Sri Lanka’s Cinnamon Colombo hotels see competition

COLOMBO (EconomyNext) – Sri Lanka’s Cinnamon branded city hotels of the John Keells Holdings group has seen rise in competition triggering a fall in room revenue, Chairman Susanthe Ratnayake has said.

Cinnamon Grand Hotel had still maintained an occupancy rate of 75 percent in 2014, down slightly from 76 percent last year.

Ratnayake said the average occupancy of Colombo city five-star hotels was only 55 percent.

Room revenue had dropped 4 percent but food and beverage revenue had grown 122 million rupees allowing overall revenue to grow 1 percent to 4.93 billion rupees. Profits had dropped 11 percent to 1.54 billion rupees.

The 501-room Cinnamon Grand had a market share of 32 percent in 2014, only slightly down from a share of 33 percent reported a year earlier.

At Cinnamon Lakeside the average room rate was maintained at 18,267 despite "intense competition" Ratnayake told shareholders of Asian Hotels and Properties, the owning company of Cinnamon Grand, but room revenue had fallen by 213 million rupees as occupancy dropped.

However total revenue had dropped to 2.79 billion rupees from 2.94 billion rupees, pre-tax profits had dropped to 664 million rupees from 871.8 million rupees a year earlier, despite an increase in food and beverage business.

Food and beverage had brought in 1.27 billion rupees, up 4 percent from a year earlier.

"Despite the new restaurants that opened in Colombo, expanding the city’s dining options, customers have continued to patronise the iconic restaurants at Cinnamon Grand," the firm said.

Cinnamon Grand also opened a new restaurant ‘Noodles’ with a Vietnamese chef, offering dishes from Vietnam, Thailand and China. The hotel has 14 restaurants.

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Colombo’s hotel prices was seen as overpriced compared to some East Asian competitor destinations as rates were jacked up in the wake of surging tourist arrivals after the end of a civil war in 2009.

However since then new properties have come up, offering more reasonable prices making the industry more sustainable and allowing more people to see and experience the country, analysts say.

Asian Hotels said there was a "plethora of lower cost new entrants into the Colombo city hotels segment," in the three and four star categories.

There are also state price floors, imposed during the last regime, which may make it less easy to draw customers during off seasons for some hotels, analysts say.

The state intervention may also discourage the establishment of any new hotels categorized officially as ‘5-start."

Small boutique style hotels in particular have come up, which are on global booking engines where prices are transparent across countries.

 

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