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Minimum room rates at hotels to be scrapped by the end of this month

May 04, Colombo (LNW): Tourism Minister Harin Fernando yesterday revealed that the minimum room rates (MRR) imposed on hotels will be scrapped by the end of this month and allow competition to return to the industry. 

“There is good news, we are taking out the minimum room rate from the 31 of this month,” he told journalists.

He stated his belief in the operation of market forces, noting that the reintroduction of the MRR by Sri Lanka Tourism Development Authority (SLTDA) was prompted by the unfair practices of destination management companies (DMCs). 

The Minister pointed out issues with DMCs charging higher rates to customers without passing on the benefits to hoteliers, resulting in significantly higher margins than usual.

“We had already planned to review and terminate the MRR by March. However, prior to that, the industry stakeholders initiated two lawsuits against the SLTDA and Tourism Ministry concerning the MRR,” Fernando said.

Looking ahead, he asserted it is crucial for hotels to actively pursue their marketing strategies.“Even if we impose the MRR, Shangri-La and all sell for much higher rates – they go $ 180-200. 

With ITC opening they have lifted the benchmark further. It is now up to the hotels to work on their own marketing strategies,” the Minister stressed. 

SLTDA Chairman Priantha Fernando stated that they had successfully met their goal of increasing the revenues of city hotels. 

“We achieved our objective. The city hotel’s occupancy went up from 46% to 71% over the past six months. There has been a 33% increase in income within the city of Colombo. 

Therefore, in terms of dollar earnings, our objectives have been accomplished. It is now the responsibility of hoteliers to sustain the demand for this policy,” Fernando added.

On 1 October 2023, the SLTDA reintroduced the MRR regime as a way to give a lifeline to the struggling city hotels. The move sparked disagreement within the industry, where 

The Hotels Association of Sri Lanka (THASL) has endorsed the MRR, whilst the Sri Lanka Association of Inbound Tour Operators (SLAITO) contended that it favoured only a cartel of hoteliers.

The city hoteliers attributed the sharp rise partly to the introduction of MRR since October last year by the Government. From a low of $ 137 million in October, earnings have soared to $ 346 million by February.

For 2024 Sri Lanka Tourism has set a target of $ 4 billion in earnings in 2024 on a base of 2.3 million tourists.

 Industry analysts noted that to reach the $ 4 billion target for 2024 would require continuity of the momentum seen thus far. City hoteliers opined that continuity of the MRR will be critical in this trajectory.The MRR excluding breakfast is $ 100 for 5-star hotels, $ 75 for 4-stars, $ 60 for 3-stars and $ 50 for others. In recent months, the Bread and Breakfast (B&B) rate in hotels and resorts in tourist areas outside Colombo was averaging $ 200 or more per night

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