Chairman of the Tourist Hotels Association of Sri Lanka ( THASL) Sanath Ukwatte said yesterday that a proper promotional and destination branding campaign was the most critical for the tourism at this moment.
“We are disappointed that successive Governments have failed to understand the importance of such an initiative and its impact. Governments of competing destinations such as Maldives, Vietnam, Cambodia, Thailand, Mauritius, Malaysia have embarked on very aggressive destination campaigns and are seeing the results of such campaigns with increased inbound traffic and in terms of added value to the economy,” he told Ceylon FT.
Ukwatte, who is also Chairman of the Mount Lavinia Hotel, said that the recent troubles in the environs of Kandy was definitely a setback and is bound to impact forward bookings for the off season from key source markets. What is now required is to fast track the TV & Digital Marketing campaign and then to launch the Global Marketing Campaign by September this year.
Here, he is in conversation with the Ceylon FT.
What are your plans to promote Sri Lanka as a tourism destination in the light of the lack of such a programme in the last three years? A: Destination Marketing is the responsibility of the Government.
A proper promotional and destination branding campaign is critical for tourism at this moment. We are disappointed that successive Governments have failed to understand the importance of such an initiative and its impact. Governments of competing destinations such as the Maldives, Vietnam, Cambodia, Thailand, Mauritius, Malaysia have embarked on aggressive destination campaigns and are seeing the results of such campaigns with increased inbound traffic and in terms of added value to the economy.
The Sri Lanka Tourism Promotions Bureau (SLTPB) finalized the digital promotional campaign about two years ago. We are baffled by the unwarranted delays in rolling this out. This is a situation which needs correction and we stand ready to assist the Government’s initiative in every way.
We urgently need a focused Destination Marketing campaign rolled out globally to increase tourist arrivals to Sri Lanka.
This is a matter which needs greater attention than it has received, but we are encouraged by current positive attitudes.
On the one hand, there is much hype and talk of a Tourism Master Plan but what about the immediate priorities in countering the current situations? I ask this in the light of all the industry heavyweights being at the ITB in Berlin, but the world knew what was happening in Sri Lanka. How do you counter adverse publicity?
A: A Tourism Master Plan is vital to make a destination successful and more sustainable.
Today, we are witnessing high-rise buildings along the coast line and unplanned construction of hotels in the city and elsewhere in the country.
If we are to cater to a cross section of the market we need not only 5-star hotels but good 4 & 3-star hotels too. We need to be mindful of over visitation and places like Yala and Sigiriya, which are becoming overcrowded and therefore, almost impossible for people to visit. We need to address these issues without any political interference.
Talking of communal riots in Kandy, unfortunately, this should never have happened in the first place and The Hotels Association totally condemns such acts.
This is detrimental for our image today, especially when Sri Lanka is recognized as one of the friendliest and safest destinations to visit. The island is listed as one of the ‘Top 10 must visit destinations’ for holiday travellers. The 30-year conflict taught us to be resilient and to understand the need to counter negative publicity. Minister of Tourism and Christian Affairs, John Ameratunge, the SLTDA and the private sector have already done whatever they can to refute the adverse publicity. It was definitely a setback and is bound to impact forward bookings for the off season from key source markets. What is now required is to fast track the TV & Digital Marketing campaign and then to launch the Global Marketing Campaign by September this year.
What are your views on the Tourism Development Levy (TDL) which has been collected from the hotels which has now amassed to between Rs 3 and 4 Billion and which has not been used by the Ministry and the Tourism Promotion Bureau?
A: This is disappointing. However, Recently the Minister together with the SLTPB finalized a plan to advertise Sri Lanka on CNN, AL JAZEERA, CCTV and NDTV. This is a good initiative and we are confident that the SLTPB will launch this campaign beginning May this year.
Most destinations have a funding crunch but what happens to us at most times is a crunch in the lack of a strategic direction on how to develop a focused marketing plan in our key source markets and most importantly the execution to deliver results.
Today, Sri Lanka has become one of the most expensive countries in the region to operate hotels and we are attracting low- end tourists due to lack of proper marketing.
We have too many committees and bodies appointed to look at the industry. Everyone is an expert in tourism. We need far greater coordination and results-oriented approach.
Are you satisfied with the growth levels of the industry as of today?
