New rates for Sri Lankan hotel rooms will be effective from April 1, after initial confusion over a budget announcement, and agreement over the rates has now been reached between the government and hotel owners.
Currently prescribed rates, according to a November 2010 gazette notification, for all hotels are: $100 per room for a 5-star property; $85/4 star; $70/3 star; $55/2 star and $40/1 star. While the 5-star category (mostly in Colombo) will be charged at $125 per room plus service charge 10%, National Development Levy 1.02%, Nation Building Tax 2 % and VAT 12% from April, the government has agreed to a request for other star categories to come up with a consensus pricing scheme that would then be gazetted ahead of the April 1 implementation date, industry officials. Small hotel owners complain that they are unable to effect a similar increase as the 5-star properties as they risk losing business.
They said there have been several meetings between the industry and the Ministry of Economic Development, which handles tourism, over the new April rate vis-à-vis the proposed bed tax of $20 announced in the government’s 2011 budget announced last November.
There President Mahinda Rajapaksa proposed a levy of $20 per bed on all 5- star hotels which ‘charge a room rate that is less than US$ 125 per night from January 2011 in order to compel all hotels to charge better rates’.
However this was at variance with the prescribed rates gazetted in November where hotels would be penalised for not enforcing the listed rates. Under his notification, the rates for-5 star hotels rose from $75 in November 2010 to $100 in January 2011.
“There won’t be any bed tax reference in the new rate in April of $125,” one industry source said, adding that, “with higher prices for rooms, hotels are set to make more profits. In such a context, it is incumbent that they re-invest this money on improving the product including the human resource component.”