The minimum rate agreement gazetted under the Tourism Act last month preventing star class hotels from virtually giving away premium rooms at next to nothing prices came into force today and will hopefully benefit Colombo’s city hotel industry.

``It will certainly help the smaller hotels that have been virtually squeezed out of the market,’’ a big player said on condition of anonymity. ``They obviously couldn’t compete with five-stars pricing low to grab as many guests as they could. Who would pay 40 dollars for a room in a three star hotel when you could get five star accommodation at that price?’’

``We are most grateful to President Mahinda Rajapaksa and Tourism Promotion Minister Faizer Mustapha for understanding our problems and acting quickly, firmly and decisively,’’ the owner of a smaller city hotel said. ``We are confident these legally mandated rules will work.’’

But Mr. Nahil Wijesuriya, controlling shareholder of the Hotel Ceylon Continental, vigorously expressed the contra view saying that it is totally unfair to lump all the five-stars together because standards varied sharply.

``Mine is the oldest five-star,’’ he said. `` With all my problems, including the security concern of being close to President’s House, I’ll have to wait till the Cinnamon Grand, the Cinnamon Lakeside and all the best properties are full before I get a guest at the same rate as them.’’

He added: ``I’m running at 25% occupancy at $ 55. It’ll be near zero at $ 75 unless a guest who looked at the Internet walks in by accident but he’ll also push off the next day when he finds our what else is on offer at $ 75.’’

Under an Order gazetted under the Tourism Act No. 38 of 2005, Mr. Bernard A.B. Goonetilleke, Chairman of the Sri Lanka Tourism Development Authority (SLTDA), has enforced a minimum rate of USD 75 on five star hotels, $ 60 on four stars, $ 45 on three stars, $ 30 on two stars and $ 20 on one stars.

This is a room only rate with taxes and service charge on top of them. There are separate (lower) rates for airline crews with five star hotels, for example, permitted to offer a $50 rate to that category of guest.

Well informed sources said that the president, fearing possible closure of smaller hotels and consequent job losses, made a virtual order on minimum rates that are expected to benefit the smaller players.

``It was a political decision,’’ one well informed source said. ``It wasn’t possible to let hotels close and people lose jobs.’’

The industry is permitted to charge whatever rate they can command for their rooms and the prescribed tariffs are only a minimum. Many hotels were charging over the prescribed minimum even before the new Order came into effect.

A Japanese guest who was here last week asked his principal to make a room reservation for him at the Hilton and a rate of USD 125 was quoted. After some haggling, the rate was brought down to $ 120 inclusive of breakfast.

Told about this, the general manager of another five-star said: ``You could have got a better product (he named another property) at 60 dollars.’’

But the guest preferred to remain where he was as he considered the Japanese restaurant at the Hilton ``the best in South Asia’’ and in any case his company was picking up the tab.

``We might have given him an un-refurbished room at $ 60 but one that has been done up would have cost him $ 100,’’ a spokesman for the hotel mentioned claimed. ``In any case we are going to do up those rooms too in the short term.’’

Trade sources said that less attractive rooms in some of the best hotels were available at prices as low as $ 40 and some Maldivian guests, for example, were happy to take these bargains.

``We did have two star guests in five star hotels under the old order,’’ a hotelier admitted. ``This is likely to change under the new minimum rate regime.’’

Hotels that are likely to be hurt under this regime include the Ceylon Continental, the country’s very first five-star, and the Galadari which is carrying huge losses with the owner of the Continental particularly mounting a vigorous opposition to the scheme. Both these properties carry five-star classification.

Asked whether it was correct that some hotels had wanted their star classification revised downwards so that they can price themselves lower under the new order, Goonatillake said that was not something that could be done just like that.

``It would happen if the facilities on offer do not match up to the classification,’’ he said. ``There’s a scientific basis for the classification,’’ he explained pointing out that it wasn’t possible to move up or down at will.

Wijesuriya said he’d asked for a three star classification that was possible under the rules. Then he would be able to compete on the minimum rate.

``The people who are happy are those who can fill their hotels at our cost,’’ he complained.

Goonetillake said that about half the country’s 14,000 hotel rooms need refurbishing. It would take two or three years for new hotels to come up. The minimum rates will become redundant as traffic improves and more visitors come in, he said.

Some hoteliers claimed that travel agents who had bought rooms ahead at less than the minimum prescribed were selling higher to clients and taking a profit at the expense of the hotels.