Big relief for Sri Lankan tourism industry as top court stays minimum room rates

MICE tourism stakeholders eye big gains in Indian traffic
/ Colombo, Sri Lanka
Big relief for Sri Lankan tourism industry as top court stays minimum room rates
Big relief for Sri Lankan tourism industry as top court stays minimum room rates

Imposition of minimum room rates at hotels had severely impacted tourism traffic to Sri Lanka, say agents

In a significant development, the top court in Sri Lanka has stayed the operation of minimum room rates that had been imposed by the government. The stay order has come as a major relief, even if temporary, to Sri Lankan tour operators and event organisers who had moved the court against the government saying that imposing minimum rates had led to a significant negative impact on tourism to Sri Lanka, especially from India, the biggest source market.
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Last week, after almost eight months of hearings, Sri Lankan tour operators and event organisers gained a major relief as the Court of Appeals of Sri Lanka suspended an order of the government from September 2023 imposing Minimum Room Rates on hotels in the capital, Colombo.

The court ruled on a petition moved by various organisations of Sri Lankan tour operators and event organisers who had argued that the government had imposed the MRR without adequate consultation with key stakeholders in the tourism industry.

The petitioners included Sri Lanka Association of Inbound Tour Operators (SLAITO), Sri Lanka Association of Professional Conference & Exhibition Organisers (SLAPCEO) and Association of Small & Medium Enterprises in Tourism (ASMET). They had claimed that the rate lacked a rational basis, adding that the Sri Lanka Tourism Development Authority did not conduct a proper study before imposing the MRR.

They added that the MRR would unfairly favour certain hotel categories while detrimentally affecting the industry as a whole. The government had fixed MRR at USD 100 for five-star tourist hotels, USD 75 for four-star hotels, USD 50 for three-star hotels, USD 35 for two-star hotels, and USD 20 for one-star hotels. Incidentally, days before the court order, Sri Lankan Tourism Minister Harin Fernando had said that the MRR would be scrapped from May 31.

Major win for MICE tourism players, look for Indian business

The court’s order and the change in government’s stance has come as a major relief for Imran Hassan, CEO of SLAPCEO, who was one of the plaintiffs in the case. Hassan says that the imposition of MRRs was an ill-conceived plan and which has seriously impacted an industry that was already struggling.

Imran Hassan

Imran Hassan

“Just as soon as we exited the Covid-19 pandemic, we had the severe economic crisis and only last year things began to improve and then we went around the world, but mainly to India as it is our biggest market, to attract tourists as tourism is a major industry and a large number of Sri Lankans are dependent upon this sector. So, just as we were recovering, this order came in and it led

Hassan says that the trouble began when a cartel of hoteliers went to the government and said that hotels needed MRR as they were making losses. “We, the tour operators and members of MICE organisers who are members of SLAPCEO, are the ones who bring tourists to Sri Lanka. Yet the government did not consult us before agreeing to the demand of the hotels and they imposed the MRR even though we had already signed contracts for business. So this led a large number of cancellations, notably from markets like India, as no one likes terms to modified once a contract has been signed,’’ Hassan tells India Outbound.

“As a result, MICE tourism and business from all the corporates from India came to almost a standstill. We may have received only about 5 pc of the business that we should have gotten since we were actively promoting and due to our numerous advantages, vis-à-vis the Indian market, including proximity, ease of access and a competitive price,’’ Hassan adds.

With the scrapping of the MRR, Hassan says that he expects the MICE business from India to pick up significantly, within a few weeks and that the SLAPCEO members would be able to negate the losses incurred so far due to MRR.

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