Move to audit city hotels to discipline minimum room rate violators

The government has started auditing the Colombo city hotels to bring to book the violators of the minimum room rate regulation, Tourism Development and Christian Affairs Minister John Amaratunga said yesterday.

“We have introduced a minimum rate because the hoteliers want it but (even) with that people are violating that behind the scene. In fact, there is now an audit programme, which has been put in place to take action,” he said in reply to questions raised by Mirror Business.

Many hotels in Colombo have been accused of selling rooms below the minimum rate to corporate clients and in business-to-business transactions with tour operators. Rooms are also sold at minimum price to retail clients, with plenty of ‘complimentary’ services.
This new revelation seems to indicate that laws would apply to both ants and giants going forward, since the government this month indicated that it would go through with enforcing regulations on the informal sector—dominated by small bed and breakfast units—by setting up an Enforcement Unit, following intense lobbying from large hotels.
The fine for each violating sale of a hotel room under the minimum room rate regulation is US $ 1,000 and the difference between the selling price and the regulated price of a hotel room. However, hotels have violated this with relative impunity over the past eight years.

The regulation was introduced in 2009 in response to small hotels being pushed out of competition through under pricing by five-star hotels.

Amaratunga said that he is not a fan of the minimum room rate regulation.

“My personal view is that we should not go for long with this minimum wage. We should open it out but we shouldn’t become like Thailand, giving rooms for US $ 10 or US $ 15. We have to maintain our standards,” he said.

On numerous occasions over the past two years, Amaratunga had announced policies to discontinue the minimum room rates by March 2017 but on each occasion, within days, lobby groups such as the Colombo City Hoteliers’ Association had managed to convince Amaratunga to continue with the minimum room rates, creating policy uncertainty.

The latest reversal came last October, when Amaratunga said that the removal of the regulation will be delayed by two years.

Most Sri Lankan hotels compete on price instead of quality and due to this, have been feeling the pressure from informal home-stay units catering to modern trends such as authentic experiences at cheap prices. Hotels are also facing issues in hiring and retaining labour, affecting their quality.

Due to a glass ceiling for the younger generation, lower wages, which do not correspond to the difficult and long hours of labour and the discriminatory nature of distributing an unregulated service charge, most young talent seeks hospitality jobs abroad, shortcomings which have been admitted by some leaders in the industry.
Amaratunga, while denying that Sri Lankan hotels are inefficient and do not provide sufficient quality, said that hotels could set higher prices if there were highly trained labour to provide premium service and that the government’s new training programmes would hopefully address this over the next two years.

Despite the existence of the minimum room rate and concessionary loan schemes, Amaratunga also said that the government is not providing that big of a support for the hotel industry and that the industry is now becoming more competitive.