President gives thumbs down for minimum room rate policy

Ranil Wickremesinghe

The highly debated minimum room rate (MRR), which was imposed on the Colombo City hotels, came under the spotlight this week, with President Ranil Wickremesinghe stating point blank that Sri Lanka should do away with such measures. 
Wickremesinghe expressed his displeasure on the MRR twice this week, at the fully-packed Sri Lanka Economic Summit 2023 on Tuesday and at The Hotels Association of Sri Lanka (THASL) Annual General Meeting on Monday. 
At the former event, he stressed the island nation must “say goodbye” to the MRR, as it “cannot go on 
crutches anymore”. 

On Monday, Wickremesinghe gave a stern message to the tourism sector stakeholders, calling them to move out of their comfort zone, go beyond the traditional methods of promotion and think out of 
the box. 
He asserted the industry must move away from the MRR and instead, improve the product offering to fetch higher revenue. He said the industry must set sight on US $ 250-US $ 500 per room night and target 2.5 million tourists in 2024. 
“When you achieve 7.5 million tourists by 2030, let us set sights on US $ 750 or US $ 1000 per night maximum,” 
said Wickremesinghe. 
The MRR, which came into effect on October 1, was brought in with the approval from the Tourism Ministry and Sri Lanka Tourism Development Authority, supposedly to prevent 
price undercutting.  

The gazetted rates are US $ 100 for five-star hotels, US $ 75 for four-star hotels, US $ 50 for three-star hotels, US $ 35 for two-star hotels and US $ 20 for one-star hotels.  
The implementation of the MRR has created division within the industry. THASL has expressed support for the MRR, while the Sri Lanka Inbound Tour Operators (SLAITO) has highlighted that it seems to favour a few stakeholders, potentially causing a negative impact on the entire sector.
Independent economic think tank Advocata Institute in its recent policy brief slammed the move stating it is “seen as a threat to competitiveness and unnecessary government intervention, potentially leading to customer dissatisfaction and loss of clients compared to neighbouring countries”. 
It argued that MRR restricts flexibility, hinders healthy competition and disregards the diverse nature of accommodations. The foundation for these rates, based on star classifications, was criticised for overlooking qualitative aspects.