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Unfair Practices by Destination Management Companies (DMCs) Prompt Reconsideration of MRR Regulations

The Sri Lankan government is contemplating the possibility of abolishing the recently reintroduced Minimum Room Rate (MRR) for hotels in Colombo within two months, pending an assessment of its effectiveness.

Priyantha Fernando, Chairman of the Sri Lanka Tourism Development Authority (SLTDA), disclosed to Mirror Business that the government might reconsider the MRR removal, as indicated by Tourism Minister Harin Fernando. The decision comes in light of a review expected to occur within the next month or two.

In September 2023, the SLTDA reinstated the MRR for Colombo city hotels in response to appeals from hoteliers. The prescribed rates stand at US $100 for five-star hotels, US $75 for four-star hotels, US $50 for three-star hotels, US $35 for two-star hotels, and US $20 for one-star hotels.

The reintroduction of the MRR has sparked controversy within the hospitality industry. While the Hotels Association of Sri Lanka (THASL) has voiced support for the MRR, the Sri Lanka Association of Inbound Tour Operators (SLAITO) has raised concerns, alleging favoritism towards select stakeholders.

Fernando underscored that the resurgence of the MRR was primarily driven by unfair practices observed among destination management companies (DMCs). These entities, he noted, impose higher rates on customers without adequately compensating hoteliers, thereby retaining disproportionately large margins.

Highlighting the SLTDA’s intervention, Fernando emphasized the necessity for resolution among DMCs. However, failing to reach consensus prompted regulatory intervention.

Moreover, Fernando revealed that hoteliers from other regions, such as Kandy, have also advocated for similar MRR regulations. Nonetheless, he emphasized that the MRR serves as a benchmark for room rates, suggesting that market dynamics should dictate future pricing based on this foundation.

The current landscape includes ongoing legal disputes against the SLTDA and the Ministry of Tourism regarding the MRR. Fernando indicated that the decision to revoke the MRR amid ongoing litigation might result in reverting to previous, higher MRR levels, adversely impacting DMCs. Thus, the government is monitoring the situation closely to determine the appropriate course of action.

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