Getting the right price
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Thursday morning. The trio is waiting outside the gate for Aldoris, the choon-paan karaya. He arrives on time at 8 a.m.
“Mata honda kontharathuwak labuna giya sumaney. Eka thama pastry sapayanna videshikayan ena podi aganthuka nivasayakata (I got a good contract last week. I will be supplying pastries to a small guest house for tourists),” he said, while dishing out hot buns.
“Den videsha sancharakayo lankawata apahu enawa wage, eh adayam marga tika tika wedi wenawa (It seems as if foreign tourists are coming to Sri Lanka now and little by little those income avenues are improving),” said Serapina.
“Mage gamey loku hotalayak thiyenawa. Egollo apahu gamey kattiyawa wadata gannawa, giya avurudde naraka kalayata passey (In my village there is a big tourist hotel and they have resumed recruiting locals after a bad period last year),” noted Kussi Amma Sera.
“Mage gameth thiyena hotalaya apey gamey waga karana elavalu den gannawa (In my village too, a hotel has resumed buying local vegetables),” said Mabel Rasthiyadu.
At this moment, the home phone rang just as I collected my first mug of tea for the morning. The caller was Arty, the intrepid entrepreneur, and he too wanted to discuss some tourism-related issues.
“I say, I have been following the progress of Tourism Minister Harin Fernando. He seems to be travelling overseas eternally,” Arty said.
“Probably the most travelled minister in the current Cabinet,” I said, adding that some decades back when then Foreign Minister A.C.S. Hameed was a frequent traveller overseas, a standard joke at that time was that to meet the minister one should visit him at the airport!
“There are some issues in the tourism industry. There is a growing unease in the industry over the imposition of the minimum rates, hotels in Colombo should charge from visitors. This is a government approved scheme,” he said.
“The hoteliers have welcomed this move which they say would remove Sri Lanka from the ‘cheap’ destination tag, while travel agents are opposing the move,” I said.
“Is there any compromise solution that would satisfy both sides?” he asked.
“Not really. Either you increase rates or you don’t,” I said. We also discussed the new destination marketing campaign that the government is proposing to launch by end-July.
Sri Lanka is aiming for 1.5 million tourist arrivals this year against 719,978 in 2022 and a record 2.3 million in 2018. The Tourism Ministry has announced a new destination marketing campaign costing Rs. 1.4 billion (nearly $4.6 million) from July onwards, the first time in decades that a tourism promotion campaign is being launched.
The campaign will cover the UK, France, Germany, India, Russia, Australia, China, Spain, Italy, Netherlands, Portugal, US, West Asia, Japan and Korea.
According to Sri Lanka Tourism Promotion Bureau Chairman Chalaka Gajabahu, the first phase of the campaign is a two-month initiative starting in end-July to counter negative publicity and to create awareness that Sri Lanka is ready for travellers while the second part is a campaign to be launched in selected markets.
However, the bigger issue currently is the row between hoteliers and travel agents over the new minimum pricing scheme. Both sides seem to have valid points of argument and comes at a time when tourism is slowly recovering after multiple crises – the Easter Sunday bomb attack in 2018, the COVID-19 pandemic and the economic downturn last year.
The government has defended the new minimum pricing policy which is only for Colombo hotels with Tourism Minister Harin Fernando saying at a recent media conference, that it is difficult to sustain selling a five-star room at US$60 per night. The scheme is scheduled to be implemented from August onwards.
The same policy was in force in 2009 but later discontinued as hotels began to undercut rates.
The new policy has been endorsed by the Hotels Association of Sri Lanka saying that five-star properties would require to charge $130 plus taxes per room as opposed to $60 at present due to intense price undercutting. It also entails 4-star rates at $100++ (taxes) and three stars at $80++.
The Sri Lanka Association of Inbound Tour Operators (SLAITO), representing travel agents, voiced caution over the move saying it would result in Sri Lanka being portrayed as an expensive destination.
SLAITO President Nishad Wijetunga told reporters that the move would discourage Sri Lanka from being chosen as a MICE destination. He said Sri Lanka is not operating in isolation, but faces competition from popular destinations such as Thailand where five star rates are $80 inclusive of all taxes, Vietnam $105 inclusive of all taxes, Delhi $95 inclusive of all taxes and Malaysia $80 inclusive of all taxes.
He said the policy would be unsuccessful because visitors to Colombo five-star hotels would have to pay $152 for bed and breakfast, per night inclusive of taxes, adding that market forces should determine prices, not minimum pricing policies.
As stated earlier, both sides have valid points in this argument. The hoteliers believe while there might initially be a slowdown in travellers, it would eventually pick up. They have a reasonable grouse; revenue from current rates is not even enough to pay salaries. The travel agents counter, saying that this would impact on winter arrivals with the industry expecting record numbers in November.
Hoteliers say the policy will help erase a bad impression of Colombo being regarded as a cheap destination. “How can you charge $60 per room by an international chain which must be selling at much higher rates in its hotels in Asia?” one hotelier asked.
One of the problems is that the room strength, currently around 7,000 in Colombo, would add another 2,000 more in the next two years, with supply outstripping demand.
The tourism authorities are also conducting two domestic campaigns to engage local communities to welcome tourists with a ‘friendly and smiling face’ and additionally targeting the Sri Lankan diaspora.
As I wound up my column, Kussi Amma Sera brought in my second mug of tea, saying: “Sancharaka karmanthaya gamata hondai (Tourism is good for the village).”
I nodded, hoping that the current dispute over minimum hotel rates won’t affect the upcoming winter season.
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