$ 15 b hotel industry wants Govt. to check in | Daily FT

 New THASL President M. Shanthikumar addressing the post-AGM session held at Taj Samudra, Colombo –  Pic by Upul Abayasekara 

  • New THASL President M. Shanthikumar says COVID pandemic unprecedented and requires new thinking and new policies since same old models in textbooks may not work
  • Stresses need for Govt. to look at exceptional financial models for tourism revival 
  • Urges Govt. to exempt tourism sector from 2.5% Social Security Tax 
  • Wants financial grants to SLTDA-registered SME sector
  • Says due to non-payment of loan capital and interest during ongoing moratorium, loan balances have risen by 40% thereby increasing overall debt burden
  • Calls for abolition of long disputed 1% Municipality by Local Government authorities 
  • Disappointed and disturbed Budget 2022 didn’t consider fresh support for tourism

The $ 15 billion hotel industry is urging the Government to give it due recognition and support to ensure that the socio-economically-critical tourism sector is revitalised sooner than later amidst multiple crises. 

The status quo of the hotel and tourism industry, and the challenges and opportunities it faces, were well articulated by M. Shanthikumar, the new President of The Hotels Association of Sri Lanka (THASL), at an event post the Annual General Meeting that saw Tourism Minister Prasanna Ranatunga, Central Bank Governor Nivard Cabraal and Sri Lanka Tourism Chairperson Kimarli Fernando and industry leaders in attendance.

“The hotel sector investment in Sri Lanka is by far the highest in the tourism industry that is estimated to be worth over $ 15 billion. Further, 70% of the entire tourism workforce is employed by the hoteliers in the country. Our member hotels and companies continue to spend a large amount of money annually to maintain the plants, for continuous training of staff and for overseas marketing and promotions striving to increase destination arrivals. 

“The highest contributions to the Government coffers are made by the hoteliers, in terms TDL payments, taxes, levies and all other charges. No one can deny the dominance and the contribution the accommodation providers in the country make to the tourism industry,” said industry veteran Shanthikumar, who is also Director of Ramada by Wyndham.

Assuring that he would work in the best interest of all hoteliers, since they have invested for hotel development and overseas promotions to bring in much-needed foreign exchange, Shanthikumar made a strong case for effective support for and industry that had been battered, first by the 2019 Easter Sunday attacks and then the COVID pandemic. 

The THASL Chief said the pandemic was unprecedented for the tourism industry, and that it therefore required new thinking and new policies to be adopted for these times. 

“The same old models that are in books may not work. We need the Government to look at exceptional financial models for the revival of tourism. It is a known fact that the recovery will be slow but hopefully steady. THASL assessed the present situation and the future of our industry, and for its mere survival there is no doubt hotels require Government assistance. THASL has sent a comprehensive plan to the authorities concerned for their consideration,” Shanthikumar said.

Stating that the SLTDA-registered SME sector had been badly affected, Shanthikumar urged the Government to consider extending a grant to this sector in order for them to recommence their operations. 

However, he said that the industry was disappointed and very disturbed to note that tourism was not even considered in the 2022 Budget. “It is an industry in distress needing Government support for its survival and revival. It is no secret tourism is the worst affected industry.”

He said hoteliers were already burdened with a series of top line taxes and levies. “The top line social security contribution of 2.5% is definitely adding to the burden. We have been without revenues for nearly 18 months still continuing to maintain the employees and the hotels. The industry will lose its competitive edge in marketing the destination with such taxes and there is no doubt it will affect the anticipated tourist arrival growth into the country. 

“Being an industry with dollar earnings we need the Government to consider exempting the tourism sector from the Social Security Tax of 2.5% on the total revenue at least until such time we see the tourist arrivals stabilising to the country. This is absolutely critical.”

He also said that, due to the non-payment of the loan capital and interest during the moratorium, loan balances increased by 40%, thereby increasing the liability. 

“The lack of funds is posing a challenge for hoteliers to continue to maintain the staff, the plant and to carry out even the smallest of refurbishment to welcome tourists,” he added.

Seeing a virtual collapse of hotels, Shanthikumar said THASL had requested for a long-term debt restructuring from the Government as revenues and profits began to slide post-Easter Sunday attacks. 

“These were requested only for businesses that had settled their dues until the Easter Sunday attack. It was very clearly stated in all THASL letters to the Government. We have no issue in this being brought in as a criteria. The most important thing is for the Government to act as soon as possible. We therefore request the Government to provide such a relief, which will be very helpful to sustain this industry that over three million of our population depends upon.

