Sri Lanka to end controversial minimum room rates policy

colombo-skyline
An aerial view of Colombo

AUTHORITIES in Sri Lanka decided yesterday to terminate the controversial minimum hotel room rates policy enforced many years ago to curb price cutting in Colombo city.

The decision came from tourism development, lands and Christian religious affairs minister John Amaratunga, who wants to abolish the policy by March 31, 2017.

The scheme was first brought into force after the May 2009 end of the civil war, after smaller hotels complained of excessive price cuts by larger properties.

The policy dictates that five-star hotels have to charge at minimum US$125 per night plus taxes, which works out to be US$185, while three-star rates have to be at minimum US$80-85 per night inclusive of taxes.

Hoteliers responded to the decision with mixed feelings. Those at five-star properties were elated while those at two- and three-star hotels were in anguish.

“Small and medium scale hotels will suffer enormously since five-star properties will start charging the same rates,” said a senior manager at a four-star property, who wished to remain anonymous.

Amaratunga said almost all the hotels have been calling for the abolition of the policy and to allow market forces to decide prices. “By sticking to the minimum rates we have been pricing ourselves out of the lucrative MICE market and losing out to our regional competitors,” he stated.

In defence, an executive at a luxury hotel in Colombo, said: “We are not opposed to minimum rates. Our concern was that there is no monitoring mechanism and the price war still continued (while we followed the rules).”

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