Sri Lanka stabilises hotel room rate to maintain excellence and service capacity

04th August 2009, www.lankabusinessonline.com

Sri Lanka plans to impose minimum room rates for hotels in and around the capital Colombo to push up prices following the end of a war which has made the country safer for tourists, government officials said.

The Tourism Ministry said minimum room only rates of between 40 US dollars and 120 dollars would be imposed when regulations under the tourism law are enforced, which they said would be soon.

Tourism Ministry secretary K A D George Michael said the ministry will hold talks with hoteliers this week or next after which the new room rates would be enforced.

"Now the rates are 30-40 dollars below what hotels can demand," he told LBO.

"We had a justification (for low rates) during the war when demand was low. But now demand is catching up very fast. We should not degrade our products."

The island's 30-year separatist war had deterred foreign visitors and kept the industry in the doldrums for years, forcing hotels to lower prices to attract tourists.

But government forces defeated the Tamil Tiger rebels in May and the industry expects more visitors this winter season with hotels reporting sharply higher bookings and inquiries.

Bernard Goonetilleke, chairman of Sri Lanka Tourism, the tourism promotion agency, said the price war among hotels could be damaging in the long-run.

"There has been a price war in hotels in Colombo and Greater Colombo city hotels which reduced room rates by a considerable figure, which if it continues would adversely affect the interests of the hotels themselves," he said.

"Also the excellence of the hotels and service capacity could get affected because if you bring down rates you also bring down service standards.

"Some hotels might find it difficult to manage if it (price war) continues. So the idea is that there should be minimum room rates justifying the cost of operations in each place. There's no need for hotels to undersell at this point of time when demand is on the rise."

Michael said hotel room rates in Colombo were far below that of hotels in the region.

"You'll never find rates like this elsewhere in the region. In India and the Maldives the minimum rate is 150- 200 dollars."

He said the minimum rate rule might be extended to other hotels in Sri Lanka as well.

A previous voluntary effort to prevent a price war among city hotels had failed, prompting the move to bring in new regulations, Michael said.