Prevent tourism industry collapse, pleads THASL

By The Hotels Association of Sri Lanka
The Hotels Association of Sri Lanka (THASL) is deeply concerned by the exponential increase in COVID-19 cases and deaths across the island. We wish to express our fullest support to the government, medical professionals, tri-forces and civil servants that are at the frontline of this crisis. We are grateful for all their efforts to help save the lives of others while risking their own.

THASL also wishes to express our deepest condolences and sorrow to those who have lost loved ones during this pandemic. 

While we grieve together, THASL wishes to applaud the brave work of all our frontline workers and employees of our own member hotels that have been converted into COVID-19 care centres and temporary isolation facilities. The hotel-led COVID-19 care centres have been able to alleviate the stress on an already taxed health system. We are proud to join the government efforts in managing this crisis. The pandemic is full of stories of everyday heroes, stories of people who have gone the extra mile to help save and support others. This is the true spirit of being Sri Lankan and we are proud to call this island our home. 

However, as we applaud our brave heroes and grieve the loss of our loved ones, THASL remains highly concerned about the ongoing impact of COVID-19 on the tourism industry. 

Vaccinating COVID-19 care centre and hotel workers
Currently, employees working in hotels that have been converted into COVID-19 care centres remain unvaccinated. THASL urges the government to treat all COVID-19 care centre workers as frontline workers because that is exactly what they are. 

Once care centre workers are vaccinated, THASL urges the government to prioritise vaccinating all hotel staff. Hotel staff have high levels of interaction with foreign guests. Only a vaccinated tourist industry can join the economic recovery effort and bring in the valuable foreign exchange Sri Lanka needs right now. 

Tourism hardest-hit industry
In Sri Lanka, no sector in the economy was hit as hard by the pandemic as tourism. With airport closures and limited international travel, hotels and tourist service providers have been bleeding dry. 

Sri Lanka’s tourism crisis has been ongoing for over two years, following the Easter Sunday attacks of 2019. Since that terrible day, tourism in Sri Lanka has suffered unprecedented crisis after crisis due to no fault of the industry. Today, our airports are closed again and the limited tourists that arrived during their brief reopening have disappeared.

Tourism investments have exceeded US $ 10bn in a decade
Over the last decade, Sri Lanka’s tourism industry, led by the private sector, has invested nearly US $ 10 billion into new hotels and services. In the absence of an effective government-led promotional campaign, the private sector has spent billions of rupees annually and in 2018, spent nearly Rs.2 billion in promoting Sri Lanka at our own expense. This in turn generated two million visitors and over US $ 4 billion in foreign exchange revenue for Sri Lanka. 

Our industry was on track to bring in five million visitors by 2025 and US $ 10 billion in revenue as set out by President Gotabaya Rajapaksa’s national policy document of ‘Vistas of Prosperity and Splendour’. 
Our members of whom a vast majority are SMEs were investing towards fulfilling that vision. The high cost of investment in tourist hotels and private tourism infrastructure has left the industry with high amounts of debt. The 65-year-old hotel industry had an unblemished record of debt repayment and debt servicing until the Easter Sunday attacks of 2019. 

Unfortunately, the twin, back-to-back crises of Easter Sunday and COVID-19, have left the tourism industry unable to pay these debts. Specifically, the SME sector and the members who are relying entirely on tourism income, which forms 70 percent of the industry, are the most affected and possible strategies will be needed to lighten the shock as they have limited resources in accessing capital compared to diversified larger firms.

Hotels on verge of collapse
Today, our hotel sector is on the verge of collapse. We are indebted with no revenue. We have very limited funds to pay our workers or to maintain our buildings. Our pleas to the government for a wage support scheme are yet to materialise.

We are grateful for the support we have received so far from the government. By recognising tourism as an export industry, tourism service providers were able to access the same benefits granted to other export industries. The Central Bank mandated debt moratoriums have temporarily helped us from collapsing by delaying debt repayment. The Level 1 hotel categories and Safe and Secure tourism reopening programme launched by Sri Lanka Tourism was a novel and successful way to reopen the battered tourism industry. 

Unfortunately, categorisation as an export industry and resulting tax incentives (in the wake of near-zero revenues), postponing our debt repayment (while interest and capital piles on) and Safe and Secure travel (when international and provincial borders are once again closed), is not a solution to the unprecedented crisis facing the tourism industry at the moment, although  it’s a step in the right direction for the long-term development of the industry.

Tourism needs a substantial solution that follows best practices adopted elsewhere to address the present crisis. 

 
Seven key requests of tourism industry
We wish to highlight our seven key requests for the government to prevent the collapse of Sri Lanka’s tourism industry.

1. Implement the Cabinet-approved wage support scheme for tourism sector employees now until provincial boarders are open for domestic tourists. This scheme will ensure that employees are paid and able to look after their families during this challenging period.

2. Extension of the debt moratorium until December 2022. We don’t expect tourism to start recovering until at least 2023 and tourism businesses will not have any cash flow to repay debt.

3. Introduce an effective debt restructuring programme of all tourism-related debt. Current tourism debt exposure by banks is over Rs.350 billion. If this debt is not restructured, hotels and banks will collapse together. We share the Central Bank’s concerns on protecting depositors and the importance of maintaining financial system stability. A collapse in tourism debt repayment will affect not only hotel owners but the financial health of banks. It risks wiping out deposits of everyday depositors and setting off an unprecedented chain of banking collapses. This is why it is ever more urgent to start planning tourism debt restructuring right now before it is too late for everyone. We urge the government  to waive off bank interest for three years, commencing May 2019 and  look into setting up an agency to manage tourism debt in a way not to burden the banking sector.  

4. Waive all penalties on non-payment of utility bills such as electricity and water and statutory dues such as the EPF and ETF. 

5. Abolish the unfair one percent revenue charge on hotels by Municipalities. This is an unfair tax that is only targeted at hotels and no other industry. 

6. Waive all Tourism Development Levy payments from 2019 until end-2022. Hotels and tourist service providers have near zero income. The little income they have is being used to pay salaries and bills to survive. To be required to pay one percent of their total revenue towards a Tourism Development Levy at this moment of time further burden the tourism industry that is barely surviving presently.  

7. Vaccinate hotel workers and tourist service providers to ensure a quicker reopening of the industry under the Safe and Secure programme. 

We cannot further emphasise how critical the situation is for Sri Lanka’s tourism industry.

While we applaud the government for all the support they have given and appreciate the challenges they face, we are deeply concerned that without meeting these requests that Sri Lanka’s tourism industry will not survive the pandemic. 

Nearly three million people are dependent on our industry. The industry’s collapse will wipe out the little income that three million Sri Lankans, who have lived on for the last two years during the twin crises. At this critical juncture for a vast section of Sri Lanka’s population, we appeal to the government to work with us to help save jobs, incomes and families. 

Tourism needs to be safeguarded and revitalised. It is one of the major economic pillars of our nation’s economic recovery. We need to keep our employees not only in receipt of adequate resources for the basic needs of their families but also in a courageous and optimistic mindset, with their expectations for the future intact. This is why, on behalf of the industry, THASL is making a fervent appeal to the government to support the industry in this critical period.