The Sri Lanka Association Professional Conference, Exhibition and Event Organisers (SLAPCEO) yesterday raised serious concerns over the moves to re-introduce minimum room rate warning it will have a detrimental impact on the mice tourism industry.
Issuing a statement, SLAPCEO, that represents the MICE (Meetings, Incentives, Conferences and Events) tourism industry of Sri Lanka, said MICE tourism is generally the first to get affected and last to recover when there is an issue.
Following is SLAPCEO’s seven reasons for opposing the proposed minimum room rate move.
The principle of minimum rates itself defies the laws of economics where demand and supply are not permitted to determine what the rate should be. We believe that external control on rates should only be considered when dealing with essential services and is never advisable in any other case, particularly with regards to aspects related to travel, where it is completely discretionary, and when we compete with the entire world. Secondly, where MICE business is concerned, Colombo primarily competes with cities like Bangkok, Kuala Lumpur and Hanoi, and the average rates for a 5-star hotel with breakfast in these 3 cities is approximately $ 100 per night or lower at present, so with the minimum rates that are currently being considered, we will not be competitive at all.
Admittedly, cities like Dubai and Singapore are priced higher, but Colombo is not considered amongst these cities.
The suggested minimum rate of $ 130 + taxes, will work out to a rate of $ 225 on an online platform like Booking.com, when the cost of breakfast, taxes and a 15% agency margin is maintained, which will make it impossible for us to compete with these cities with such a price disparity.
Thirdly, arrivals from our key source markets are still at a fraction compared to what it was at pre pandemic levels. Please see a comparison given below for your easy reference against arrivals in 2018, which was prior to the Easter Sunday attack and the pandemic. (See table)
Fourthly, Europe is officially in recession in 2023, and the USA is on the brink of declaring a recession, which in turn impacts the rest of the world. We are already seeing the implications of this on our export industries that are negatively impacted, and we feel that this is not the time to go for significant artificially-controlled rate increases, as it could prove to be detrimental. Whilst the Indian and Chinese economies are less impacted by the global economic crisis, we cannot ignore
that the entire world will be trying to woo travellers from these economies, and will certainly compete on price, which we will not be able to do if a minimum rate is brought in.
Fifthly, setting a minimum rate by star category is not as simple as it seems – older properties that have not been through refurbishments in a while always suffer as they have to compete on the same rate, as one that is brand new or has had a more recent refurbishment. There is a further implication on whether it is a part of an international brand or not. For instance, it would be seemingly unfair to have a slightly older property from a local brand to be forced to sell at the same price as a brand new property from an international brand.
Sixthly, the hotel offering today is significantly compromised compared to what it was a few years ago as properties are older, have not gone through refurbishments and have serious issues around the lack of staffing. When hotels are sold at higher rates, the expectation levels are equally high, and there is a high risk of not delivering good value when compared with our competing destinations.
Finally, our prior experience has been that the minimum rate laws were rampantly violated in the past by offering free airport transfers, free meal plan upgrades, free or discounted conference offerings or through commissions and kickbacks to the agent. This cannot be monitored as well, and it was for this very reason that many General Managers of city hotels actively lobbied to have the minimum rate law lifted in 2017 and 2018, and have even gone to the press expressing their views. We don’t see how this will be any different this time round.
As SLAPCEO, we are keen to see Sri Lanka sold at the right price ourselves and are keen to earn top dollars for the destination, and thereby ensure the government earns higher tax revenues through this industry as well. However, if a policy like the minimum rate policy is not rolled out carefully, or at the right time, we sadly feel that the implications will be no different to the organic fertiliser regulations that were brought in by the previous government. Undoubtedly, that too was a laudable effort, but was not thought through and prematurely implemented, and we have grave concern that this may do the same to the MICE industry which we represent.
Sri Lanka Travel Feneteko