Sri Lanka’s tourism industry, still recovering from the pandemic, finds itself in the midst of a heated debate surrounding the recently implemented minimum room rate (MRR) policy. The policy, aiming to elevate the standards of the hospitality sector, mandates specific minimum prices for hotels in Colombo based on their star classification.
- Five-star hotels: US $100
- Four-star hotels: US $75
- Three-star hotels: US $50
- Two-star hotels: US $35
- One-star hotels: US $20
These rates are only applicable to hotels located within the Colombo Municipal Council limits.
While the government, represented by the Sri Lanka Tourism Development Authority (SLTDA), views the MRR as a step towards quality improvement and fairer competition, concerns linger about its potential impact. Free-market proponents, represented by organizations like Advocata, express strong reservations. They argue that the policy stifles competition, creates an artificial price floor, and could make Sri Lanka less attractive compared to regional competitors, especially for budget travelers.
Adding fuel to the fire, the Sri Lanka Inbound Tour Operators (SLAITO) report negative impacts on hotel occupancy rates in Colombo.
SLAITO President Mr. Nishad Wijetunga claims that Colombo City hotels ended 2023 with an average occupancy of around 60%, and that this number could have been over 75% without the MRR. He blames the MRR for driving away walk-in guests and MICE groups (meetings, incentives, conferences, and exhibitions). He cites an example of an Indian group of doctors who wanted to hold a conference in Sri Lanka but ended up moving it to Thailand due to the perceived high costs associated with the MRR.
The debate highlights the complex challenges faced by Sri Lanka’s tourism industry. Balancing quality improvement with affordability and market competitiveness is crucial for attracting a diverse range of tourists and ensuring sustainable growth. Moving forward, a nuanced approach that considers the concerns of all stakeholders, including hoteliers, tour operators, and tourists themselves, will be essential in navigating this complex policy and ensuring a thriving tourism sector for Sri Lanka.
