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Tourism industry: A slow return to normalcy   

28 Mar 2021

  • holders struggling to pay debt 

  • Smaller stakeholders worst affected 

  While international tourists have begun to slowly trickle back into Sri Lanka after a 10-month lockdown, industry stakeholders are not yet out of the woods. Due to inadequate arrivals of domestic and international tourists, stakeholders, both big and small, have reported difficulties in paying off their debts.  The industry currently has an accumulated debt of over $ 1.7 billion over the years. However, it has received several moratoriums in the last two years.   The sector was initially given a debt moratorium following the events of Easter Sunday in April 2019, with the moratorium being further extended following the Covid-19 outbreaks in March 2020 and October 2020. The moratorium was most recently extended again until October 2021. However, stakeholders have stated that they need more financial support from the Government and the moratorium extended further.    Bigger stakeholders  Speaking to The Sunday Morning, The Hotels Association of Sri Lanka (THASL) President Sanath Ukwatte stated that the entire hotel sector is grappling with the burden of paying off their debts. He explained that hotels are large investments and the hoteliers plan on paying off their debts according to the cashflow coming into their businesses.   However, he stated that since the 2019 Easter attacks and the 2020 pandemic, the local hotel sector has been struggling to pay these debts.  “First, we had the terrorist attacks on multiple hotels, then the pandemic which shut our cashflow completely for 10 months. Even though there are tourists trickling into the country, we only expect tourism to have a major recovery at the end of 2021.”  Due to this, Ukwatte stated that until there is a large number of tourists entering the country, the sector will not be able to service its bank loans.   He stated that the industry has to pay its collective debt of $ 1.7 billion, alongside maintenance cost for the hotels and the salaries of their employees.  He stated that they are now requesting some kind of support from the Government to mitigate the impact they are facing; one that would allow them to maintain their properties and protect the livelihoods of the employees.   “Due to this lack of business, we are finding it difficult to even meet our basic commitments. We were promised a wage support scheme, which was initially put forward to the Cabinet of Ministers, but unfortunately, it did not come through. Therefore, we are requesting the Government to come up with a stimulus package.”  He went on to state that they have also requested a mechanism from the Government, in which they can forgo the interest which had accumulated during the period where they had to completely shut down operations.  However, Sri Lanka Association of Inbound Tour Operators (SLAITO) Chairman Thilak Weerasinghe stated that the extension of the moratorium to October 2021 was greatly appreciated, as it included both loans and leases.   He explained that paying off leases on vehicles was one of the biggest challenges for the smaller players, as they had almost no income coming in.  "We are happy that it was extended but we have requested for the moratorium to be extended until March 2022, and we are also lobbying for a credit line so that we can continue our operations."  He stated that the entire industry is lobbying both the Government and the Central Bank of Sri Lanka (CBSL) to give them a special credit line with a low interest rate and a two-year grace period.    Smaller stakeholders  The industry's smaller stakeholders have claimed to have experienced the worst impact during the current situation, due to them getting no international tourists and very few domestic tourists. Speaking to us, an official from the Tourism and Trade Association of Ella, Harshana Abewickrama, stated that most of the stakeholders in the tourist town are having a very hard time when it comes to paying off their debt to both banks and other financial companies.  He explained that Ella's tourism stakeholders primarily consist of unregistered homestays, which have been asked to seize functions by the Government due to the ongoing pandemic. Ella is home to over 830 hotels; however, out of these 830, only about 100 hotels are registered with the Sri Lanka Tourism Development Authority (SLTDA) and are being operated with a proper licence.  Due to this, these smaller stakeholders have been unable to pay off any of their debt, which has led to them being pressured by finance companies and other debt collectors.  “The banks are okay; they do not pressure us to pay the debt we owe. But the finance companies have begun taking our vehicles as collateral,” said Abewickrama.  He stated that the issue has now grown beyond paying off debts, as these stakeholders are now struggling to even pay their monthly bills. He went on to state that several homestay owners have had to pawn their belongings to pay their bills and are now running out of options.   "We have sent letters to the Sri Lanka Tourism Board requesting some sort of financial aid, because we do not know when tourism will fully recover and if it continues this way, we are in big trouble."  This same sentiment was shared by hotels down south, as the smaller stakeholders located in Galle, Weligama, and Unawatuna are facing a similar issue. Speaking to us, five hotels located in these three areas stated that they, among many others, have become completely dependent on domestic tourists, but are unable to sustain themselves solely on domestic tourism.   “We contacted the SLTDA a few months ago and they advised us to focus on domestic tourism. However, with the current unstable environment and the varying restrictions placed on both the public and us, we cannot fully tap into that market either,” said one hotelier.  Another hotelier stated that they faced a greater loss due to the restrictions placed on high-profile holidays such as 31 December and Valentine's Day, when they were asked to keep occupancy very low. They explained that these were the holidays when most of the hotels down south would host parties or be the venue for private parties, which bring in a lot of revenue.    Government's response  Speaking to us, SLTDA Director General Dhammika Wijayasinghe stated that the target at the moment is to revive the tourism industry as quickly as possible, so that money can start coming into both the country and the industry.  She explained that to do this, the SLTDA has been in constant communication with the health authorities on relaxing some of the guidelines, so that they can increase the number of international tourists coming into the country.  She stated that currently, only the Level 1-certified hotels and a select group of travel agents are in operation.  However, she pointed out that if the tourism industry workers were vaccinated, they can relax the restrictions and open up these businesses regardless of the Level 1 certification.  “We understand that the banks cannot keep extending these moratoriums forever; they use the public's money to give these loans and if the depositors want the money back, they need to be able to give it back. Therefore, more loans and moratoriums are not the way to go. We need to revive the industry and vaccinating the workers is a start. To this end, we are pushing the health authorities to vaccinate the workers.”  Wijayasinghe stated that the SLTDA is already working with the health authorities to relax the quarantine period for tourists from 14 days to seven days, if the tourists in question have completed their vaccination.    PHOTO ©️PICTURE ALLIANCE/ROBERT HARDING


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