Sri Lanka hotel boom seen hitting room rates

ECONOMYNEXT – Sri Lanka’s hotel construction boom, especially in the capital Colombo, could put pressure on room rates, a hospitality investment forum was told.

The island does need more investment in hotels to keep pace with rapid growth in arrivals since the ethnic war ended seven years ago, said Jesper Palmqvist, area director Asia Pacific of STR, a hotel industry market research company.

“Arrivals are increasing steadily to two million tourists,” he told the two-day Hospitality Investment Conference Indian Ocean in Colombo. “Demand has gone through the roof.”

But with more hotels being opened rapidly, average occupancy levels were only around two-thirds, he said.

“Sri Lanka will probably be one of the worst-hit destinations, with an expected increase in the supply of rooms in years to come,” Jasmita Banga, business development manager of STR, told the forum organised by Sphere Conferences, the conference arm of Singapore Press Holdings Limited.

She said a government floor rate for Colombo helped keep rates in check, but that new supply will always have an impact on a developing market.

“It is not uncommon to see rate wars,” she said. “It is important for hotels to keep the long-term view and not undervalue or undersell in order to gain that short-term advantage.”
(COLOMBO, August 24, 2016)

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