Lankan corporates bet high on Maldives despite downturn in tourism

By Chandeepa Wettasinghe
The Sri Lankan companies opening resorts in the Maldives could remain profitable if they focus on the high-end segment, a leading leisure sector executive said, as concerns are being expressed about the business prudence of more Lankan companies into the archipelago. 

“The mid-level market for the Maldives has dropped, but the high-end market is being maintained,” Amaya Leisure PLC Managing Director Lalin Samarawickrama told Mirror Business.

Amaya Leisure’s parent, Hayleys PLC, recently bought a two-year-old resort in a seven-acre Maldivian island for US $ 25 million, which Samarawickrama said Amaya Leisure would refurbish beyond five-star luxury and operate.

Sri Lanka’s largest leisure sector operators John Keells Holdings PLC and Aitken Spence PLC, the two largest foreign resort operators in the Maldives, saw dampened performances in their operations in the archipelago in the first quarter of 2017 (1Q17), as well as during the 2016 financial year.
John Keells Hotels reported a 33.05 percent year-on-year (YoY) drop in profits to Rs.135.88 million in 1Q17 and a 22.40 percent drop in profits to Rs.976.03 million in 2016.

Aitken Spence released a statement saying that the reduced tourist arrivals to the Maldives and the price competition had contributed to the downturn.

Tourist arrivals to the Maldives over the first six months of 2016 had increased just 1.8 percent YoY to 609,105 tourists, but for the past quarter, the arrivals had decreased by 1.21 percent YoY to 275,755, mainly due to a slowdown in the Chinese market.

John Keells and Aitken Spence—whose hotel sector executives were not available for comment—are still aiming for further expansions in the Maldives, while Galle Face Hotel-controlled Ceylon Hotel Corporation entered the Maldives recently with plans to construct a US $ 28 million property.

The Sanken Construction group, which opened a four-star resort in the Maldives under the management of Onyx Hospitality, had also planned for further expansions in the archipelago.
Samarawickrama opined that the fall in tourism arrivals to the Maldives is mainly recorded from the mid-segment markets in Russia, China and other regions, due to the downturn in the global economy, while the high-end Chinese, who contribute most revenue towards the Maldivian tourism industry, remain healthy.

He added that the Maldivian tourism sector had developed tenfold in quality, infrastructure and services over the past decades.

John Keells and Aitken Spence have been in the Maldives for over two decades now and mainly cater to the mid-segments, with the John Keells resort rates being in the range of US $ 200 and US $ 300 per night, while the Aitken Spence rates being between US $ 210 and US $ 420; two of its higher range properties charge between US $ 648 and US $ 761.

High-end resorts in the Maldives charge over US $ 800 per night, with the Four Seasons charging US $ 1,100.

“The Four Seasons, etc., have dictated terms in the high-end market. The success in the Maldivian market will depend on whether one is going for volumes or quality. We believe we will go in between and we are aiming for an occupancy rate of 75-80 percent with a room rate of US $ 600,” Samarawickrama said.

He added that if older properties are not maintained well, there will be no demand.
“I have a feeling that given the enquiries we’re getting from tour operators, we will be successful. If there’s a right product, there’s demand, but if the property is neglected, there’s no demand,” he said.