Small hotels for sale
Many small hotels in the southern coastal belt are approaching their bigger counterparts for management buyouts or part stake sales, as they struggle to fight escalating costs, overpricing and competition, industry analysts say.
“Most hotels are based on future earnings and valuations. Right now they are overpriced. Small hotel operators are finding it increasingly hard to operate with the high costs, and expensive rates. Most are for sale and some have approached larger hotel groups to either sell or part-sell their properties,” an industry analyst said.
He said that this includes boutique hotels and 3-to-4 four star properties in Wadduwa, Hikkaduwa, Galle, Thalpe, Ranna among other towns. According to industry sources, boutique hotels are being offered at as much as US$ 3 million for a 70 per cent stake. “Both locals and foreigners are seeing these properties and some sales are nearing completion,” an industry source said.
While the minimum room rate is seen as a positive factor leading to high revenue generation of hotels via higher room charges, not all segments of the industry agree. Industry officials believe that room rates are 30 to 40 per cent higher than regional counterparts such as India, Malaysia and Indonesia, making Sri Lanka an expensive destination.
The recent electricity tariff hike is affecting smaller hotels with overhead costs rising.
Analysts say that most small timers (whose properties have been up-graded and maintained to international standards) in the industry would gain from the sale of their properties as they are in prime locations. Larger hotel groups will benefit from these acquisitions, adding to their room inventory of small hotels and making money on economies-on-scale.
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