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Govt.’s thrust on upscale Western tourists may be misplaced: JLL

14 Jan 2016 - {{hitsCtrl.values.hits}}

By Chandeepa Wettasinghe

The Sri Lankan government’s decision to place the utmost importance on upscale Western tourists seems to be misplaced, a Fortune 500 company said.

“It’s true that governments want the Western traveller because they find him to be a more affluent traveller and spends more dollars in the country.

But saying that, when the clear writing on the wall is that your largest travellers are from the continent, I think that it could probably be misplaced,” Jones Lang LaSalle (JLL) Hotels and Hospitality Group Managing Director Mandeep Lamba said.

He was presenting his views during the launch on the findings of a new JLL report into Sri Lanka’s tourism industry, in Colombo.

In addition to his preference for Western tourists, Prime Minister Ranil Wickremesinghe said last year that the tourism trends in Eastern countries tend to mimic the West, and therefore, promotions should be done in the West.

Lamba said that when Sri Lanka has such a large source market to tap into, it should be capitalized on, with proper marketing as well as the development of infrastructure to cater to the wants of the tourists from the neighbouring countries.

Sri Lanka’s leisure sector leader - the John Keells group - is following the same theory, changing its products to suit the Chinese and Indian markets.
However, the other hoteliers have only been complaining that Chinese tourists come in large groups and tend to pay low rates through
travel agents.

This is despite the United Nations World Tourism Organisation listing Chinese tourists as the highest spenders in the world.

Lamba said that proper promotions and infrastructure should correct the situation.

“In countries like India and China, which have very large populations, you will find that initially, when the markets are developing, you will attract the mid-end or lower-end, but as Sri Lanka starts promoting actively in these countries and gets infrastructure, it will get the higher-end,” he said.

JLL Business (India) CEO and Sri Lanka Operations Chairman Gagan Singh concurred.

“If they need that element of shopping, we’ll bring it in, and the retail space is coming up by 2017-2018. We’ll have it. So you need to understand the customer like in any market,” she said.

Lamba added that Sri Lanka could become a hotspot for ‘uber-luxury’ tourism in another seven to eight years, as other luxury operators seem to be extremely interested in the destination, after their peers like Sheraton and Shangri La set foot in the country recently.

“To get luxury, there aren’t enough luxury products on offer,” he spoke of the current situation. The government is keen to position Sri Lanka as a luxury destination.

Meanwhile, Singh added Sri Lanka would realise that high-end tourists from India and China are also interested in religious tourism, especially with the Buddhist Circuit, if there had been research into customer needs.

“And when compared to similar destinations like Vietnam, Myanmar and the Philippines, Sri Lanka has a much better offering,” she added.

The JLL report said that Sri Lanka must have a clear and strong promotional campaign, and that the country must reduce the dependence
on a single market.

However, the industry’s Rs.2 billion promotional fund was seized by the government through the new Budget and the industry is planning to do ‘dynamic promotions’, since it has to pursue the government to include promotional funds during the next Budget, which will be enacted in 2017.

Should end minimum room rate for Colombo hotels
JLL said abolishing the minimum room rate in Colombo should help increase the demand for tourists, especially in the meetings, incentives, conferences and exhibitions (MICE) tourism segment.

“We think so… the minimum rate, in our opinion, should no longer be in existence and hotels should compete in a free marketplace,” Lamba said.
However, he noted that the policy was essential in the past.

“We think that the minimum room rate was essential when the markets opened up after the war. I think it was a move in the right direction, to keep a standard platform,” he said.

The minimum rate started as US $ 124 per night for five-star hotels when the policy was implemented in November 2009.

However, when Mirror Business contacted the Sri Lanka Tourism Development Authority yesterday, officials said that the minimum rate is now US $ 200 after a recent revision.

However, five-star hotels are providing rooms at prices as low as US $ 137 on online portals like booking.com, by putting in conditions such as ‘room only’ or ‘room only with free breakfast’, in order to attract more clients.
Whether this is legal is up for debate.

Despite such gimmicks, the JLL report said that the occupancy rates in Colombo were 57 percent in 2014/15, compared to 60 percent in 2013/14.
The fall in occupancy rates and the competitive prices and strategies could be attributed to the rise of the informal sector, now accounting for 60 percent of the country’s accommodation and 50 percent of bookings.

However, JLL Hotels and Hospitality Group Assistant Vice President Roopa George said only 35 percent of tourism in Colombo is for leisure, with the rest dominated by MICE tourism—which tends to stick to reputed hotels.

She said that the prices in Colombo hotels are too high to attract the bulk of the largest MICE markets of India and China.

“Compared to destinations like Thailand, it (air tickets) tends to be slightly higher on average and the cost of the hotels is another important factor again, with Colombo hotels being regulated by the minimum room rate. As a package, it tends to fall slightly higher compared to similar destinations,” she said.

This presents a dilemma for the Sri Lankan government, as MICE tourism was given tax holidays during the recent Budget due to its growing importance.
The income per MICE tourist is usually over 10 times that of a leisure traveller. However, much of the income is through events and conferences, instead of through accommodation and consumption.

However, John Keells seems to have found a solution, placing the five-star Cinnamon brand into its three-star lean-luxury Cinnamon Red business hotel, and its success is likely to push the conglomerate to replicate the model.

Business Main

Govt.’s thrust on upscale Western tourists may be misplaced: JLL

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