Hoteliers suffer despite higher tourist arrivals

Though there is a lot of hype created through monthly arrival figure produced and disseminated by the Sri Lanka Tourism Authority (SLTDA), tourism earnings have failed to lift the bottom lines of Lankan hoteliers, with luxury hotel operators being the hardest hit category.

This week saw the shocking revelations of how the star class hotel occupancy rates had gone down-hill with the average occupancy rates falling to 76 percent in November 2012 from a high of 90 percent a year earlier.

This was amply demonstrated by the sharp earnings drop of 22 percent reported in Q3 of the largest hotelier in Sri Lanka, John Keells Hotels PLC (KHL) with more similar earnings reports to follow.

According to John Keells Stock Brokers (Pvt) Ltd, (JKSB), growth in tourist arrivals to Sri Lanka in 2012 has not translated into higher occupancy rates across the board, with many hotel operators - particularly in the 4-5 star categories - reporting a drop in visitor volumes.

The is mainly due to the average room rate increase in Sri Lanka over the last three years, where some have gone up as much as 50 percent from a few years ago, making the ‘low cost destination’ tag a mockery.

JKSB further expects this trend to continue in the medium term unless a revision in the room rate charges or a change in the marketing strategy aimed at capturing a greater share of the higher end budget segment.

Further, the trend will lead to the risk of Sri Lanka reducing her competitiveness against regional peers when the increase in rates does not coincide with corresponding increases in the country’s overall product offering.

 “Certainly there is a dramatic downturn in occupancy levels in all upper-end (5/4-star) hotels. This is quite evident from the newspapers, which carry some exciting offers for weekend packages. `Buy one and get one free’ attractive credit card discounts of up to 65 percent and `partner stays free’ offers are abundant in the market today,”Srilal Miththapala, the immediate past President of the Tourist Hotels Association of Sri Lanka having closely analyzed the industry stated in a recent article.

According to Miththapala, the national arrival figures are established on the basis of international norms, where a person holding a foreign passport staying in the country for more than 24 hours is deemed to be a tourist. Further the Sri Lankan diaspora, holding foreign passports, returning to the country for vacation too leads to a 20 percent error margin in the arrival numbers.“Most of these persons stay with relatives and therefore do not get `caught up’ in the hotel occupancy statistics.

The arrivals statistics in comparison with the Foreign Guest Nights (FGN) in graded and supplementary establishments as given by SLTDA gives an accurate indication of the number of tourists who actually stayed in graded tourist establishments and this revealed that of the total arrivals of 654,476 recorded for 2010 only 82 percent were `real tourists’ who stayed in proper hotels”.