Ravi Thambiayah identifies hotel trade issues demanding quick action


Ravi Thambiayah with wife and daughter

A senior hotelier with decades long experience owning and managing two mid-sized Colombo hotels has focused on some deficiencies in the tourist arrival ‘numbers game’ as presently played in the annual report of Renuka City Hotels PLC which has posted what he called an "impressive profit" of Rs. 344 million with 77% occupancy in the year ended Mar. 31, 2018.

Mr. Ravi Thambiayah has said that the official count of tourist arrivals had signaled seven percent growth last year with arrivals up to 2.2 million from 2.07 million a year earlier which he saw as "far from satisfactory" in terms of the growth of room supply in the industry.

"In addition, the hotels registered with the Sri Lanka Tourist Development Authority (SLTDA) have not seen a corresponding increase in occupancy or revenue despite this increase," he said outlining three broad factors clearly contributing to the decline in occupancy and revenue of hotels here.

One of these was the lack of collective marketing of destination Sri Lanka resulting and our not attracting the right type of tourist. A mere increase in the number of arrivals, he said, will not add value to the industry. The tourist spending must increase along with increased arrivals to ensure sustainability of the sector.

He further cautioned that arrival figures could be diluted by the inclusion of persons coming here for work on tourist visas and not necessarily living in hotels. There was a need for a better mechanism in computing statistics of actual arrivals so that construction of hotels and the issue of licences to open new hotels are based on more accurate figures.

Thambiayah further noted that recent statistics said that there were approx. 24,000 registered rooms accounted for by SLTDA. But there were 90,000 unregistered rooms available for sale with the informal players including luxury villas and apartments selling rooms on a daily basis. They do not pay any statutory levies, fees or taxes.

"This has resulted in a huge disparity in respect of rates that the ‘informal’ sector can charge in comparison with what guests residing in formal sector accommodation are liable to pay," he said. "This creates an uneven playing field posing further challenges to the sustainability and existence of the formal sector."

He hoped the authorities will take initiatives to bring the informal sector within a regulated framework and bring them into the tax net. The task of registering the informal sector has been recently identified in the SLTDA’s Tourism Strategic Plan 2017 -2020 with mainstreaming such properties in the informal sector listed as a priority.

While SLTDA acknowledges the existence of the informal sector as a standards and compliance risk for all stakeholders, registering them alone will not created a level playing field, Thambiayah asserted.

"While we appreciate that small enterprises which truly provide a ‘home stay’ should be given incentives to develop and be taught to maintain quality and standards, the grave concern shared by a lot of registered establishment owners and operators is that in a market where there is already an excess of room inventory offered by the registered/formal sector, whether there is any more room to develop another entire sector without having far reaching implications."

He further pointed out that the there is strong growth in the formal sector with 250 new hotels due to be constructed in the pipeline which would bring a total of about 650 hotels to the country. Consequent supply and demand factors would lead to further competition, unhealthy pricing and lowering service standards among formal sector stakeholders.

He also urged that the industry and authorities should together address the problem of the severe shortage of skilled and unskilled workers in the hotel industry, the shortage of food supplies (seafood, meat etc.) and the inadequacy of well developed road, rail and domestic airline infrastructure.

Thambiayah credited management and staff at Renuka City for their dedication to optimize resources and run a lean operation and their commitment to service excellence for the results they have obtained.

The older Renuka Hotel adjacent to Renuka City funded the development of the second property of which it is the biggest shareholder with 62.22% of the owning company. Renuka City too, like its associates the now quoted Renuka Hotel and Cargo Boat Development, have done very well with its quoted share portfolio with dividend income and share trading profits substantially adding to profits from hotel operations.

Renuka City with a stated capital of Rs. 110 million has a general reserve of Rs. 3.4 billion, available for sale reserve of Rs. 618.9 million and retained earnings of Rs. 445.8 million in its books. Total assets ran at Rs. 4.67 billion and total liabilities at Rs. 84.58 million. The quoted share portfolio costing Rs. 868 million had a market value of Rs. 1.49 billion as at Mar. 31, 2018.

Renuka Hotels with 62.22% followed by Cargo Boat Development (6.51%), Associated Electrical Corporation (3.26%) and Crescent Launderers and Dry Cleaners (an associate with 2.63%) are the biggest shareholders.

The company’s share with net assets of Rs. 654.95, up from Rs. 616.11 the previous year, closed the year at Rs. 267.70, trading between a high Rs. 356 and a low of Rs. 267.60 against a trading range of Rs. 374 to Rs. 270 closing at Rs. 294.50 the previous year. A dividend of Rs. 6 per share, the same as the previous year, has been declared.

The directors of the company are Messrs. RB Thambiayah (executive chairman), Ms. NA Thambiayah (executive deputy chairman) Ms. SR Thambiayah, (Jt. MD), Mrs. MA Jayawardena (executive director), Ms. AL Thambiayah (executive Jt. MD) RS Tissanayagam (independent non-executive director), CS Wijeyeratne (independent non-executive director), Ms. NR Thambiayah (non-executive director) and Mrs. HMNS Gunawardana (independent non-executive director).

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