A: Not really. Although we achieved the highest number of arrivals, out of this almost 50% of them seek accommodation in the informal sector. Most hotels in the formal sector did not see much improvement in rates nor the yield. In 2017, e.g. tourism grew only by 3.5%, the lowest since peace returned to the country.
We need to plan for double digit growth in the next three years if we are to achieve a target of five million tourists.
It needs to be recognized that the tourism industry, especially the Hotel Industry by its nature, is capital intensive. Today, we are catering to an increasingly discerning clientele, so that the product has to be constantly upgraded. Quality human resources have to be attracted into the industry and this calls for imaginative incentives. All of these require greater commitment of capital.
This is why a realistic taxation policy which does not weaken the industry and help us to complete effectively with other regional peers is absolutely essential. This is the only way we can compete and grow in the future. To summarize, investing in Brand building and having a stable tax regime are essential for Hotel Industry to grow.
What is your prediction of growth in the next three years?
A: The realization of a good promotional campaign will take two to five years to realize. This is now more urgent than ever before. There is almost doubling of capacity with so much more supply to come on stream.
Do you think that the growth will sustain itself to maintain good occupancy levels in Colombo?
A: Well, Colombo hotels sustainability will depend largely on activities taking place in the business world and how well Sri Lanka is positioned as a MICE destination. Unlike in resorts, a large percentage of business in Colombo city is penetrated by business travellers with a short length of stay. Only a small percentage are leisure clients in Colombo.
The Meetings, Incentives, Conferences and Exhibitions (MICE) segment can make the difference to the city hotels. Again, it is unfortunate that over the years, under successive administrations, we have not marketed Colombo aggressively to the MICE segment. This is a different market and should have a different strategy altogether.
ITB, WTM and other trade fairs are for holiday travel business and there is limited potential for MICE at these trade fairs. We have India, our giant neighbour right next to us with good air connectivity, but what we receive from them is negligible. This is, unfortunately, the result of a lack of strategic direction for MICE business. It’s eight years since the war was over and we have failed so far to develop a state-of-the-art exhibition centre, such as what is found in Singapore, KL, Hyderabad. Banquet halls in hotels are not exhibition halls and the Colombo city rooms cannot be filled to achieve desired results by targeting small conferences which are held in 5-star banquet rooms. We need to look at three to ten years ahead and target large events with 5,000–10,000 capacity.
Entertainment is another aspect. If tourism is to grow in the city, we need to look at all these aspects holistically. We need to ask ourselves, where are we? Where do we want to be? And by when? This assessment must form the basis of a practical strategy.
What do you think of the minimum rates or do you think that it should be allowed for market forces to decide vis a vis competing destinations such as Thailand and Malaysia? A: The Minimum rate yielded excellent results. We tracked it all the way. It is these rates that helped Colombo City Hotels to turn around loss-making properties, and infuse funds for major renovations and refurbishments to match up to International standards.
Today, we have quality 5, 4, 3 and 2-star hotels in Colombo City. We can learn from other countries, but we cannot be Thailand, nor can we be Malaysia. Those countries receive over 40 million visitors per year.
We need to carve out an identity for Sri Lanka. It is an island destination with unique characteristics. We need to believe in it and market it to the world. Let us learn from other experiences, but not to copy them.
The informal sector is now a major influence in the supply of rooms and is as big as the formal sector, numbering around 90,000 rooms and they have a 30% kick-start.
The Tourism Promotion Bureau has no idea of the numbers as they are not registered. Do you think that some form of Moratorium should be imposed to limit the supply?
A: The informal sector is very much a part of tourism development. They need to survive but should join the main stream.
This will bring standardization and will help to position the destination. There must be consistency in product standards, safety and service delivery. That is key to any successful tourism destination. This too is part of positioning a destination. The Tourist Board (SLTDA) has already ventured out to get the informal sector to the main stream. SLTDA has done an excellent job in this regard.
Yes, they are a formidable sector in the industry today. They attract a new client segment, young, experiential, adventurous explorers. A destination needs them.
They use public transport, eat at local cafes, mingle with the local communities and so on. This sector now contributes to almost 49% of the total arrivals. This is where we see a mismatch. The worrying factor is not the growth of the informal sector but the phenomenal growth in supply of the formal sector, which has a dwindling demand.
