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The Minimum Room Rate riddle: a house divided

Is it lawful for hotels to ‘join together their independent decision-making power’ to raise prices? Due to one’s inability to convince others, is it proper to use the government to get those who might not agree otherwise, to simply ‘make it law’? Does a minimum room rate reduce competition whilst increasing prices?


Sri Lankan authorities introduced a Minimum Room Rate (MRR) regulation for Colombo city hotels in October 2023. In the wake of certain city hotels (4-star class and below), appealing to the Government to continue with the decree which was to cease by 31st March 2024, it appears likely to continue.


Then, there now is a proposal to apply the MRR to the entire country, resulting in the debate as to whether the MRR is a blessing or blight - rising sharply!


According to the Vice President of Sri Lanka Association of Inbound tour Operators (SLAITO), implementing the MRR countrywide would drastically reduce the Russian Market and have a huge impact for beach hotels and dry up Russian charters as well. Aeroflot and Rossiya airlines though, have decided to continue summer operations in Sri Lanka.


Joining in the chorus of protests was the President of the Sri Lanka Association of Professional Conference, Exhibition and Event Organiser (SLAPCEEO), who claimed that all the 5-star hotels including the Shangri-La in Colombo, Taj Samudra, the Cinnamon Hotels, and the Colombo Hilton are opposing this and only a few run down hotels are for it.


He went on to add “Over 2,000 new rooms from 4 to 5 –star hotels  including the ITC Colombo, Cinnamon Life, InterContinental and more would be added to Colombo city’s hotel inventory, and it will be a tall order for them to find guests due to the increased price created by MRR.”


Countering these arguments are city hotels such as Renuka, Jetwing Colombo Seven, Ramada by Wyndham, The Steuart, Radisson Hotel, Fairway hotel and Colombo City Hotel as well as the Kingsbury who all are in favour of the MRR and appeal that it be extended - on the basis that it had been a lifeline for the smaller hotels which market around 3000 rooms, employing 6,000, in the city.


Other reasons cited include the MRR been a catalyst for revenue growth, that it safeguarded the stability of individual properties, brought in more foreign exchange to the country, generated higher service charge for staff, and that the MRR allowed all hotels, irrespective of capacity or classification, to compete on an even playing field. 


Essentially, these hotels want a level playing field where fixing prices by law provides them market share - amidst least effort. Insofar as the consumer is concerned, supply and demand with the best possible choices of price and quality is bereft of any consideration.


In defense of the hotels that wish for the continuation of the MRR, the Chairman of a family owned hotel chain had this to say.”“You try to market a hotel and see, it’s not easy. People don’t have the confidence, and when there is fear, you don’t necessarily go out and sell at a higher price. That’s why it’s necessary for someone to come and push it up. Finally, hotels are making money; do you want to stop that? ”


Sales and making money is at the heart of every commercial enterprise and that been the revenue-generating engine of a business is a ‘no contest’. No one I’m certain wants hotels to not make any money-but in this manner?


There is truth in sales people having fear and a lack of confidence. Confidence isn’t a fixed trait, and that’s especially true when it comes to salespeople. Shifting market trends, changing buying habits, new products, unfamiliar technologies and new competitors can all shake a person’s confidence, no matter how much experience they have. With so much change going on right now, one cannot assume anyone is immune from a crisis of confidence.


However, if you want to your team to remain confident and successful, help them see what’s possible for them to achieve and then support them in developing the self-belief to make it a reality. That can only come from the right training approach. Learning must be accompanied by structured follow-up, bite-sized application over time, accountability, repetition, reinforcement and ongoing coaching. How many hotels care do that?


Only the best invest in this type of training. Others might see investment in such training as a needless expense – especially with a MRR in effect.


Shafeek Wahab – Editor, Hospitality Sri Lanka, Consultant, Customer Service Trainer and Ex-Hotelier


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