Undercutting of room rate charges among five star hotels in Colombo has adversely affected smaller hotels and forced the government to enforce a compulsory minimum room-rate structure from November 1 with stiff penalties for offenders.
Any violation of these rules will be subject to a penalty of $1,000 plus the difference between the official rate and the lower 'illegal' rate sold by the guilty party, according to Director General of Sri Lanka Tourism Promotions Bureau (SLTPB) S. Kalaiselvam. Under the new rates, all five star properties will charge US$75 ++ (taxes), which works out to a total US$93 per room and for lower star categories it would be US$15 less. This means a four star hotel will charge US$60 (excluding taxes) and the three star hotel US$45 per room night.
"We will monitor the rates daily and ensure enforcement," Mr Kalaiselvam said, adding that any tour packages that have been sold prior to October 24 will be exempt from the November 1 rates. "But this concession will be given only for three months (till end January) and from February 1 even pre-Oct.24 contracts must follow the new rates," he said, adding: "All city hotels have agreed to this pricing mechanism."
But hoteliers said their understanding is that earlier agreed contracts are valid for the entire contracted period and not just for three months after November as stated by the SLTPB
M. Shanthikumar, President of the Colombo City Tourist Hotels Association, told the Sunday Times, that all hotels had agreed to the new rates coming into effect on November 1, adding, “Our understanding is that already signed contracts are valid at the old rates for as long as they have been contracted, specific dates given and bookings confirmed. These old rates are valid throughout the contracted period.”
At least three hotels the Sunday Times called last night were unsure about the new rates.
The receptionist at the Galadari Hotel said current room rates were $85 with breakfast but that these might change in December. She didn’t know what the new rates were. The Hilton said current room rates were $105 nett with breakfast for a single and $115 for a double but the receptionist said the new rates after November were yet to be finalized. The Cinnamon Grand receptionist said the new rates for November were yet to be worked out while current rates are $124 nett.
Some tour operators say this could have an impact on the business as packages have been sold beyond three months. "We need to see how to resolve this issue as already-agreed packages will have cost more to the operator after February," one operator said.The Tourism Ministry intervened after small hotels complained that five star properties were involved in severe undercutting in room rates, even after city hotels got together and came up with a self-regulatory mechanism.
Mr. Shanthikumar said that the Association had a ‘gentlemen’s’ agreement among its members to have a pricing mechanism but that arrangement failed after eight months as hotels were charging different rates.
According to the general manager of a small, three-star hotel, who didn’t want to be named, the undercutting has worsened with five star hotels offering rates as low as US$35-40. "Some hotels were cutting into our markets with their low rates and better facilities and we were losing guests,” he said
He said he was happy that the Tourism Ministry was taking over the minimum pricing mechanism as this would ensure a level playing field, adding: "How could we survive when big hotels and small hotels charge the same rates?" |
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