Policy on minimum room rates leads to customer dissatisfaction, loss of clients: Advocata
Colombo (LNW): Colombo-based independent policy think tank Advocata has expressed reservations regarding the recent policy implemented by Sri Lankan authorities to enforce minimum room rates for hotels in Colombo, effective from October 1st, 2023.
According to the gazetted rates, 5-star hotels are required to set a minimum room rate of USD 100, 4-star hotels at USD 75, 3-star hotels at USD 50, 2-star hotels at USD 35, and 1-star hotels at USD 20.
In a statement issued by the Advocata Institute, the organisation scrutinised the policy and its potential impacts on the hotel sector, presenting its findings in a detailed policy brief accessible at https://www.advocata.org/. While authorities argue that the policy aims to counter underpricing, Advocata contends that it could pose a threat to the tourism sector, placing an additional burden on hotels already grappling with challenges resulting from the global pandemic.
The policy is viewed by Advocata as a potential detriment to competitiveness and an unnecessary intervention by the government, which could lead to customer dissatisfaction and the loss of clients compared to neighboring countries. Past attempts to enforce price controls have seen limited success, and these minimum rates could restrict flexibility, impede healthy competition, and overlook the diverse nature of accommodations, the institute argued.
Critically, the foundation for these rates, based on star classifications, is criticised by the Advocata Institute for neglecting qualitative aspects, and emphasised the importance of considering factors beyond star ratings to ensure a fair and dynamic pricing structure in the hotel sector.