May 01, 2011 (LBO) – Profit margins of Sri Lanka’s tourist hotels are widening with an influx of arrivals and rising room rates after the end of its 30-year ethnic war, a report said. RAM Ratings also noted that despite the recent rate hikes, Sri Lankan hotel rates are still lower than those of the other countries in the Asia-Pacific region. Given the rather “anaemic” demand prior to 2009, when the war ended, most hotel operators had been compelled to compete on price, RAM Ratings (Lanka) said in a report on the island’s hotel sector.
“Price undercutting had been evident among most city hotels and those in the southern region, with certain 05-star establishment only charging about 60 US dollars per night.”
However, the government started imposing minimum room rates in 2009 to curb excessive price competition, and a third increase recently implemented raised minimum rates to 125 dollars from April.
“With tourist arrivals hitting a record high in 2010, occupancy levels have also surged, reducing the pressure to compete on price,” RAM Ratings said.
“The upsurge in demand for hotel rooms has led to a concurrent rise in room rates across the industry.”