News

Elephant Corridor - optimism personified

Fancy waking up one morning, walking out into the patio and being greeted by elephants or peacocks?

A touch of paradise the jungle way, perhaps. This is probably what is in store for guests at Sri Lanka's newest boutique hotel which opens this winter near the picturesque Sigiriya rock and the Kandalama hills.

A bold move in an industry that virtually crashed after last month's devastating Tamil rebel attack at the Bandaranaike International Airport? "Be positive," counters Suzanne Filippin, a German national who is executive director at Tropical Leisure Management Ltd, managers and designers of The Elephant Corridor.

Construction of The Elephant Corridor hotel is due for completion in October and the scheduled opening is in December with Sri Lankan clientele being initially targeted. "We had to change our marketing plans due to the Katunayake blasts and we are now banking on the top-end of the Sri Lankan tourist traffic for the first few months," she said, adding that Sri Lankan expatriates returning for holidays home were also potential targets. European and Russian tourists are the hotel's main audience.

Filippin, who has worked in upmarket boutique hotels in Bali and the Seychelles where room rates fetch as much as $ 3,000 per night, is upbeat and remarkably confident in marketing a new property in a seemingly uncertain market.

"Yes, it is difficult to market in a war environment. But remember no tourist has been harmed in Sri Lanka unlike in Eqypt and Israel where tourists are targets. We need to get this message across. Yes, there are places which are unsafe but these could be easily avoided," she said, reflecting on a project that took two years to complete.

"It is useless sitting back and saying this won't work out. We need to be positive," she asserts, also happy that Sri Lankan authorities – especially the Tourist Board – responded positively after the Katunayake attacks in getting the airport quickly back on track.

The hotel and its 24 suites which start at $ 150 per night and go up to $ 1,000 for the presidential suite with four bedrooms and two private swimming pools, is a refreshingly different product. It is a blend of luxury, wilderness, space and wild life conceived by the management company whose chairman is Prasanna Jayawardene, the veteran hotelier who has served in many local hotels including the Mount Lavinia and has worked in ten countries.

The suites, lounge and other hotel facilities have been built on an earth-mounted platform with a ditch that runs along aimed at preventing elephants from getting too close or climbing up. It is designed on the lines of the Singapore zoo.

"There is a lot of wild life and this ditch concept will keep the animals at a same distance but still enable guests to be as close as possible to them," Fillipin noted.

The 200-acre property has water holes, salt lakes, plenty of trees, borders a tank, a teak forest and has an abundance of bird life. Indigenous plants and foods plants for animals are being grown and a concerted effort has been made not to tamper with nature. The hotel is in close proximity to the Sigiriya rock and the Minneriya wildlife park.

No motorised traffic would be allowed into the premises. All guests check in at the entrance pavilion and would then be taken to their suites on an elephant, electro-car, bullock cart or bicycles for the enterprising tourist. The same applies to all suppliers to the hotel. The vehicles would be parked outside the premises. Water is supplied from two tube wells while solar panels will be used for heating water as well as for electricity in addition to power from the national grid.

All suites at the naturally landscaped boutique hotel, the second of its kind in Sri Lanka after Saman Villas in the south, have private swimming pools, cable TV, Eqyptian cotton bed linen, wool blankets, non-allergic foam pillows, complimentary toiletries and knapsack, tastefully-designed sarongs, private security and maid quarters. "Each item for the suite has been chosen with care as we want to give the best to our guests," she said.

The hotel is hoping for at least 50 percent occupation in the first few months after the December opening. An occupancy rate of 10 suites a day will bring it profits while five suites would help to break even. Staff levels would be in the region of 130 - a ratio of five workers per suite is the highest in the industry. The owning company, Sansun Boutique Hotels, is investing 200 million rupees in the project.

The management company is also launching two other boutique hotels called Leopard Mountain at a tea estate in Maskeliya and Flamingo Plains at Ambalantota in the south. Leopard Mountain is scheduled for opening in 2003.

"Follow your biological clock and have your meals served when you are hungry, in your preferred style – in the suite, at our specialty restaurants or even outdoors under the trees," says a hotel brochure.

There is no fence around the 200-acre property and the hotel doesn't turn away curious villagers wanting to peek at the site. Lessons from the Kandalama Hotel experience, which drew a storm of protests only to be convinced later that there won't be environmental damage or uprooting of village communities.

The hotel managers believe in maintaining a good rapport with the nearby village of Kimbissa. Filippin said community development projects were being planned, a nearby tribe of gypsies was likely to be helped through work for snake charmers and conducting traditional rituals, while the hotel was also trying to help the Veddah community. The tank is to be dredged by the hotel which would help to raise the water collection capacity and boost farming.

