Day, Month 1996

Tourist industry seeks Rs. 275m relief package

By Ruvini Jayasinghe

Crushed by increased terrorist activities in Colombo and negative macro economic factors, the tourist industry has asked the government for a US $ 50mn (Rs. 2.75 billion) rescue package for image building, and an additional relief package for survival.

The hotel industry which took a particularly severe beating in the past few months, is "almost on the verge of a collapse", Tourist Hotels' Association Chairman Gilbert Jayasuriya told The Sunday Times Business.

A Cabinet paper seeking approval for the US $ 50mn image building exercise was submitted last week, he said.

The joint proposal by the Tourism Ministry, Ceylon Tourist Board and the private sector (hotel industry) has already been approved by the line ministries, he added.

The industry which earned Rs. 11 billion last year, despite poor tourist arrivals, has asked for export industry status which will exempt them from paying turnover taxes. Mr. Jayasuriya added that the industry's net foreign exchange earnings were 71% of gross turnover. If the country's security and economic environment was more conducive to the industry, we could have earned up to 2 1/2 times more last year, he added.

With a few resorts already closed, more expected to close and the majority of hotels running at very low occupancy, the hotels have fallen back on their bank loan instalments, for which they have appealed for relief measures. The relief package will be taken up by Cabinet this week, Mr. Jayasuriya said.

Sri Lanka's tourist industry which recorded 407,000 arrivals in 1982, dropped to 403,000 arrivals in 1995. Meanwhile room strength had increased 49% from 7539 in 1982 to 11,255 rooms in 1996. Another 750 rooms are scheduled to be added by the end of this year. Figures for the first quarter of 1996 show further declines in arrivals. In January this year, arrivals declined by 32.7% compared to January 1995; in February the decline was 30.6%, in March 39% and April 39.6%.

"We need at least 600,000 tourists annually to achieve an annual average occupancy rate of 60% to make a reasonable profit", Mr. Jayasuriya said.

A good tourist destination attracts about 10 million tourists annually, Mr. Jayasuriya said. "Before 1983 our arrivals were growing at 10% annually. In 1989 the JVP insurrection badly hit the industry which however picked up slowly between 1990 and 1994. Incentives and relief helped the recovery process", he added.

"Also people had begun to feel that the war in the country was restricted to the North and East", Mr. Jayasuriya said. But events in late 1995 and in 1996 had changed perception, he added.

Following a series of terrorist attacks in Colombo beginning with the attack on the Kolonnawa oil refinery, then at the Army headquarters at Slave Island and the Central Bank, tour operators are seriously questioning the safety of Colombo.

The most recent debacle, the power crisis and power cuts seems to have compounded their problems.

Mr. Jayasuriya said following the three-day total blackout, the British Foreign Office issued an advisory to British travellers warning them of power cuts throughout the island and possible health risks.

While Europe is still the largest market, British tourist arrivals were picking up fast in the past months with three British operators selling Sri Lanka aggressively. But such warnings kill such trends, Mr. Jayasuriya said. But the declaration of the islandwide emergency was the actual turning point for the trade, Mr. Jayasuriya said. While the government had good reason for taking this decision, tour operators over-reacted to the declaration which received unnecessary publicity abroad, he said.

"Although our association and the industry in their individual capacities attempted to correct the situation, the warning signals had already filtered down to potential travellers, via tour operators and it was too late to reverse the damage, Mr. Jayasuriya said.

This is why image building is vital, he explained. Other well known trouble spots like Israel, Egypt and Turkey have a thriving tourist industry because they market their destinations professionally, through international public relation agencies.

These countries clearly market themselves as safe destinations although some areas of the countries are at war and unsafe. The best example is Israel, where only the West Bank is portrayed as unsafe and at war, while the rest of Israel is marketed aggressively as a safe destination, he said.

Three top agencies specialising in tourist promotion have already been approached to undertake Sri Lanka's image building programme, Mr. Jayasuriya said.

He added that since 1983, Sri Lanka has not been marketed properly as a tourist destination. He said the Tourist Board does not have sufficient funds to undertake the type of marketing exercise required to place Sri Lanka back on the map as a top tourist destination.

Mr. Jayasuriya said there was a whole new generation of high potential travellers in the age group of 20-33, who know Sri Lanka only negatively, or not at all. "We desperately need to change their image of our country", Mr. Jayasuriya said.

The two-year image building program, which has the support of the Treasury, BOI, AirLanka, EDB, and Tea Board will kick off with 75 top travel writers visiting Sri Lanka during the Kandy perahera. The 75 journalists will be hosted by the hotel and travel trade.

"A hotel room is the most perishable thing in the world", Mr. Jayasuriya said. It is often compared to a airline seat, but at least planes can re-route unprofitable routes, lease or sell aircraft to bail out. But hotels don't even have that kind of mobility, he added. While all industries are affected by power cuts, Mr. Jayasuriya pointed out that the hotel industry had no way of catching up with last time, by working overtime, or extra shifts.

Power cuts are affecting the industry severely, he said. Most hotels have standby generators, intended for random power failures. Most of these are 10-15 years old, and are not industrial generators, with a capacity to run 24 hours, he said.

The government directive to stop operating air conditioners on the national grid has put further pressure on the industry, he said.

"How can we sell a room with A/C and not provide it", he said. One hotelier was running up a monthly bill of Rs. 500,000 for centrally operated A/C when he had only five guests in his resort hotel, Mr. Jayasuriya said. The hotelier was compelled to close temporarily.

Mr. Jayasuriya says that high interest rates, unrealistic exchange rates and difficulties faced by support industries, have further depressed the industry. Mr. Jayasuriya added that the industry provides direct and indirect employment to 87,000 people.

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