Financial Times

Curbing all inclusive business-the options
The air was full of talk about ‘all inclusive’ hotels for some weeks. More often than not, the negative aspects of this type of package were spotlighted, so much so that its total elimination was being contemplated.

Tourist Board sources confirm that the subject was discussed at several forums but the Board is now more inclined towards reducing the share of all inclusive business in the total volume of inbound tourism rather than scrap it entirely. This indeed is a sensible alternative.

All inclusive hotels usually provide the entire requirements of their clientele within the hotel for a fixed price. The package may include, apart from food and beverage, even tours and transport booked by the tourists. They may also be allowed unlimited consumption of food and beverages. Indeed, this is one of the negative aspects commonly quoted here and abroad. There is no spill over business to small entrepreneurs in the vicinity of the hotel.

In places like the Caribbean, taxi drivers’ unions have been agitating over the loss of tour business. Another objection to all inclusive hotels is that the packages are too cheap and therefore, the quality of clientele is of a lower standard. Ultimately the hotel may become a losing concern.

This may be true of the local situation but it is by no means universally true. In the case of Sri Lanka, many establishments converted themselves into all-inclusive businesses during the post-1983 lean period in order to capture any available business. All inclusive hotel business was just coming into vogue at the time. As a result, they ended up with clientele from the low end of the market, according to the Hotels Association Chairman, Malin Hapugoda. Prices invariably had to be low for this class of clientele.

Hapugoda quotes the case of the Caribbean chain, Sandals, which operates on an all inclusive basis but charges US $700 - 800. They are by no means loss incurring concerns. There are many others e.g. the luxury Le Grenadian Hotel in Grenada that operated on an all inclusive basis but offered limousine service for tours and airport transfers.

Whatever the objections are, the mechanics of dealing with the situation seem complicated. The fact that a hotel is operating at a loss is certainly no justification for asking that establishment to reduce or scrap the type of business it is conducting. On the one hand, the change over cannot be accomplished overnight. It may perhaps be phased out over a period. On the other hand, as long as the type of tourism offered by an establishment is legitimate any attempt to curb its business may give rise to a fundamental rights application in a court of law.

The volume of employment created by the establishment is another factor that must be taken into account in a move like this. What legal instrument does the Tourist Board have in order to curb this type of business? The license to operate a hotel, granted in terms of the Hotels Code, can only be withdrawn if a hotel fails to fulfil the minimum specified requirements.

The type and nature of tourism that the establishment caters for cannot be a cause for disciplinary or legal action against it as long as it does not violate the laws of the country.

During the post-1983 decline in tourism, the Board armed itself with a regulation that enabled it to fix minimum hotel tariffs. Hapugoda reminds us that when it was first promulgated, hotels got over it by offering various gratis facilities and services. An example is one additional room for every two reserved.

Hapugoda says that if all inclusive businesses are depriving small entrepreneurs of the overflow of business from the hotel, there may be moral justification to act against it, whatever the legal questions are.

He thinks that it is time to look critically at the phenomenon of low priced all inclusive business and explore ways of reducing their proportion in the total volume of inbound business.

In any event, four and five star hotels should remain outside the pale of all inclusives. The current demand for them is strong. So they must maintain a high level of quality and command high tariffs, he says.

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