There is insufficient appreciation nationally of the predicament in which Sri Lanka’s tourist industry is placed right now and the resulting hardship that various stakeholders are confronted with. While there is a general realization that tourism is going through a bad time, with visitor arrivals dropping due to the country’s situation and safety perceptions, there appears to be a subconscious confidence that the industry is resilient and will bounce back as it has done before. That is all to the good. But it is necessary for the government, cash strapped as it is, to do whatever possible to help the industry to weather this storm. The industry too must try and help itself rather than wallow in self-pity.

Among the pluses that President Mahnida Rajapaksa, either consciously or otherwise, has stacked up on his side of the table through his various moves on the political chessboard, is that he has obtained the services of many UNPers who are better able to do the jobs that have been assigned to them than many of their predecessors. Tourism Minister, Milinda Moragoda is one of these, He, together with officials of his ministry and the Sri Lanka Tourist Board, has been meeting the various industry associations and other bodies to brief themselves on the problems confronting the tourism sector. They have been provided with a wish list on some areas where assistance is appropriate. Among the matters that have been raised is the Value Added Tax (VAT), the cost of energy and a debt moratorium.

VAT is not a charge that the industry itself bears but passes on to its customers. When a guest pays his bill, he is not concerned about what proportion is tax or service charge. What matters to him is the bottom line - what has to come out of his pocket. He may scan the bill to find out whether a service charge has been levied to decide whether he will leave a tip or not. Many people do tip, despite the service charge on their bill. That is a perk for front of house hotel employees directly dealing with customers. Back of house people also doing their bit in the kitchen, laundry and garden or even keeping the swimming pool clean are less fortunate with tips. Be that as it may, relieving hotels of VAT can mean some respite as they can hopefully keep net prices intact and compensate themselves even partially for the low occupancies they must live with in this situation. A decision on whether VAT relief will be granted to hotels and other tourism related business will lie with the Treasury and obviously depend on how much revenue will be lost as a result.

There has already been a decision that hotels, now charged a super tariff on their electricity consumption over and above the industrial rate, should be relieved of this burden. But implementation has not happened up to now and the Ceylon Electricity Board, for reasons that are readily understandable, is dragging its feet on this matter. The CEB is a big loser and its officials who may not be familiar with an old Tamil proverb which says that “when you are wet, you don’t feel the rain” may not look kindly about adding to its already gigantic losses. The cabinet, obviously, being very well aware of CEB losses nevertheless took the decision to throw the tourism industry this modest respite and it is necessary that the concerned authorities ensures compliance.

As we reported last week, some large city hotels have attempted to economize on energy use and other overheads by closing floors or wings. Unlike the resorts where occupancy has plunged to levels reminiscent of the post-1983 riot situation, the larger city hotel can depend on some level of occupancy from business travellers and others described as FITs (free, independent travellers) as opposed to tourist groups who today are few and far between. They also have their regular banqueting business from weddings and other functions and some patronage for their restaurants. The resorts however are in very poor shape with occupancy near zero. Some of them have been trying to make do by attracting local tourists particularly during long weekends.

The late Mr. Cyril Gardiner, Chairman of the Galle Face Hotel, once famously said that “it is better to sell a room at any price rather than leave it empty.” The point he was making was that once a night passes, it’s gone forever just like whatever revenue the unsold room might have yielded. It is very well known, particularly to inbound tour operators and others buying hotel rooms for group tours, that Sri Lanka’s hotel trade had long indulged in the practice of undercutting their competitors to grab whatever business they could particularly in periods like now when arrivals are dismal. The end result is that room rates are pushed down to the pits and the whole industry has to suffer the consequences. Once room rates come down, getting them up again is difficult as industry players well understand.

The time has now come for the industry to close ranks and not shoot itself in the foot with cutthroat competition. Hoteliers can certainly offer incentives without going down on their room rates. Free breakfast thrown in with the room is a common device used the world over: Special packages like giving a night’s stay without charge, for every two or three paid nights is another. What is important is not to come down on the room rates the way that many of our hoteliers have been used to doing. Agents representing principals abroad must also not try to cash in on a philosophy of “your difficulty, my opportunity” and try to squeeze the last possible ounce of advantage by pushing down already cheap room rates to score brownie points for themselves.