"Farmers could have two harvests instead of one," she said, adding that the community service projects were more out of concern for the villagers and their income levels than an effort to get them on "our" side to ensure the hotel project is a success. (FS)

Lighting his way to success

By Diana Mathews

Most people grumble about the crippling power cuts but there are a few others like Gunaratne Ranasinghe whose survival virtually depends on it.

With a load of 400 candles, Ranasinghe, a vendor of candles, starts his day around 9.00 a.m. under a shady tree in Fort. The candles are laid out in front of him.

Grabbing hold of a business opportunity, he began selling candles just two weeks ago when the number of power-cut hours increased. He enjoys the short-term profits that he is currently receiving and loves the dawn of each day knowing that the candles would somehow sell due to the demand.

There are seven members in his family and the money he earns is just enough for them. "I have to look after my family somehow so I thought that candles would save my day," he said.

Ranasinghe is fondly called "mudalali" by his helper, Kithsiri Costa, who is also his friend. "Suvandai, elliyai - harima labai," he shouts throughout the day trying to attract attention.

"I don't come on week-ends mainly because all the banks and other institutions are closed," he said. "But on weekdays even people in cars and vans purchase candles from me," he said happily.

The candles range from large 8-inch and 12-inch ones to small 4-inch candles while the price ranges from Rs. 5 to Rs. 20. "I sell around 150 to 200 candles per day," he said, adding that a large candle lasts eight hours. "When I first bought the set of small candles they were sold almost instantly," he said.

The candles are purchased from wholesale shops in Biyagama and Ragama. When asked what he would do when the power crisis is solved, he responded - "I would look for another business opportunity." 

Business Features

Banking on an uncertain future

By Arjuna Mahendran

Throughout the developing world, governments casually mismanage the banks they own on a routine basis. In the most basic form, this mismanagement takes the form of politicians and/or civil servants pressuring state-owned bank managers to give loans to their pet projects and/or cronies. These loans are rarely, if ever, repaid. But the state-owned banks soldier on with regular infusions of cash from the government's coffers. Another source of cash is government ministries and agencies who are compelled to bank their cash in these state-owned banks. So who are the losers?

The hapless depositors and taxpayers whose money is injected into these ailing financial dinosaurs on the face of it. But there is a more insidious cost which gets forgotten. In order to keep these banks liquid with cash, the spread between deposit and lending rates is huge. So the struggling entrepreneurs who have to borrow to fund their projects pay unnecessarily high rates of interest, which, in most instances, makes their projects unviable anyway. So the development of the country suffers. 

Moreover, the granting of a licence to form a bank is a form of political patronage. Given the thick interest rate spreads in force, these are effectively licences to print money. No wonder everyone from tea barons to casino mudalalis want to own banks. Much more profitable than investing in manufacturing, and no risks involved to boot. And it also means that many private Sri Lankan banks are much too small to be of any use to anyone, except their major shareholders. Small banks cannot absorb the risks that go with development lending needed in Sri Lanka.

But that's a digression; let's get back to the state banks.

Business as usual

Sometime in the early 1990s, a Sri Lankan finance minister made a statement in parliament to the effect that state-owned banks were insolvent. We all waited with bated breath to see if there would be a run on the banks concerned. Nothing happened. Business went on as usual and the depositors of the banks won the day by reposing their trust in the fact that the bank was owned by the government. The government subsequently injected about Rs. 20-odd billion into these banks to restore solvency. That was in 1993.

Then again in 1996, the government injected a similar amount once more into these banks to tide over losses and fund dubious projects like assembling buses locally at a much higher cost than importing them. But there was a "con" underlying these repeated government capital infusions. They were made in government bonds instead of cash. The idea was that the banks would repay these bonds to their sole shareholder, the Treasury, in lieu of their dividends. So the Treasury didn't have to fork out the hard cash, which it would have been hard-pressed to find in any case.

Fine in theory, not so in practice. The trouble was that these banks rarely made profits. Take the hypothetical case of, say, a state bank called Pickled Bank (PB). At the end of 1999, PB had total deposits of Rs. 105 bln and total loans of Rs. 63 bln It wrote-off Rs. 7 bln in dud loans that year, and made a total loss of Rs. 8.5 bln. This means over 10% of its loans went bad that year. By generally accepted banking principles, a bank which has bad loans in excess of 10% of its loan book had better prepare for receivership.

