Business
‘Government should rethink minimum room rates policy’
A proposal, set to take effect from October 1, 2023, stipulates rates of USD 130 for 5-star hotels, USD 100 for 4-star hotels, and USD 80 for 3-star hotels within the city of Colombo. While the authorities argue that this measure aims to counter underpricing by higher-tier hotels, this policy threatens to undermine the growth and vitality of the tourism sector. It places an unnecessary burden on hoteliers already grappling with the challenges posed by the global pandemic and subsequent economic crisis. Further, it undermines the country’s competitiveness in the regional tourism market, the Advocata Institute said in a press release.
The release adds: ‘Pricing acts as a reflection of the quality of services offered by hotels and serves as a differentiating factor. If prices fail to accurately represent the services provided, customer dissatisfaction can ensue, especially when compared to more competitively priced options in neighboring countries such as Thailand and Vietnam. This is supported by a comment made by the Sri Lanka Association of Inbound Tour Operators (SLAITO) which states that “before implementing such prescribed rates, it is crucial to generate demand and interest in Sri Lanka…Adopting these rates will render Sri Lanka uncompetitive and result in a loss of clients, even when compared to hotels in New Delhi, with which they are currently competitive”.
‘Sri Lanka has previously attempted to implement price controls between 2009 and 2019, following lobbying by a segment of hoteliers aiming to compete more effectively against 5-star rated hotels. However, this policy failed due to numerous violations resulting from inadequate monitoring and enforcement by the authorities. Many hotels, including those that initially advocated for the government’s proposed room rates, have not complied with the established rates, as alleged by the former Minister of Tourism, John Amaratunga.
‘The imposition of minimum room rates restricts hotel owners’ flexibility in setting prices in accordance with market demand and effectively stifles healthy competition among various establishments. The tourism industry experiences fluctuations in demand that correspond to seasonal and weekly trends. Such demand patterns necessitate the ability for hotels to tailor their pricing strategies to capitalize on peaks and optimize profitability.
‘Every hotel has its unique room pricing considerations depending on factors such as location, size of the hotel, market demographics, level of competition, and type of service offered to name a few. The uniform imposition of minimum rates disregards the diverse range of hotels and accommodations available in Sri Lanka, catering to various budgets and preferences. This one-size-fits-all approach disregards the crucial factor of consumer choice. Imposing minimum room rates on a certain type of accommodation whilst disregarding alternate forms of accommodation available within the city of Colombo such as guest houses and Airbnbs, undermines the effectiveness of this policy.
‘Furthermore, hotels do not solely rely on revenue from room occupancy; rather, the occupancy of rooms paves the way for alternative sources of income such as from food and beverages, along with the provision of other hotel-related services. For example, a leading hotel in Colombo earned 77% of their revenue from food and beverages in contrast to the 19% earned from accommodation services in 2022. Therefore, when the government intervenes in one component of a hotel’s business model, it disrupts the interconnected methods of revenue generation.
‘Further, the foundation for these minimum rates—star classifications—is itself flawed. This system primarily relies on quantitative factors, often overlooking qualitative aspects such as service quality and ambiance. The inability to quantify these vital attributes compromises the accuracy of the classification.
‘The tourism industry in Sri Lanka has historically played a crucial role in the country’s economic development, providing employment opportunities, promoting cultural exchange, and contributing significantly to foreign exchange earnings. However, the recent decision to enforce minimum room rates could deter these potential visitors who are seeking affordable accommodation options, particularly given the publicity international vloggers have given Sri Lanka as a tourist destination. Further, this approach stifles innovation within the hospitality sector, and ultimately leads to reduced tourist arrivals and negatively impacts the entire value chain that relies on a thriving hospitality sector.
‘This policy undermines competition and oversteps in a serious way the role of government in a competitive market economy, the stated policy framework of the government.
‘The Advocata Institute strongly urges Sri Lankan Authorities to reconsider this ill-advised proposal.
By fostering an environment that embraces market competition, Sri Lanka can position itself as an attractive destination for travelers while allowing its hotels to thrive and cater to diverse consumer demands.’
Advocata is an independent policy think tank based in Colombo, Sri Lanka. We conduct research, provide commentary and hold events to promote sound policy ideas compatible with a free society in Sri Lanka. Visit advocata.org for more information.
Advocata spokesmen are available for live and pre-recorded broadcast interviews via +94 77 895 1491
CONTACT:
Subashini Kaneshwaren,
Senior Communications Executive, Advocata Institute
Email: subashini@advocata.org
The Ceylon Electricity Board (CEB) has announced an international call for proposals to develop two 50 MW wind farm facilities in Mullikulam on a Build, Own & Operate (BOO) basis. The initiative aims to bolster Sri Lanka’s renewable energy capacity, aligning with the government’s strategy to increase the share of clean energy in the national grid.
