- Chair stresses increased earnings, higher foreign exchange inflows
- Cites economic impact amid criticism
- President criticises MRR, questions its efficiency for tourism revival
- SLTDA faces legal challenges as associations oppose minimum rates
The Sri Lanka Tourism Development Authority (SLTDA) has defended the introduction of Minimum Room Rates (MRRs), claiming that the decision is backed by sound evidence on the benefits to the economy and pointing to the increased revenue observed by hoteliers after the MRR came into effect from 1 October.
Speaking to The Sunday Morning Business, SLTDA Chairman Priantha Fernando stated that following the introduction of the MRR, the 44 hotels located within Colombo City that were subjected to the relevant gazette had reported an increase in revenue of over $ 1.7 million.
This follows the increase of over 70% in the Average Room Rate (ARR) during October in comparison to August, which had previously been the best performing month.
Therefore, he stated that the increased foreign exchange inflows and its subsequent benefits to the economy justified the introduction of the MRR.
Fernando stated: “The purpose of tourism is to earn the required foreign exchange for the country, create employment opportunities, etc. The more tourists that come in, the better it is. However, for example, if 100 tourists spend $ 55 per day, it amounts to $ 5,500, whereas 80 tourists spending $ 100 per day will yield $ 8,000. Therefore, we have done a proper cost-benefit analysis on the benefits to the economy.”
He stressed that the introduction of the MRR had not been an ad hoc decision and that it had been backed by sound evidence on the benefits to the economy.
He pointed out that although Colombo City hotels had recorded a 16% drop in occupancy, their revenue had increased by 25% in October.
He further stated that they would continuously monitor the situation and that the MRR may be reviewed once the prices had been established.
Associations such as the Association of Small and Medium Enterprises in Tourism (ASMET) and the Sri Lanka Association of Inbound Tour Operators (SLAITO) had taken steps to challenge the MRR introduced by the SLTDA in courts, he revealed.
Meanwhile, delivering a speech at the Sri Lanka Economic Summit 2023, President Ranil Wickremesinghe expressed his dissatisfaction with the SLTDA’s move to introduce the MRR.
Wickremesinghe, questioning the efficiency of the MRR, stated: “We must say goodbye to minimum rates.”
“Which country has minimum room rates? If you provide a good service, you will get the business,” the President declared.
According to the President, in terms of economic recovery and strengthening foreign exchange earnings, the Government’s priority lies with tourism, followed by modern agriculture, which are low-hanging, reachable ‘fruits’ for the Sri Lankan economy.
The SLTDA published an order under Section 53 of the Tourism Act No.38 of 2005 in Gazette Extraordinary No. 2349/02 dated 11 September 2023, revising the MRR for corporate and free independent tourist hotel rooms located within the limits of the Colombo Municipal Council (CMC) area.
Accordingly, the MRR for five-star tourist hotels is $ 100, four-star tourist hotels is $ 75, three-star tourist hotels is $ 50, two-star tourist hotels is $ 35, and one-star tourist hotels is $ 20.
The gazette notification also emphasised that these rates were payable for a period of 24 hours and excluded service charges and other applicable taxes, fees, or charges levied for any other services provided.