Tour, MICE operators cry foul of demand to extend minimum room rates

Wednesday, 3 April 2024 00:30 -     - {{hitsCtrl.values.hits}}

 SLAITO President Nishad Wijetunga (second from left) along with Vice President Nalin Jayasundera, SLAPCEO President Imran Hassan (left) and ASMET President Prebudda Jayasinghe at the media briefing yesterday — Pic by Ruwan Walpola

  • Claims move would destroy tourism; Sri Lanka would have had 40% more occupancy without MRR
  • Alleges those calling for extension are hiding behind MRR for survival 
  • Rooms still being sold for previous rates despite claims

By Darshana Abayasingha

Several tourism associations, yesterday, rebuked calls by what they alleged as “a cartel of lazy hoteliers” to continue with Government regulated Minimum Room Rates (MRR), stating that Sri Lanka lost close to 40% of additional occupancy due its implementation, and a decision to continue could lead to the breakdown of the industry. 

The Sri Lanka Association of Inbound Tour Operators (SLAITO), the Association of Small and Medium Enterprise in Tourism and the Association of Professional Conference, Exhibition and Event Organisers (SLAPCEO) at a media briefing castigated calls to extend MRR by a group of hoteliers, whom they claimed have done little to boost the appeal of their properties, and are looking to survive by hiding behind MRR without improving standards. These hotels are stifling the progress of the industry with their selfish motives, the associations charged. 

“The authorities told us MRR will come to an end in March. However, there is no indication on that as yet. Supply and demand coupled with quality of offering should determine market rates. Controlling prices in the tourism trade is not something any Government should be doing. Minimum Room Rates have not served their purpose, as we can responsibly state that many of the rooms that were sold this season were with booking that were already in place. It would be interesting to note how many rooms sold in Colombo were genuinely sold at the minimum rate, as they have presented no facts in their representation,” SLAITO President Nishad Wijetunga said. 

Earlier this week, eight city hotels insisted that MRR must continue throughout the year, and that these properties could operate properly as a result. They added MRR boosted revenue to the Government by way of higher taxes and levies, whilst ensuring a level playing field irrespective of capacity and classification. 

In an article published in the Daily FT yesterday, Sri Lanka Tourism Development Authority Chairman Priantha Fernando said minimum rates have made a positive impact to the overall wellbeing of the tourism sector within the city and outside. “This policy in turn, allowed other establishments outside Colombo to adjust their rates, benefitting the entire industry and the economy,” Fernando said.

“No one is talking about the business Sri Lanka has lost because of this needless process,” Wijetunge added, noting that very little new business has been generated because of MRR. 

SLAPCEO President, Imran Hassan, added Indian business has been seriously impacted due to minimum room rates. 

“India is a price-conscious market, when they don’t come how are we going to achieve targets? If this continues we will lose the Indian business. The Convention Bureau published that until September last year there were over 10 Indian corporates visiting Sri Lanka in large numbers. Now that has fallen to a bare minimum. That business has been affected and is going to other countries. How are we going to maintain growth with these stumbling blocks?”

“There are hotels violating this. They took bookings last year at pre MRR and we can see these because we bring the clients in. We said this would be violated. The Tourism Development Authority should not work on something they cannot monitor. They should monitor Russians running hotels in the south. MRR is killing the Meetings, Incentives, Conference and Exhibitions (MICE) segments. This is an ignorant cartel of rundown hotels who have no facilities to offer who are lying and calling for an extension of MRR,” Hassan stated. 

Responding to questions on the reported growth of tourism arrivals this year, the Associations stated that whilst numbers have grown in comparison to previous year, the real comparison must be done against 2018 and 2019 as the past two years were special years impacted by crisis. However, more than 2,000 quality rooms have been added to the city alone and therefore the benchmarks have changed, they added. 

SLAITO Vice President Nalin Jayasundera said: “We are killing the market for the future with MRR. Some of these hoteliers think we are against price increase. We are not but as long as it is based on demand and supply. If you look at the hoteliers who have commented in this article, they don’t control a big inventory. They only form about 30% of rooms in the city. The big names have not commented. Sri Lanka is not operating in isolation, we are competing with the Middle East and the rest of Asia, and we are outpricing ourselves. This will kill the industry. Every operator has a perception about the destination, and they think of price. Tour operators say you have lost the business to X country because of your minimum rate. If we continue to control prices, they will not look at us favourably.” 

The Associations noted that a wider adoption of minimum room rates could spell trouble for resort properties, as they are priced based on their product offering. MRR is currently killing the opportunity to market Colombo City hotels better, they said. For a city’s tourism to thrive the destination must have adequate infrastructure and activities and Sri Lanka cannot compare itself to many Asian and Middle Eastern destinations. 

When asked if MRR might prove an obstacle to the industry’s ambition to attract high net worth tourists to Sri Lanka, the Associations noted that Sri Lanka has about 40,000 registered rooms, with a total of about 90,000. Accordingly, there must be a cross section of products to serve all stakeholders, they said.