Development of Sri Lankan condos and apartments could erode hotel margins - report

The construction of Sri Lankan condominiums and apartments in urban areas would intrude into the hotels' portion of Foreign Guest Nights, eating into their margins, analysts say.

The availability of informal sector hotel rooms ( approximately 11,700 according to the Institute of Policy Studies) will pry tourist contributions away from the city hotels, a Bartleet Religare Securities report said.

"The preference of home abode, lodgings in guest houses and bungalows also impact on the city hotel dwelling of the tourist community."

It said though Sri Lanka is considered a value tourist destination; the minimum price platform imposed on city hotels indicates a medium to high level tourist country, surpassing price levels of peer regional tourist destinations. The minimum price level for a five star city hotel in Sri Lanka amounts to US$ 125 plus taxes ( Malaysia offers at approximately $110).

"Inconsistent service standards and quality issues due to lack of skilled staff, poses a threat to attracting foreign guests.

The immigration of skilled employment and the inadequate international training qualifications are threats to the service standards of the hotel industry," the report added.

It said that the high fuel and electricity costs, skilled staff cots, food and beverages costs erode into hotel profit.

As a step of reaching the ambitious target of entertaining 2.5 million tourists in the next two years the country achieved a listing amongst the top 10 best places to visit in year 2015 by Forbes.

The tourist arrivals for the 12 months of year 2014 recorded 1.53 million highlighting a growth of 19.8 per cent year on year (YoY) compared to the 1.28 million for the whole of 2013.

The highest arrivals were during the months of January, February August and December with numbers surpassing 140,000 guests. "Tourist arrivals exceeded expectations in year 2013 recording cumulative visitors of 1.27 million ( 26.7 per cent YoY) surpassing the planned tourist arrivals of 1.2 million. The arrivals for year 2013 exceeded the UNWTO tourist growth estimate of 6 per cent for the region," the report said. The report said that in order to reach the target of 2.5 million tourists by the year 2016, the authorities developed several tourism promotional zones in Kalpitiya, Kuchchaveli and Yala regions. Constructions of four water bungalows were given approval in the Vellai Island while

The availability of informal sector hotel rooms (approximately 11,700 according to the Institute of Policy Studies) will pry tourist contributions away from the city hotels, a Bartleet Religare Securities report said. "The preference of home abode, lodgings in guest houses and bungalows also scourge into the city hotel dwelling of the tourist community."

Ippantive and Uchchamuni islands were given on lease for development during year 2013.

During 2013, approval for 36 new hotel projects adding 2,547 rooms were given and locations in Ampara, Gampaha and Puttalam were identified for tourism promotional developments, according to Central Bank data.