The formal sector hotels are beginning to see their yields go down. Again, this is a reflection of the much spoken delay in rolling out a brand campaign targeting a well-defined, specific market segments. We are glad to note that there is now a strong resolve to address this.
How do you do that?
A: It is been done in other countries and we need to study those models. Also, I believe that we need to engage a panel of lawyers to find a way to get the OTAs to respect the law in countries they operate.
It is also alleged that the informal sector is banking the funds overseas and not even bringing it to Sri Lanka, How do you see this?
A: This requires appropriate intervention by the Central Bank of Sri Lanka. There is very little an Association like ours can do about this. But, the SME Sector has grown remarkably well. From homestays to small restaurant operators to transport suppliers, tourism has contributed to the economic activities in the country.
Also, the advancement in technology, on-line booking sites such as Air BnB has helped this sector to secure bookings. We need to develop a system to track these bookings and charge an appropriate tax on the informed sector without destroying this sector.
Or, what will you do to bring the informal sector into the formal sector?
A: As I said earlier, SLTDA is doing an excellent job in getting them registered as a first step.
There is an erosion in the earnings and the profitability of hotels and resorts in the western coast. This is reflected in the financial statements of some of the listed blue chip companies. What are your thoughts on this?
A: I did mention this earlier. These are first signs of a decline and we need to take cognizance of this development. If we are not proactive even at this stage, we cannot expect much in the future.
What remedial action should be taken with possible strategic marketing to bring in quality tourism into Sri Lanka?
A: Tourism is a very broad and complex subject but it is not a rocket science. There are varied opinions on how to market the county. Some are sincere and objective, but others suggest initiatives which will benefit their own pockets and not the country at large. Even the private sector is guilty of this.
The right leadership should be able to evaluate every aspect of it and then arrive at a proper strategy without any bias and by engaging all stakeholders.
We need to develop a practical strategic plan. A pragmatic one. One which we can yield quantifiable results. Over the past years, many plans have been developed with both local and international consultants. But the progress made is clearly inadequate.
We must go out into the world immediately and communicate the unique features of our country, to make the world know that we are one of the finest islands of this size. Quality tourism should be to increase the average spent per tourist. This trickles down to the grass root levels.
Certain drastic but very strategic decisions will have to be taken if the Government wishes to position the island as a quality destination. Then again, I am not a marketing expert. We need to get expert advice.
In short, what will you do to limit the supplies or on the contrary, what measures will you take to add value to the tourism product which will pressure the prices to go up?
A: Stifling growth is not the best way forward, but it may be necessary at times. Until such time as we get our act together with regard to promotions and where we want to reach by 2025, we should not have new supply coming into operation.
This is my personal opinion. This means to consider stopping new approvals other than what has already received the go ahead. As per official records, by 2020, 6500 new rooms are due to be opened in the country. This will take the total formal sector room inventory to nearly 35,000. That’s 70,000 beds.
This is just two years from now. With the challenges we face and the new rooms in the market, one can imagine the pressure on pricing when supply begins to exceed demand. This is a perfect ingredient for Sri Lanka to once again be known as a cheap destination and not a value for money holiday destination.
We must make sure that this does not happen, as we have realized from past experiences that when you lower prices to recover again takes a long time.
Do you think that the Tourism Promotion Bureau not proceeding with a structured programme of promoting the destination has led to this situation?
A: Fortunately, these are now indications of a corrective trend. I must mention that the industry met with Minister John Amaratunga on Tuesday and agreed to direct the marketing team to fast-track the global marketing campaign.
He promised to launch the TV Campaign in major international television networks to showcase the country, as an immediate measure and launch the social media campaign thereafter, starting in May. So, we are hopeful that the Minister will act fast within the limitation of Government procurement systems which actually cause undue delays in implementing some of the planned marketing activities. MD SLTPB is also trying his best within these constraints. We have all the confidence and renewed hope that this time around something positive will happen.
The fact that the Prime Minister’s office is also actively backing the Tourism Ministry’s plans brings us additional comfort and hope that things will be addressed soon.
How do you see the drawbacks in the structures and strategies of the Tourist Board ?
A: In any organization, stability in the leadership is critical for success. The private sector is well aware of this. Unfortunately, the number of changes in the SLTPB and SLTDA leadership is far too many.
