City hotels minimum room rates will be abolished next year: Minister

The much criticized minimum room rates imposed on city hotels since 2008 will be abolished by March 2017, the Tourism Development Land and Christian Religious Affairs Minister said.

“With the abolition of the minimum rate regime, hotels will be free to charge what they want. They can charge US$ 50 or US$ 500 depending on the quality of the product. The market will decide the prices and as a result tourists will get value for money,” John Amaratunga said. He said that the rates will be kept until the end of the winter season to honour existing bookings.

“This decision was taken by the Minister based on a recommendation of the Tourism Advisory Council which comprises of key players in the hotel and travel trade,” the ministry statement added.

Tourism Advisory Council Convenor Felix Rodrigo said the Council had arrived at the decision unanimously.

The ministry added that the minimum rate has served its purpose, and is now acting as a stumbling block for further tourism growth.

The minimum rate gazette was implemented in October 2009, after the end of the war, in order to help stop hoteliers from undercutting prices to get ahead of competition.

The Gazetted minimum rates are applicable to all star class hotels ranging from one to five stars in the Colombo city limits.

However, competing neighbouring countries have been even cheaper, causing MICE (Meetings, Incentives, Conferences and Exhibitions) tourists to look out for these countries, while Sri Lanka drifted along without coming across as a welldefined destination with inadequate destination promotions.

“Almost all the hotels have been calling for the abolition of the minimum room rates and to allow market forces to decide prices. By sticking to the minimum rates, we have been pricing ourselves out of the lucrative MICE market and losing out to our regional competitors,” Amaratunga said.

Some proponents of the minimum rates have been saying that Sri Lanka cannot attract MICE tourists due to the lack of MICE infrastructure—such as halls with seating for 5,000-10,000 delegates in Sri Lanka.the latest budget had called for the setting up of such a conference hall in Colombo and an exhibition centre in Battaramulla, with tax holidays for the investor.

The country’s largest leisure sector operator, John Keells Holdings PLC, has been lobbying for the removal of the minimum rates.

However, Colombo City Hotels Association President M. Shanthikumar had earlier this year been calling for the minimum rate to be sustained.

Even with the minimum rates, some hotels have been undercutting each other by providing rooms below the rate—especially online—and providing ‘complimentary breakfast’ to circumvent the regulation.