Sri Lanka Tourism cushions industry’s financial crisis
File picture of the empty Dutch hospital entrance to many restaurants.
Sri Lanka’s tourism regulator is seeking a monetary push to the now-devastated tourism industry, facing a financial crisis with not a single traveller in sight, to help pay wages of part of its workforce.
Sri Lanka Tourism Chairperson Kimarli Fernando addressing a webinar hosted by Advocata on “COVID Impact on Tourism” on Tuesday stated that they were in talks with the International Monetary Fund and was working with the Bank of Ceylon as coordinator to provide support to workers earning less than Rs.40,000. At present there are about 80,000 direct employees in the sector.
In addition support in the form of a one-off payment for drivers and tour guides will be made including restaurant owners and establishments that have registered with the Sri Lanka Tourism Development Authority (SLTDA), she explained.
Further financial impetus is being worked out through the UNDP for an assessment of the way forward for the industry.
“Currently with the pandemic we are talking with the UNDP to have a 3-stage strategy on the situation assessment, impact assessment and roadmap for the way forward,” Ms. Fernando said.
Another Euro 3.5 million has been allocated by the European Union but this is not for hand-outs and would serve for other work of the industry, she said.
Moreover, she called on banks to stand by the industry and assist them to overcome the crisis they were faced with as they have contributed sizeably to the incomes of the financial sector as well.
“I appeal from you to help us,” she said adding that the respective associations of the industry should send a list of the assistance required by them with names of banks as has been done by the tour guides already in order for the authorities to assist them.
In addition, the authorities are looking at working with the SMEs since they are the worst affected in this crisis and in this respect, Ms. Fernando noted they were faced with some challenges but will look at the classifications and will work with the land registry and Pradeshiya Sabha to work out a financial assistance for them as well.
Eventually people will travel
Optimistic of the future recovery, the chairperson noted that: “Eventually people will travel when the traveller is comfortable with the place they are staying in and the airline they travel in and the country’s health system.”
In this respect, she noted that some airlines have already started their process of carrying out health checks on their passengers prior to going onboard.
And the time is right to ask the question on the yield per tourist and market targeting the senior citizens that visit destinations for longer periods, Ms. Fernando said.
In this respect, the health and safety factors would be essential and in fact the visa process will need to change as everyone will be requested to take a test as a voluntary or mandatory requirement depending on the regulations of the health authorities, she explained.
Further regulations would have to be brought in to introduce visas that are currently only for single entry to be extended for a 5-year period, it was noted.
Moreover, hotel bookings need to be made prior to arrival in Sri Lanka and upon entry to the country tourists considered healthy will be given an app to which tourists will need to register giving all details of the visitor to ensure authorities are aware of the travel arrangements.
New business model for SriLankan
The national carrier is currently working out a new business plan to take the ailing airline forward by internally working out a route map and the opportunities they have for the short and medium term, CEO of SriLankan Airlines Vipula Gunatilleka said during the seminar.
“I wouldn’t see tourism returning in the near future,” he explained adding that tourism depends on the economic well-being of its passengers.
He noted that it is expected that some of the developed countries in the European region might start travelling by November this year.
Mr. Gunatilleka explained that airlines’ fixed costs were its lease costs and when the aircraft were grounded they face problems so SriLankan Airlines has obtained some concessions from the lessors under the circumstances.
The company’s monthly payroll amounts to 25 per cent that would be $7-8 million and lease cost attributing 40 per cent of fixed monthly cost at around $14 million, the CEO said.
Aviation is a capacity-driven business and in this respect, the airline needs to look at a new business model and reinvent the current model and focus on ecommerce, he noted.
In this respect, the carrier will reconsider moving into destinations they had earlier dropped like Frankfurt, Sydney and Paris, he said.
India may not be a route they could move into easily. “One of the worrying factors for me is India” as it is one of the worst affected countries and no one knows the magnitude of the persons affected by the coronavirus, he said.
“If markets don’t recover in six months we will have to look at new opportunities,” he said.
On the other hand, he pointed out how domestic carriers in China and the US had recommenced operations; similarly they expect South Korea and Japan to bounce back.
Not gloom and doom
Sri Lanka Association of Inbound Tour Operators (SLAITO) President Mahen Kariyawasam said they hope the government will assist them with some soft loans, else they would be compelled to initiate staff cuts.
He pointed out that the financial package offered by the government need to ensure that SMEs were not requested to give collateral as these smaller firms would be unable to cope.
In addition, the VAT component that was reduced for the tourism sector in December last year was not passed down to the tour operators and this needs to be worked out.
“Most of our members will not be able to pay the VAT instalment going forward,” he said adding that they will have to look at a new business model with new markets and more stringent health and safety measures adopted.
SLAITO has 200 members with about 4000 workers but under the coronavirus outbreak they would have to go for reductions since the tourism industry is unlikely to revive within one year, Mr. Kariyawasam said.
With the global promotional campaign receiving Cabinet approval, the country needs to work out new terms of reference and ensure the marketing takes place as people have saved up and will be ready to travel, he noted.
Hotels Association Chairman Sanath Ukwatte said that the prices in the industry fell by nearly 60 per cent and occupancies dropped by 40 per cent last year when the Easter Sunday attacks occurred but recovery was happily taking place this year in January and February.
As a capital intensive industry with a fixed cost on payroll and maintenance and with nearly 6500 additional rooms there seems to be a glut in the market, he noted. “This is an unprecedented situation.”
Most member hotels were compelled to go for pay cuts with a majority of the staff staying at home, he said.
“But it’s not gloom and doom – we are confident that the industry will recover,” Mr. Ukwattte noted.
In terms of wages, a minimum could be Rs.13,000 plus service charge that could vary from Rs.15-17,000 per month and 2018 recorded the highest service charge payment at Rs.50,000.
At present hotels run on the new guidelines with social distancing norms practiced and an essential staff running plant and machinery and conducting maintenance, household duties and security. But once the business opens they will have to refurbish the hotel, Mr. Ukwatte said.
He also noted that they have been receiving inquiries for tentative bookings for January and with companion-free deals the industry needs to work together with them and airlines to launch the country onto the world audience.
The webinar was moderated by JB Securities CEO Murtaza Jafferjee.