Will MRR be the Holy Grail for Colombo hotels to achieve higher revenue?
Aimed at elevating the island nation’s capital as a high-end tourist destination, prices of Sri Lanka’s Colombo city hotels will be soon increased under a Minimum Room Rate (MRR) policy. However, opinions between local hoteliers and tour / travel operators remain divided on the move.
Very recently, the Chairman of Sri Lanka Tourism Development Authority (SLTDA) announced plans for a MRR regulation to be introduced from 1st October 2023 onwards, where the minimum nightly room rate charge, fixed for city hotels below the 3-star rating will be US$50, US$60 for 3-star hotels, US$ 75 for 4-star hotels and 5-star hotels to charge US$ 100. However, exceptions would be made for those travelling in for business related purposes, or else known as Meetings, Incentives, Conferences, and Exhibitions (MICE) travelers, he said.
The move comes at a time when President Ranil Wickramasinhe has reiterated the need for Sri Lanka to attract 2.5 million high-end tourists on a yearly basis, under the ‘Visit Sri Lanka’ tourism plan that is yet to be publicly disclosed.
According to the SLTDA Chairman, the shift towards applying a MRR for Colombo city hotel rooms is intended at protecting the capital’s hoteliers from the unfair treatment dealt by Destination Management Companies (DMCs), who do not pass on the benefit of tourism packages to direct service providers such as hoteliers. Going on to add, that the amount that directly reaches the service provider is “very small”, after a eight-night / nine-day tour package of Sri Lanka is marketed to Indians at a price range of US$ 1,800 - $1,900.
He also mentioned that the current rates within city hotels are ridiculously low and in turn convey an indirect message that leads to positioning Sri Lanka as a low-price destination. The SLTDA Chairman further opined that as the rupee has depreciated against the US Dollar at present, tourist will not have any issues in paying these rates and remarked that changing rates in Colombo city hotel rooms will in turn enable the changing of hotel rates throughout the island.
According to Sri Lanka Association of Inbound Tour Operators (SLAITO), tourists have access to seek more competitive and realistic pricing within the [Asian] region. If not Sri Lanka, they will pick competing destinations in the region and Sri Lanka as a destination will lose out altogether. With a surplus of hotel rooms in Colombo, the best way is to create events and activities in the city that would increase the demand for the city. Once that occurs, hotel rates will automatically go up, it goes on to argue.
During the first seven months of 2023, both the arrivals and industry revenue have increased, arrivals totaling 767,913 and revenue US$ 1.1 billion, but they are still below the peak the country achieved in 2018. Whether the MRR will succeed on all counts is left to be seen.
Hospitality Sri Lanka
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