise its approval systems if it hopes to remain competitive in the regional tourism market.

He further stressed that all accommodation providers, including guesthouses and boutique properties, should be registered with the SLTDA to improve regulation, ensure tourist safety, and prevent tax leakages from the expanding informal sector.