The story gets better. The Treasury apparently has no money left even to pay the interest on its bonds. So the state banks like PB can no longer get bonds to fund their losses. They have to make do with a 'Letter of Support'. On the other hand these banks have this year funded the losses of the CEB (Rs. 10 bln?), CPC (Rs. 15 bln?), Air Lanka ?, etc. etc.

Point of no return

According to the May 2001 IMF country report on Sri Lanka, state banks already had 19% bad loan ratios on their books. My hunch is that the post-Katunayake post-power crisis outlook is much more grim. We are thus about to reach the point of no return where the entire banking sector will have to undergo emergency surgery. The managements of these banks are so bogged down in trying to recover these bad loans, that new lending flows into the economy has slowed down to a trickle.

The experience of other Asian countries after the 1997 financial crisis is a useful pointer for us in this regard. Their strategies revolved around a new set of institutions whose sole function was to take out the bad loans from the banks and forcefully restructure the borrowing companies. This released the banks to concentrate on new lending.

But such a strategy requires a resourceful political leadership that doesn't get led astray by beautiful dreams and suchlike. And as with most surgical procedures, the likes of PB will have to get amputated in the process. Only then can the gargantuan interest rate spreads be reduced to enable the economy to grow once more.

Leveraging knowledge for short, long term profit

By Indra Abeysekera

The writer is Director Dynamic Accounting of a Sydney- based accounting and business consulting firm in Australia.

In the present economic climate organisations are constantly improving their products and services to reach their intermediary or final consumer. The knowledge is translated into 'intangible' content to increase the value of their product or service and thereby increase their bottom line.

There are two major ways to leverage on knowledge for both short and long-term profits. One way is to use technological aids such as expert systems, databases, and interactive websites. However, in 1994, Professor Davenport at Boston University pointed out that most of the valuable corporate information is not on computers but held in peoples' heads, and managers don't rely on computer-based information when making decisions. The other way is to structure management processes to leverage knowledge, using employees as the crux of the process.

Following are some of the strategies organizations can easily adapt to their benefit:

If knowledge is power, those who share knowledge can lose their perceived importance, status and even their promotional prospects. Therefore, creating a platform to share knowledge with others should address that downside and further reward their efforts. For example, organisations can reward people based on the number of times they effectively helped others to solve problems, and can be used as a criteria for annual reviews and promotions.

Codifying knowledge means translating knowledge held in employees' heads into some visible form so that other employees can access it when needed. They can manifest in different ways such as forms, manuals, case studies, or postings in electronic or manual newsletters. However, codifying all the knowledge in an organisation is a horrendous task and is not cost effective. The managers should decide what knowledge should be codified based on the cost benefit criteria.

Rotating or changing activities employees carry out from time to time force people to interact with each other to share knowledge. Internal promotions and change of jobs within the group is another method adopted by several big companies. Another way is to create project committees that comprise employees with different skills and backgrounds to get together. As employees undertake unfamiliar tasks, managers should have a margin for their mistakes as they attempt to learn more skills. The idea is that people learn by finding out how to correct their mistakes and right answers do not offer that luxury.

As most knowledge resides in employees' heads it is important to facilitate their interaction to leverage knowledge. Employees spend substantial amount of time searching for the 'right' source of information. An expert 'yellow page' on intranet or commonly accessible drive helps to point to the appropriate person in a fraction of that time. A yellow page is a database that lists employees and their skills by tasks important to the organisation. It can be built using the job specification of the employee, employees' experience and qualification as a basis. Some organisations structure their office space for more interactions among employees - a concept adopted by organisations at different corners of the world. Organisations can adopt different strategies such as having common office car parks, encouraging staff to take the staircase than the lift on lower floors, having regular office gatherings to increase interaction among employees.

Organisations tend to standardise practises and have a tendency to presume they are the best practices for them. However, hiring outside consultants and staff on short and long term assignments can throw light into better ways of doing things even if the objective of the exercise is not improving management processes. Resorting to outside labour also helps organisations to match overheads with their revenue patterns.

A change in management processes or information technology in the organisation does not change its management processing or information culture. Any change in culture should flow from the top to down by setting the example to adopt the new culture.

Instituting appropriate reward systems, codifying knowledge, rotating employees, facilitating interaction among staff and changing corporate culture are some examples that corporations can adopt to leverage knowledge. On the other hand, management processes that are appropriate to one organisation may not be appropriate to another. However, reviewing management processes is a key to knowledge leverage. Every organisation can learn from others both within and outside their industry.

This is because management processes are achieved through and by people and involvement of people in the processes is the crux to knowledge leverage.

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