Hotels (Commonwealth Union) _ The recent introduction of the Minimum Room Rate (MRR) for star hotels in Colombo has raised concerns about its potential negative effects on the city’s competitiveness in MICE (Meetings, Incentives, Conventions, and Exhibitions) tourism, according to a tourism industry update by First Capital Research (FCR).
FCR’s analysis highlights that while the MRR was initially intended to promote fair competition and elevate Sri Lanka’s status as a high-end holiday destination, it may have unintended consequences, particularly for the MICE sector, which is a key growth area in tourism.
Despite the aim of positioning Colombo as a premium destination, FCR notes that the city has become comparatively more expensive in terms of average room rates when compared to regional competitors like Ho Chi Minh City, Bangkok, Jakarta, and Kuala Lumpur, especially in the four-star and three-star categories.
The disparity in room rates could potentially dissuade MICE groups from choosing Sri Lanka as their destination, impacting the growth prospects of this lucrative tourism segment. FCR emphasizes that the bulk nature of MICE bookings makes affordability a crucial factor in decision-making, potentially diverting business to other destinations with lower room rates.
Furthermore, the implementation of the MRR has disproportionately affected smaller star hotels in Colombo, leading to increased demand for alternative accommodations such as home stays or hostels, particularly among price-sensitive customers.
While Colombo’s star-class hotels have experienced reduced occupancy levels, there has been a notable rise in revenues. However, FCR highlights a shift in demand towards alternative accommodations, with travellers prioritizing affordability over luxury, especially for short stays.
This trend has also led to a redistribution of tourism traffic, with Negombo hotels benefitting from significant discounts on room rates compared to their Colombo counterparts. Travellers, often spending a brief period in either city before embarking on round trips, are increasingly opting for cost-conscious lodging options.
In conclusion, while the MRR implementation has led to revenue gains for some Colombo hotels, it has also raised concerns about the city’s competitiveness in MICE tourism and contributed to the growth of alternative accommodations. Balancing affordability with maintaining standards will be crucial for Colombo’s tourism industry to remain competitive in the evolving market landscape.
