Price gamble and missed opportunities

11 September 2013 06:30 pm Views - 3679

By Ramzi Ali

With the end of hostiles, a golden opportunity was missed by the Sri Lankan tourism sector by hiking prices of accommodation by 200-300 percent, forgetting the ordinary hotelier in the process.

Today we see the impact on tourism as arrivals have gone down by 75 percent when all big hotels started throwing 50 percent off the rate to attract locals. It is very unfortunate for the top hotels as this was the norm during the latter stages of the war, when price’s had to be dropped as tourists abandoned coming to Sri Lanka.
It’s true that, right after the war ended, the forthcoming season was 100 percent full, and we saw many airlines featured on the front pages of Sri Lanka promoting tourism. But hoteliers wrongly estimated Sri Lanka to be on a par with the Maldives, and started hiking the rates, even without upgrading the hotels, with the hotels selling a room rate at US $ 70 while trying to sell to tour operators at US $ 180 which is not the way to do business in anyone’s book.

Four years before, the hoteliers were too stubborn to increase the rates when operators questioned the sudden increase. They simply said, “Now we have to make money, as we must increase dividends of our investors”.

 Big overseas tour operators warned that this will adversely affect the marketing, and the hoteliers responded with disgust; “this is our rate, take it or leave it”.
Then the big tour operators stared pulling out from Sri Lanka, with statements like “over priced” or “cannot sell” flying around. The next year saw a considerable drop in arrivals and cancellations of several big time worldwide operators, still several hoteliers were still reluctant to reduce the rate “ I will not reduce even if I close down the hotel”. This absurd attitude is bringing the Sri Lankan tourism industry to its knees.



New trend: Selling direct online
With the sudden increase in arrivals in the first year after the war, hoteliers started exploring the internet thinking that travelers would book directly and started investing money below the line, but failed to realize that jacking up prices would take the clients away from Sri Lanka to cheaper destinations.

Sri Lankan hotels are heavily dependent on the OTA’s (Online Travel Agencies) and the OTA is in control of all hotels, which is good for clients and others, but is very bad for the country. Due to the height of frustration and cut throat nature of the hotels, they now have started undercutting their own tour agencies.



Boutique hotel: The latest cheating
Forty five percent of the total room inventory in Sri Lanka features absurdly high prices, poor maintenance, cramped conditions, cheap untrained staff, bad food, and dubious location etc today.

The beautiful websites full of unsustainable promises is a mirage that is consistently leaving customers in a state of high flux.  

So called boutique hotels are comprised of less than 30 rooms and no government ratings. So the greedy owners decided to set their own rates and standards. Unfortunately the owners of the Boutique hotels are misguided by this “boutique hotels” word and doing what they think is good for them. Too many boutique owners are trying to reclaim over spent build budgets, by unrealistically hiking their prices to a level that their hotels cannot service.

The actual problem is the low salary they pay to staff. So, they try to get the best jobs by quickly switching the job. As a result, the existing hotels staffs are always new and the service level is always down since the new recruit doesn’t know the lie of the land and even when someone asks for a simple thing like salt and pepper shakers.

The other  major thing is the food standard and its availability, which they create a world-class menu spending heavily and that lasts only for few months as the stock is out of stores, having never been filled and the menu is often 90 percent unavailable as they cant fill freezers due to the low room sales.

• Solutions : The government should first stop allowing anymore boutique hotels, and then standardizing and rating the existing boutique hotels along established star lines.
   
• Consistency: Government should have the independent audit team to audit the maintenance and the service. (Probably the foreign entities only)
   
• Penalizing: Strict rules should be placed with the penalty or the star down for every purposely made mistake by the hotel
   
• Training: A periodical seminar should be offered to the owners of the hotels to learn about their trade.
   
• Very Important: When standardizing and rating, We think Sri Lankan hoteliers should not get involved in this as they favour other hoteliers for self ratings- a very unfunny joke within the industry.

City hotels and minimum rates
The City Hotels Association immediately blamed the government over the minimum rates depsite the City Hotels Association was the one that steered the ministry to implement it to control the undercutting.  Some hotels still look old but the prices are premium and huge. The best solutions is reducing rates immediately.

The minimum rate has damaged the tourism to such an extent that one of the small hotels located in the heart of Colombo, is now selling a room at US $ 115$ (was selling at 50$ before).

Despite the high room rates, the overall amenities, staff appearance and uniforms are very cheap and not up to the standards of the US $ 115rate. Whoever is paying the US $ 115, no matter if this is including taxes or not, they still pay a price and it should serve as they charge.

Sri Lanka hotels are selling rooms at the rate for US $ 300-400 a night, but we still have not done the infrastructure properly.



Solutions
After the lapse of 4 years since the end of the war, we were doing mistakes thinking that we are “A United Arab Emirates”.

 The City Hotels Associations has done a huge damage of fixing a rate where other associations and hoteliers quickly followed the footstep and started hiking prices, and we tried to run before walking.

The tour agencies have lost lot of groups and FIT’s due to this. Millions of rupees by tour agencies spent on promotions have gone waste today.

 One should think that the accommodation is the basic amenity one that attracts the visitors. When that basic is so high, then there is no other word to talk.

 We hope that hoteliers will reduce the rates rather than blaming the government of fixing the minimum room rate, since the minimum rate was fixed because City hotel requested so. Still they can re-fix to reduce the rate.

Too much time has already been wasted on administrative nonsense and paper pushing. Prices are too high right round the block. If the Chinese charge $11 to visit the Great Wall of China, how can Sri Lanka charge the same tourist $30 to see the Sigiriya? Until answers  and solutions are found to such questions, the Sri Lankan tourist industry will remain in the lower divisions, a disgrace when one considers the natural attractions the island has to offer for visitors from all around the globe.

(The writer is the Country Director for DirectWithHotels and has 23 years of experience in the hospitality sector)