Tour operators sidelined, says top operator
Sri Lankan tour operators have once again been sidelined as a result of which they incurred approximately Rs. 275-300 million in losses over the past two months since, unlike hoteliers, they were not exempted from the zero VAT.
Former Sri Lanka Association of Inbound Tour Operators (SLAITO) head and NKar Travels Managing Director Nilmin Nanayakkara said that by Destination Marketing Companies (DMCs) not being exempted from VAT, they were to lose as much as 8 per cent from profits.
“As tour operators the profit we make is between 5-10 per cent out of which when 8 per cent is taken away how could be survive,” he queried.
Authorities have already approved a zero rated VAT for hotels provided 60 per cent of their supplies are local purchases, which Mr. Nanayakkara explained they were appreciative of.
Explaining how this works, he said, “The time when a hotel gave us a VAT invoice would stop since they (hotels) are zero rated and as a result we don’t get an opportunity to claim that 8 per cent as input credit.”
Following this, DMCs held negotiations with the hoteliers “to give a reduction of 8 per cent component that they gained from VAT reduction to us; but that is not happening except in a few cases since they say they are into huge losses due to the current situation”.
However, upon approaching the relevant authorities from Sri Lanka Tourism, Ministers, and the Treasury, SLAITO representatives had found that the Treasury authorities had not realised the role they play and had verbally agreed to reverse this process. “It’s approximately two-and-a-half months since this happened and nothing has happened,” Mr. Nanayakkara said.
Tour operators are said to be nervous “if this is not reversed we will not be able to sustain and we will have to close shop,” he said adding, “The top decision-makers are totally ignorant about the role that DMCs play.”
It has also been found that tourism authorities had evaluated DMCs on the basis of the amount of Tourism Development Levy (TDL) paid by hoteliers and DMCs. On the contrary, Mr. Nanayakkara said authorities need to look at this through the banks in terms of the foreign exchange earnings.
Moved by the turn of events as tour operators have been continuously sidelined over the years as well when back in 2005/2006 the Colombo city hotels were able to impose a minimum room rate within a matter of three days resulting in tremendous losses to DMCs. “I agree there was a need to increase the City Hotels rate then but three days’ notice was not fair.”
Again during the last regime a budget proposal to ensure DMCs pay in foreign currency to hoteliers, Mr. Nanayakkara said.
“Had it been gazetted we would have taken legal action. But I feel this was the reason for not gazetting it.” Such moves are not at all reasonable as we are the ones who generate and move the bulk of the traffic to Sri Lanka.
Moreover, the new tourism authorities are looking at once again sidelining the tour operators by planning to promote the Online Tour Agents (OTAs) that has repeatedly been brought before the Sri Lanka Tourism Promotion Board (SLTPB).
“There’s a move to support OTAs and I believe with funds to promote Sri Lanka,” Mr. Nanayakkara said querying “On whose interest are we doing this.”
OTAs are unregulated by Sri Lanka Tourism and do not pay VAT or TDL and are owned by foreign entities, bulk of the inventory they sell are of unlicensed accommodation providers and made to compete with local DMCs that added to the above taxes and levies also contribute income tax upon making profits.
SLAITO has protested against this move by the authorities which “we anticipate it to be imminent,” Mr. Nanayakkara said adding that authorities must “use their brains to support the local industry and not the foreign investor.”
“I’m confident the government is not interested in eliminating the DMCs (the local tour operators). If any government is interested in protecting the local investor this should be stopped immediately.”
While the President and Prime Minister may not be aware of these moves, Mr. Nanayakkara noted it would be well should this information reach them.
“We are pleased with the way the President expressed that tourism should be placed in the highest level,” he said.
He also said if you look at the foreign exchange earnings from tourism any one would realise that it is the local tour operator or DMC that brings the absolute bulk of foreign exchange to Sri Lanka.
Sri Lankan tour operators generate about 60-75 per cent of the tourist traffic to the country and spend nearly Rs.1.5 billion per year promoting the destination.