The bidding process, launched on behalf of the Cabinet Appointed Negotiating Committee, invites local and international project proponents to finance, design construct and maintain the wind farms under a 20-year agreement. The deadline for proposal submissions is June 12, 2025.
A senior electrical engineer at the CEB, speaking on the significance of the project, told The Island Financial Review: “This initiative is a crucial step towards achieving Sri Lanka’s renewable energy goals. Wind power is a key component of our strategy to reduce reliance on fossil fuels and enhance energy security.”
According to the CEB, interested parties can obtain the Request for Proposal (RFP) document by paying a non-refundable fee of Rs. 300,000 (or USD 1,035 for foreign applicants). The RFP provides comprehensive details on project requirements and evaluation criteria.
“Given the global shift towards clean energy, we expect strong interest from both local and international developers. This project not only supports our sustainability targets but also creates investment opportunities in Sri Lanka’s energy sector, the engineer added.
The wind farm project is part of a broader initiative to achieve 70% renewable energy generation by 2030, a key target set by the Ministry of Energy. Experts believe that projects like these will play a vital role in stabilizing electricity supply and reducing carbon emissions.
by Ifham Nizam
LOLC once again emerges as the “People’s Financial Services Brand of the Year”, securing the prestigious title bestowed at the SLIM Kantar People’s Choice Awards 2025 for an unparalleled ninth consecutive year. This recognition, conferred through a comprehensive consumer research, reflects the brand’s firm connection with the Sri Lankan people and its consistent leadership in financial services.
Unlike many industry awards, the SLIM Kantar People’s Choice Awards is determined by independent consumer research conducted by Kantar, a global leader in brand insights. Instead of relying on a judging panel, this recognition is purely based on public perception, brand recall, and customer loyalty, making it one of the most authentic measures of a brand’s standing. Securing this title for ninth consecutive years highlights LOLC’s deep-rooted connection with its customers and its ability to evolve with their changing needs while maintaining a firm commitment to excellence.
Kapila Jayawardena-
Group Managing
Director/CEO of LOLC
Holdings PLC
LOLC’s continued success is driven by its assurance to financial empowerment, innovation, and inclusiveness. It has redefined accessibility to financial services by reaching underserved communities and pioneering digital transformation. Beyond its core financial solutions, LOLC is a brand that stands with the people, for the people, embodying resilience and hope through the years. In times of crisis, be it economic hardships or global disruptions, LOLC has remained a pillar of strength, stepping in when the nation needed it most. This deep-rooted connection with the people is what truly sets LOLC apart. The company has also been recognized for initiatives that create real social impact, such as the Divi Saviya Humanitarian Project, which uplifts vulnerable communities through sustainable support.
Orient Finance PLC has reported an outstanding financial performance for the nine-month period ended December 31, 2024, showcasing significant growth in key financial indicators compared to the corresponding period in 2023.
The Company recorded a remarkable 161% increase in profit after tax, reaching Rs. 254.6 million compared to Rs. 97.6 million in the same period of the previous year. Net interest income surged by 37%, amounting to Rs. 1.66 billion from Rs. 1.21 billion, demonstrating strong portfolio growth and enhanced operational efficiencies.
Total assets expanded by 28%, rising to Rs. 25.3 billion, while loans and receivables increased by 36% to Rs. 19.76 billion. The Company’s deposit base grew to Rs. 15.12 billion, marking a 19% increase, reflecting continued customer confidence. Meanwhile, total equity improved by 12%, standing at Rs. 3.86 billion.
Earnings per share (EPS) grew 163% to Rs. 1.21, up from Rs. 0.46, while net assets per share (NAPS) rose by 12% to Rs. 18.27.
For the month of December 2024, Orient Finance reported a Cost-to-Income Ratio of 68%, reflecting continued efforts towards cost management amidst challenging market conditions. The Gross Non-Performing Loan (NPL) Ratio stood at 9.62%, while the Provision Cover was maintained at a healthy 65.37%, demonstrating company’s prudent approach to credit risk management. As the quarter ended 31st December 2024, Orient Finance’s Tier 1 Capital Ratio stood at 13.14%, with the Total Capital Ratio recorded at 13.16%, both remaining comfortably above the minimum regulatory requirements.
Commenting on the results, Rajendra Theagarajah, Chairman of Orient Finance PLC, stated, “These exceptional results underscore our commitment to sustainable growth and operational excellence. Our focus on innovation and customer-centric financial solutions has strengthened our position in the market. As we continue to evolve, we remain dedicated to offering innovative financial products that meet the diverse needs of our customers while driving long-term shareholder value.”
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