Tourism Minister’s call for dialogue on MRR sparks debate among stakeholders

Tourism Minister Harin Fernando

• Minister Harin Fernando hopes more time to discuss will prompt industry to address undercutting issue 
• Industry splits with hoteliers favouring move, while tour operators opposing it
• Hoteliers claim MRR will stabilise prices, restore financial viability, and boost forex earnings via tourism
• Tour operators argue imposing MRR may render destination unattractive, affect its competitiveness

By Charumini de Silva 

Tourism Minister Harin Fernando called on the hoteliers and tour operators to engage in another round of constructive dialogue to foster unity and reach a consensus on the minimum room rate (MRR).

 “I had a meeting with the industry stakeholders and gave them more time to discuss the matter amongst themselves hoping that it will prompt the stakeholders to address the issue of undercutting,” he told the Daily FT.

 The Government’s decision to reintroduce the MRR in Colombo city hotels starting from 1 August is aimed at boosting foreign exchange earnings from tourism and ensuring the financial viability of hotels. 

 For several months, the Government and tourism officials have expressed concerns about the persistently low prices charged by 5-star hotels, even after the country regained stability. Some hotels have been offering rates as low as $ 60 per night for double, inclusive of breakfast and a 30% tax. As per plans, the new MRR for 5-stars will be $ 130+, $ 100+ for 4-stars and $ 80+ for 3-stars.

 The MRR system was in place from 2010 to 2019 but was discontinued following the Easter Sunday attacks. Despite the implementation of the MRR, Sri Lanka Tourism was successful in attracting 2.3 million tourist arrivals in 2018, making it the industry’s best year so far, whilst last year’s arrivals plummeted to only 700,000, matching the levels seen back in 2010.

 The decision to reinstate the MRR is supported by the hoteliers citing the need for sustainability in operations. With rising costs and widespread undercutting, the financial viability of city hotels is at risk, posing a threat to the revival of tourism. The MRR, therefore, is seen as a measure to stabilise prices, restore financial viability, and enhance foreign exchange earnings from tourism.

 However, tour operators expressed caution regarding the proposal put forth by the hoteliers to reintroduce the MRR in August. They believe that this move could lead to Sri Lanka being perceived as an expensive destination, adversely affecting its competitiveness.

 Additionally, tour operators argued that imposing the MRR may render the destination unattractive, particularly for the Meetings, Incentives, Conferences, and Exhibitions (MICE) market.