Covid-hit hotel industry seeks urgent support from government

THASL Chief says support needed to prevent widespread devastation

Hotel industry alone employs approximately 250,000 staff

Seeks loan interest waiver for Rs. 350 bn debt till business rebounds to pre-pandemic level

Says banks are very understanding but they are reluctant to take a haircut

‘If govt reduces bank taxes by 2-3%, banks would be happy to accommodate our request’

‘There’s a lot of international donor funding available for hospitality industry’

‘None of the hotels have defaulted on any loans before’

‘Industry looks forward to 2021 with determination’

BY HARISCHANDRA GUNARATNA

As the hotel industry is forced to live with zero revenues with international travel becoming a long forgotten phenomenon in this Covid world, The Island Financial Review recently spoke with Sanath Ukwatte, President of The Hotels Association of Sri Lanka (THASL) to find out how the whole thing is weighing on his mind.

Following are excerpts from the interview we had with him.

“THASL is recognised for the incredible work it has done to support tourism in Sri Lanka. No other association or industry body of any industry has done so much under so much pressure. The fact that THASL has managed to obtain almost everything we have asked from the government to support the industry is remarkable. No other industry body has managed that”.

“At the moment the entire tourism industry has collectively taken loans amounting to Rs. 350 billion. 80% is from hotels big and small. It’s not as big compared to the assets. Total hotel assets are worth around $10b at present valuations. This fact was mentioned by Prime Minister Mahinda Rajapaksa during the Budget speech recently. None of the hotels have defaulted on any loans before. Moratorium is only a temporary solution as interest is accumulating during the moratorium period”.

“Since Easter attacks hotel debt is on moratorium. Pandemic came from no where. And again we are on moratorium. That’s why we are requesting the government for an interest waiver for 2 years or until international travel is restored and industry gets back to normal”.

“Banks are very understanding but they are reluctant to take a haircut. If the government reduces their taxes by 2-3% they would be happy to accommodate our request or else the government will have find another mechanism. There’s a lot of international donor funding available for hospitality industry as this is a global problem. 1 in 10 workers is employed by the travel industry, whether it be hotels, airlines, cruise lines, travel agents, theme parks, restaurants, retail etc”.

“As the worst affected industry due to COVID-19, governments world over have announced targeted relief for the hotel sector. Naturally THASL seeks government assistance to grant short-term and medium-term relief for the industry until the business bounces back”.

“We must also remember that our sector was completely crippled by the Easter Sunday attacks and as we were just about recovering from January this year onwards, industry came to a grinding halt in March as a result of this pandemic. Both these unfortunate events were out of our control. Now we are in a serious situation. Our priority is to maintain the livelihoods of 500,000 direct and indirect employees. Hotel industry alone employs approximately 250,000 staff who have undergone years of training. It’s a pity to lose staff who are committed and have made a career in the industry. In total there are 2 million dependents on tourism industry both indirectly and directly.

“In 2018, in addition to the salary, average service charge of a hotel employee was Rs: 25,000 per month. Now all that is lost. Hotels are struggling to pay monthly salaries to their permanent employees as company reserves has now depleted. Already nearly 20,000 have lost jobs. They were mainly trainees or who have worked for less than one year. Even the restrictions between inter provincial travel and 50 people limit for weddings and events have badly impacted on local business”.

“New Year’s Eve which is an important day for all hotels in the country in terms of revenue is all subdued now due to government’s call to restrict gatherings. The businesses are in danger. Cash flow has become a serious issue for hotels and jobs are at risk. That’s why we seek government support to restructure hotel debt with a two year interest waiver and a long term settlement plan for capital repayment”.

“Currently total hotel debt stands around Rs 350 billion. We have also requested the government to grant us the wage support scheme for the most vulnerable employees for which the Cabinet has already given the go-ahead. As a result of the 2nd wave of the virus UNWTO has revised the prospect for the international tourist travel for 2021 to a negative growth. Although we welcome the government’s decision to re-open the airport for tourists from January – a step in the right direction – it will take a minimum two years for the industry to rebound. Small and medium sized enterprises consist about 70% of the tourism industry. That’s why we call for financial and political support to enable critical recovery measures as speedily as possible.”