RECEIPE FOR A TOURIST BOOM
Priantha Fernando is a Senior Tourism and Management Consultant. He was a former Director of Marketing of the Ceylon Tourist Board. Fernando accounts for over 43 years of experience in the Tourist Industry, Public and Private Sectors. His expertise extends beyond tourism covering other fields such as, Employment Services, Hotel Management, Exports and Export Production, Construction and Project Management. Priantha Fernando is professionally qualified in Hotel Management as well. He is also the holder of a Master’s Degree from the University of Surrey, UK, in Tourism Marketing. Dr. Tilak S Fernando recently had a discussion with him on Tourism to Sri Lanka
What is your opinion on revoking room rates for City Hotels?
Minimum room rates were introduced during a buyer’s market to protect hotels and to ensure a decent rate based on quality and standards. The yardstick used was the Star grading. In the mid 1980’s 5 Star hotels charged ridiculously low rates (US$27.00), which compelled others to lower their rates. In such a situation an over-supply situation of rooms could develop.
From 1982 to 2009, tourist arrivals declined. 1982 figure of 400,000 could not be exceeded in 2008. However, at the end of 2015 1.8million were recorded which means that the room capacity too had expanded in Colombo with 70% occupancy.
The net rate for a 5 Star hotel is around US$175.00 per night based on the minimum room rate (inclusive of govt. taxes, service charge). Old properties therefore need to compete with the new with refurbishment programs and offering the same level of standards and quality of service.
Minimum room rates contradict with government policy. Price control cannot exist if the State adopts an open economic strategy! The prices are based on the supply, demand, the quality, standards and the value added image. Hotel pricing is complicated than it appears. From an hotelier’s perspective room charges have to be at a price higher than the cost, rather than keeping it closed. So, it becomes the responsibility of authorities in the Industry to ensure price wars are avoided.
Removal of minimum price strategy will compel hotel owners to improve on their quality of standards. Consultations with trade associations before removing room rates to understand the pros and cons of the operation before any final decision on implementation would benefit the industry.
Do you consider Hotel Rooms are far in Excess?
Currently Sri Lanka maintains over 70% occupancy. As long as there exists forward planning to match the supply (taking account of approved new projects and availability), the equilibrium could be maintained. However, one needs to be cautious about the growth in the informal sector and the location based room capacity. Here the planners need to encourage hotel room development in the informal sector considering the room capacity in total. Informal sector has over 40% room capacity of what is available in the formal sector. It was 10% eight years ago. In certain areas over capacity of rooms exist. Planning and density are important factors in tourism. Prior to granting new developments such preferences need to be looked at on an overall development plan.
What are your views on converting Sri Lanka as an upmarket destination with 4-5 Star hotels?
It’s always good to have a vision and a mission but its a long path which will take at least 5 years with product on offer being of high standards with room capacities. China and India are examples of today’s market leaders in tourism; they concentrate on ‘budget tourists’ while travel agents offer rates between US$90 to US$100 for a double room (half board). A segment out of them visits Sri Lanka for gambling purposes as ‘repeat visitors’! On the contrary, Sri Lankans patronising tourist hotels pay a higher rate. In Sri Lanka’s promotional activities China too were included, yet the market segment that is being discussed had not been targeted! We have not seen the new resort areas such as Kuchchiweli, Kalpitiya developing as envisaged. Authorities expect an “average spend” of US$200 per day out of up-market tourists, which is farfetched. What needs first is proper planning on short, medium and long-term objectives with set targets. If there is a demand for other types of accommodation what purpose is there to maintain a high percentage of 4-5 Star hotels? This could only lead to super star hotels offering lower rates to be competitive (by dropping their standards) which in turn destroys the destination image. To have 1, 2 and 3 Star properties offering higher standards are better than having 4 & 5 star graded hotels with diminished lower standards.
Do you think our hotels are over priced?
Hotel rates need to be on par with quality of service offered. Should a demand exist why not go for a higher price? Generally room rates may appear too high but one should not unduly worry if 75% occupancy on average can be maintained.
Hotel owners expect good returns. Present borrowing rate ranges from 8.5 to 12%. Sri Lanka’s energy cost is significantly high, skilled manpower startles; HR cost is no different, food items are expensive. With all the government taxes, service charges etc., overall cost becomes higher to achieve a decent profit margin.
What is your view on Domestic Tourism?
It’s the bedrock of the industry. Unfortunately it has received step motherly treatment. In the late 1960s and early 1970s this important segment was considered in structural overall domestic plans. There are over 4.0 million domestic tourist movements per year making a significant contribution to the regional economies. Those countries that thrive on tourism emphasise on Domestic Tourism. An overall negative impact on tourism could reflect on international tourists too if domestic tourism is neglected.
During tough times the industry survived mainly on local tourists. It is imperative to identify local contribution and to make provision ensuring that they are treated with a feeling of importance. A weekend newspaper recently highlighted the provision of special toilets for tourists at railway stations. Why should Sri Lankan be treated as second-class citizens in their own country?
Are you satisfied with the progress in Tourism since 2009?
Globally tourism has grown while the South Asian region had the highest growth rate. Sri Lanka achieved considerably in the past six years. It is high time authorities look at the past as a springboard and plan ahead. Policy decisions seem to clash at present rather than safeguarding sustainable tourism. Of late charter carriers ferrying European tourists to Sri Lanka has dwindled to less than 10% as opposed to over 40% in the year 2000. SriLankan Airlines attempt to pull out of major European markets would be akin to rubbing salt on a wound.
What is required today is to build capacity at national provincial and regional levels. A well thought-out planning programme could make tourism the number one foreign exchange earner in Sri Lanka with 3.5 million tourist target in five years.