Minimum rates a sore policy, some hoteliers hurt

Sri Lanka's city hotels are currently governed by a minimum room rate (MRR) that one month on some hoteliers believe is eating into their revenues while others believe a drop in occupancies compensates for the higher revenue earned to ward off bank pressures and increased employee service charge.

“We have seen a drop in bookings by around 50 per cent from OTAs and FITs for the month of October,” Tangerine Group of Hotels Head of Contracts, Marketing and E-Commerce Nadeem Lebbe told the Business Times.

OTAs and FITs generate about 80 per cent of the business for the city hotels and this has seen a significant drop.

This impact is felt a month since the minimum room rates policy was implemented by the authorities for city hotels that sent hotel rates flying high.

Hilton Hotel Area General Manager - Sri Lanka Manesh Fernando told the Business Times that he believes in free markets and pricing should be decided on one's own cost lines and market strategies and noted that "anticompetitive behaviour should not be a part of policy making".

While October was a bad month, he noted that it is unclear as to whether it was due to the minimum rates regime or due to the softening of demand for Sri Lanka and the world due to external events that arrivals were slow.

"Our strategy as a destination should be to increase arrivals which will benefit all in the country," he said adding that "price is only one element in it and prices must be determined by market forces".

The government is on the right track with all the new airlines and charters which are operating into Sri Lanka and we must support the government in its endeavours to increase US$ inflows into the country by working hard to improve arrivals, Mr. Fernando said.

However, he pointed out that when a tourist comes to Sri Lanka "it's not only the hotels which stand to benefit but everyone from the taxi driver to the king coconut seller and handy craft seller, gem merchant who stand to benefit. A tourist lost to another competitor destination is a loss to the country".

Sri Lanka Hotels Association President M. Shanthikumar said that he does not agree that the minimum rate has impacted on a drop in number of arrivals to the country.

On the contrary he pointed out that the minimum rate has definitely improved the revenue by 25 per cent adding that at the "end of the day the country needs the revenue and not the numbers".

Mr. Shanthikumar noted however, that in November and December he expects an increase in number of arrivals and revenue.

In fact, Sri Lanka Tourism Development Authority (SLTDA) Chairman Priantha Fernando told the Business Times that while they still have to assess the impact of the minimum rates on the hotels after one month, he believes that the revenue gained is more than the increased occupancies to the hotels.