“A long-term request to relieve the hotel industry of the burden of an unfair top line tax of 1% Municipality by Local Government authorities has still not been settled. It is totally discriminatory Local Government authorities to charge millions of rupees from hotels when they only charge without an exception a measly sum of Rs. 6,000 annually as license fees from every other industry. 

“Why do hoteliers have to pay so much more when the industry is struggling to survive? We seek immediate attention from the Government again to resolve this issue and abolish this tax.

“So is the case with electricity. The tariff rate for the hotel industry is higher than all the other sectors. Our request is for the Government to bring the hotel sector on par with the other industry tariffs and not to discriminate against the hotel sector with higher tariffs. 

“Further, with the onset of the pandemic in early 2020, closed borders and vacant hotel rooms, the hoteliers could not settle their electricity bills. We requested a temporary instalment settlement structure over a period of 12 months from March 2020 to September 2021 (for 18 months). Unfortunately, we have not received a positive response to any one of these critical requests. 

“We need the Government to provide a long-term sustainable solution to our problems. Post-pandemic we believe tourism to Sri Lanka has the potential to reach its revenue targets in the near future.”

The THASL Chief added that the perception of hoteliers being only service providers of accommodation for foreign visitors was totally incorrect. 

“A country cannot be marketed without the accommodation component. Hoteliers play a critical part in the overall tourism growth of the country. Not only in Sri Lanka but across the world. Hoteliers spend large amounts of money overseas by way of direct marketing. 

“This has developed a new segment of business to the country. The percentage of direct bookings to all hotels have shown substantial growth over the years. We hope to increase this contribution more with the support of SLTPB.” 

In his speech Shanthikumar also acknowledged that the initiative taken by the SLTDA to appoint an internationally reputed company to conduct a ‘safe & secure’ audit for all hotels regardless of the hotel category was commendable. “This helped the hoteliers to safeguard our own staff and guests during the pandemic. It will undoubtedly help portray Sri Lanka positively among the tourism community across the world.

“Our industry has faced many challenges including a 30-year war. We have always shown resilience and come out better. However, the present situation is unprecedented in our entire history. Tourism was hit with a double blow – the Easter Sunday attacks in 2019 and then the pandemic in 2020. 

“The industry has come to a virtual standstill. Whilst some hotels have converted their hotels to intermediary care centres and quarantine hotels just to get the cash flows to pay the monthly wages, many hotels still remain closed.”

Shanthikumar pointed out that tourism is an export industry and a key foreign exchange earner to the country.  

“If the net foreign exchange is assessed, tourism becomes the second-highest foreign exchange earner, surpassing even apparel. This is due to the consumption of the product happening in the country itself where the benefits filter down to grassroots levels. For example, a tourist arriving in the country not only remits dollars prior to their arrival but spends a large amount of money within the country during their stay. 

“The benefits of this surpasses all other export industries. Unfortunately, these figures are not tracked by the Central Government as Tourism Revenue. This industry has the potential to achieve $ 1 billion revenue in the coming years. For these reasons most countries give a stronger emphasis to tourism and development when formulating their national policies.”

In his speech, the THASL President also thanked officials in the Ministry of Health and all front-line staff of the entire medical profession for their yeoman service during these difficult times, risking their lives and the lives of their close family. 

“This has been a difficult period for all of them. Their commitment and dedication is appreciated by all of us in the hotel industry. Our condolences go to all Sri Lankans who lost their lives due to the pandemic,” he said.

Tourism Minister and Secretary, Sri Lanka Tourism Chairperson and Director General, and the team were also commended for their support.  

Shanthikumar also recognised the support from business partners the DMCs, SLAPCEO, the national carrier SriLankan Airlines and all other airlines. “You have shown resilience through the years and hope we will overcome the present and the future challenges in the same manner to make Sri Lanka the most sought-after holiday destination in Asia,” he added.

THASL Immediate Past President Sanath Ukwatte also came in for special praise, for chairing the industry body during the most difficult time in its history of over five decades. 

“Some of us know the hard work you put in to strategically take the Association to another level and to get a relief package for the hotel sector, which helped the members’ survival post-Easter Sunday and now the pandemic. 

“You travelled on a very hard and rough road. We will remember it with gratitude and appreciation. I certainly intend to take forward the good work you have done for the betterment of the hotel industry in Sri Lanka.”