Hotel price war hots up as tourist arrivals increase

•  THASL says low rates in Colombo spreading to other cities
• “Everyone is undercutting. There is price war going on” – THASL chief
• Says move impacting employees due to low service charge, and economy for fetching lower forex

• By Shabiya Ali Ahlam

Sri Lanka’s hotel sector is unable to fully reap the benefit of the increasing tourist arrivals as industry players have opted to slash rates in a bid to capture market share.

The Hotels Association of Sri Lanka (THASL) shared with Mirror Business that despite there being an improvement in the momentum of international visitors entering the country, the hotel sector has not been able to fetch higher revenues.
 “One of the biggest issues we are facing at the moment are low rates. Everyone is undercutting. There is a price war going on.

The rates are low in Colombo, and this is spreading to other cities across the country which is impacting hotels,” shared THASL President M. Shanthikumar.
Discussions are underway among industry stakeholders to address the issue. While the majority are in agreement to maintain higher rates, a few are not keen on doing so, shared the THASL chief.
“It is unfortunate that five-star hotels are slashing prices. One can get a room at a star class hotel for about Rs.25,000 per night. Because of this the smaller hotels are pushed to cut rates to get bookings,” he added.

Shanthikumar cautioned that the move by sector players will severely impact all stakeholders and ultimately the overall economy of the country.  Alongside having to grapple with higher overheads, employees are hit once again due to lower service charge.
“Staff is suffering because of lower service charges, and eventually the country, the national economy is impacted as despite the increase in tourist arrivals, the foreign exchange earned from tourism is low,” pointed out Shanthikumar.
Meanwhile, in terms of occupancy, hotels in Colombo, down South, and Nuwara Eliya are faring well. However, occupancy in other regions across the country remains low.

The month of May is witnessing a reduced momentum in tourist arrivals due to the end of the peak season. For the first three weeks of the month Sri Lanka welcomed only 57,142 international visitors.
Shanthikumar shared that bookings for the months of July and August are already “looking good,” and it is hoped the industry will take necessary measures to benefit from the improvement in tourist arrivals to the country.