Tourist arrivals for February 2010 reached a high of 57,300, surpassing February 2009 arrivals by a resounding 67.7 percent. While certainly February has always been the peak month of the Sri Lankan Tourism calendar, this year it is not only the increase in numbers but also the relative increase in yields that is noteworthy. For many years during the conflict, hoteliers had to resort to discounting to fill their rooms, but not so this year. Hence earnings from tourism should also show a healthy increase (these figures are only available quarterly).
Several hotels reported 100 percent occupancy levels for the month, no mean feat under any circumstances. Resorts in the Negombo area had the highest overall occupancies of close to 90 percent occupancy, while most of the other areas also recorded a very high occupancy levels. In fact, there was a considerable overbooking in resort areas, and many hotels have now suspended forward sales for the next few months in an effort to manage the situation.
All markets show healthy increases for the month, with western Europe (71.7 percent YOY increase), Middle East (127.4 percent), east Asia (93.7 percent), and south Asia (66.6 percent) leading the growth.
Hence, as expected, 2010 has got off to a flying start with the first two months having 108,057 arrivals compared to 72,637 last year for the same period, a 49 percent increase.
In preparation for the next winter season (which is expected to be very good), several hotels have already planned refurbishing activities during the forthcoming summer months from May to October 2010. Information collected by the Tourist Hotels Association indicates that close to 1,000 rooms will be temporarily “out of stock” due to refurbishing/upgrading activities in several leading resort hotels. In the Negombo region alone, there will be refurbishing activities in Club Hotel Dolphin, Blue Oceanic Hotel, Sea Shells Hotel, and Goldi Sands Hotel. Other hotels undergoing various forms of upgrading/refurbishing are Airport Garden, Taj exotica, The Blue Water, Cinnamon Grand, Mt. Lavania, Club Oceanic, Palm Garden, Riverina, Coral Sands, Hotel Sigiriya, Cinnamon Lodge, Berjaya, and Saman Villas. It is estimated that close upon Rs 3.0 Bn will be spent on refurbishing and upgrading the product according to the survey.
This is indeed a very good sign. The Sri Lankan Hotel product has over the years lost out to its regional competition, because everyone was in a survival mode, not having surplus cash to plow back for refurbishing/upgrading activities. With price revisions in the offing, it is imperative, therefore, that the product offering is improved to guard against the destination losing its “value for money” proposition.
However, it also noteworthy that it is mostly the larger hotels that are taking this initiative. With much larger stakes in the industry and more “corporate muscle,” they have better access to capital than most of the SME sector. The SME sector comprises almost 60 percent or more of the THASL membership, and it is this sector that needs urgent support right now. The government needs to come out with an urgent short-term plan to help refurbishing of hotels by way of incentives, including duty-free imports of capital items for refurbishing and also some form of preferential interest bearing loans for the SME sector.