It is a must that professionals who understand the role of marketing with a good knowledge of tourism and how the Government Procurement System functions have to be appointed to such positions. If not, we will never get where we want to be. Age should not be a barrier.
How would you recommend the drawing of top class professionals into the industry?
A: The Hotel Association has been considering over the last year practical ways and means of adding value to the Industry, by modernizing it and elevating its performance in the overall interest of the economy.
The overall contribution of the tourism sector is to enhance the nation’s foreign exchange earnings and the expansion of employment opportunities for our youth. We launched the ‘Rising Star’ competition for the first time in October last year, to create awareness and induce fresh blood into the industry.
It was well received by all stakeholders and as a result of that event, the Education Ministry invited our Association to address teachers, students and their families to highlight the opportunities in the hotel sector.
It is distressing to note that the proportion of female personnel in the hotels sector has declined from 10% to the appalling level of around 3%. Our Association has now finalized plans to go around the country, to visit schools, temples and other places of worship, talk to parents and launch a major public awareness campaign to address series of prejudices and false assumptions which dissuade potential school leavers, especially female entrants, into the sector. During the 30-year conflict, few professionals wanted to join the hospitality sector. We are seeing the impact of it now.
There is a lack of quality Management staff, middle level staff, skilled and unskilled staff. This is a serious challenge that we are facing today.
By 2020, it is estimated that the industry will require an additional 150,000 staff across all levels. The tourism industry has a direct and indirect employment of over 350,000 at present. Over 5% of our population is depended on tourism.
Do you think that entertainment with possible controls will see the attraction of Indian and Chinese tourists?
A: Entertainment is a separate subject and I believe it needs greater consultation with the public. This must be a well-thought out decision, keeping the culture and the sensitivities of our people in mind. Gaming is not the only source of entertainment.
It certainly will attract the Chinese and the Indian tourists. We can look at other types of entertainment such as a cultural centre showcasing dancers of the world, sound and light shows, shopping, theme parks and more dining experiences.
This too will attract the Indians and the Chinese. It will also attract the local community. We have a fine ocean around us and great water bodies. These can be developed. Today, cruise tourism is one of the fastest growing sectors. We need to develop a strategy to include Colombo, Galle, Trincomalee and Hambantota in the tours and itineraries of major cruise lines.
Is sustainable tourism in terms of optimizing of resources, caring for the environment, employees in the industry, high priority in the list of the policy makers and frontline industry players?
A: Yes, indeed. The private sector has many such initiatives and is quite active. In some cases this is done in partnership with foreign missions.
What sort of emphasis is laid for the preservation of energy, water and waste? In short, is the tourism pot giving enough attention to the employees and to the community at large?
A: Many hotels in the country are already practicing renewable energy initiatives such as installing solar panels to generate electricity, calorie fires or more recently using wooden pallets to fire up boilers so that you could reduce the consumption of furnace oil. Most hotels also use LED bulbs, key card systems to power hotel rooms and use of recycled paper where possible.
Since hotels are heavy users of electricity, they should be encouraged to shift into using more energy efficient systems like what I mentioned by offering an attractive financing packages to upgrade heavy equipment and use more renewable energy systems in hotels.
Do you think that the lower strata of employees have been given sufficient attention in terms of earnings ?
A: Yes. Most people are not aware the hotel sector staff earns an additional 10% as service charge over and above their salary every month. This is quite substantial. It varies from anything from Rs 5000 to Rs 50,000 per employee per month on an average, depending on the hotel.
All staff get free meals on duty, uniforms on duty, transportation on late evening shifts, free training, free English teaching in some hotels etc. As hotels are located across the country most people have an opportunity to work in the areas they live.
It is also alleged that the Government has increased VAT for the industry from 11% to 15% and reduced it to 12% now which also affected the triple bottom lines of the major hotels. Your comments?
A: Hotels pay 15% VAT, and that is one of the highest in the region.
Do you propose having a domestic airline flying to the East coast and other destinations?
A: This is the ideal. Not only to the east coast, but to the hill country and some popular tourist locations in the country,
These should be scheduled domestic flights so that it can be presold at the time of confirming the bookings. There are many other areas which need attention in terms of infrastructure development. They need to be developed concurrently with the tourism strategic plan 2025.
Recent opening of Batticaloa Airport for civilian traffic is a good start in this direction and it will directly benefit hotels in the East Coast.