Sri Lanka to abolish floor rates for hotels from next March

ECONOMYNEXT – Sri Lanka will abolish floor rates for city hotels from March 2017, following requests from the industry, which has priced Colombo out of meetings and incentive travel market, the ministry of tourism said.

"With the abolition of the minimum rate regime hotels are free to charge what they want," Tourism Minister John Amaratunga said in a statement.

"They can charge 50 dollars or 500 dollars depending on the quality of the product. The market will decide the prices and as a result tourists will get value for money."

The current floor rates will be kept until March 2017, to protect forward agreements entered into by some hotels.

Ending of the floor rate for city hotels followed a recommendation of Sri Lanka’s Tourism Advisory Council made up of key players in the hotel and travel trade, the ministry said.

“Almost all the hotels have been calling for the abolition of the minimum room rates and to allow market forces to decide prices," Minister Amaratunga said.

"By sticking to the minimum rates we have been pricing ourselves out of the lucrative MICE market and losing out to our regional competitors.

"As a result we have been uncompetitive in the MICE market."

Floor rates are deceptive and generates lower occupancy than a free market price. The floor rates were imposed on star class hotels, which allowed new properties pricing freedom to unclassified properties. (Colombo/July28/2016)
 

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