Formal Tourism Sector Larger Than Informal Sector – SLAITO
By Sulochana Ramiah Mohan
Following the interview with Chairperson of Sri Lanka Tourism, Kimarli Fernando published on 23 August under the title ‘Don’t Dictate Terms on How to Promote Sri Lanka Tourism’ where she spoke on the new global tourism trend with the COVID-19 pandemic situation. She urged tourism stakeholders to join hands in promoting the destination.
In that context she also pointed out that the Sri Lanka Association of Inbound Tour Operators (SLAITO)/ Destination Management Companies (DMCs), need to be flexible in embracing all tourism stakeholders, adjust to the new trends and work on the vision set out by President Gotabaya Rajapaksa.
A team of SLAITO members met Ceylon Today to explain their stance and how they have been promoting the destination at the same time denounced some of the statements made by the Chairperson about SLAITO.
Four members of SLAITO, the traditional inbound tour operators with 231 members established in 1975 speaking on behalf of the Association noted that they were compelled to speak to Ceylon Today since the Chairperson of Sri Lanka Tourism made several misleading statements regarding SLAITO that might dilute the stance of the Association if it was not rectified.
They rejected the claim that the informal tourism sector was larger than the formal sector in the tourism industry.
A member noted that Fernando is forming her own opinion regarding the two sectors.
“The formal sector is bigger and they were bigger foreign exchange-earners,” SLAITO noted.
“We reject that the informal sector is the larger sector as she claimed. We need a definition on the informal sector, whether it is the turnover, revenue or the number of people employed in that sector,” they said.
SLAITO reiterated that the income generated to the Government by way of taxes was the formal sector.
“The informal sector has two components namely the local informal sector and the foreign informal sector and we are facing a dangerous situation, they noted. They said that from Matara to Weligama the so-called ‘foreign informal sector’ runs the business and even engages in tour operations that are not registered by SLTDA. “Can she explain why they are not added to the pool?” they queried.
They noted that the Tourist Board should find out about them because they were also reaching out to the Government to get what the Government was offering to the tourism sector.
Explaining the strength of the formal sector, SLAITO noted thus: After 2005, the new Act has introduced taxation called CESS and a Tourism Development Levy (TDL) which is 1% of the turnover obtained from travel agents and hoteliers of the formal sector.
Between 2010 and 2019, the TDL was Rs 10.622 billion for Sri Lanka Tourism from the formal sector. Of this, the Treasury obtained Rs 5 billion. Adding to that was VAT from the turnover which is 15% paid to the Government. This is proof that the formal sector is larger than the informal sector. If the informal sector is counted, there should be some Rs 6 billion but nothing has been shown in this regard. As an inbound operator or hotelier, everything is accounted for. We don’t know how payments are made by the informal sector.
Fernando in her interview said the informal sector was those who were not into big-time tourism but were engaged in tourism but had gone unnoticed. She pointed out that there are tourism associations in Habarana and Trincomalee who are not recognised. However, SLAITO said SLTDA could not invite small associations to the table to make decisions. “She can give an ear to them but cannot drag all of them to the decision-making table. That is what her interview implies.”
Invested in people
SLAITO said, “We have gone to villages too and invested in people to put up huts eating areas and even construct toilets in the event foreigners are taken to their homes for lunch or a meal those areas should be clean and available. We are also promoting homestays and small eating houses under SLAITO but we don’t segregate these ventures,” they noted.
Fernando, on the other hand, pointed out that SLAITO does not allow them to promote others engaged in tourism.
“We the members of SLAITO also own hotels and home-stays and we are happy to see them grow too but they are not more important than formal sector,” they reiterated.
The Chairperson claimed that the informal sector also should be registered and be in the pool of Sri Lanka tourism and recognised them so that they get the benefits and perks given during a crisis from the government just as much as the formal sector enjoys.
She also said SLAITO should promote destination with Online Tour Agencies/Agents (OTAs) and that SLAITO cannot dictate agendas for Sri Lanka Tourism anymore. She said only 2,500 registered accommoda-tions were listed whereas there are 25,000 in the informal sector and it has grown and gone unnoticed because they go only on OTAs. She also said guests coming to Sri Lanka are through OTAs and tourism associations should not take credit about getting guests to Sri Lanka.
But SLAITO argued that all tourists arriving at the airports were not through booking.com, expedia.com or some destination DMCs and also stated that even SLAITO members use OTAs but the strength of the DMCs cannot be second to OTAs. “We bring tourists up to the airport. From our promotional budgets, we spend about Rs 1.5 billion annually. In this regard the Chairperson’s assumption about SLAITO is wrong,” they said.
The SLAITO while praising Fernando’s efforts on the Covid-19 protocol and taking measures to bring under control and the COVID certification issuance but they see a major delay in expediting it.
SLAITO members said logistics management on issuing the COVID-19 certification is slow and so far only 10 hotels in Colombo received clearance certification and if travellers are ready to visit Sri Lanka by next January/February, the licensing process has to be completed. “Still not a single DMC has received clearance certificates. Hotels have to be ready with the certification for organisations that bring in clients because only those hotels that are certified can carry out bookings.”
SLAITO said they have worked with efficient personalities in the past and past Chairmen such as Renton de Alwis, Udaya Nanayakkara and Kishu Gomez etc who drove the industry giving the right directions with no hidden agenda.
They also pointed out that in 2018 they brought in 860,000 guests and generated Rs 2.2 billion revenue, pointing out that the Chairperson’s claim that SLAITO has only 4000 employees was incorrect and they have over 11,000 employees. “We pay the TDL and that money is used for foreign promotions not only for us but for others too. Hence the industry has looked at the model keenly and had drawn plans based on the people who contribute to the industry and persons on board, SLAITO noted.
“We never said that hotels do not bring business and they should not be recognised because it is their product that we bank on and it is our guest who goes there, so we have to go hand in glove and what we need is to maintain the unity between these two parties rather than segregate them and show negativity. They cannot survive without us and we cannot survive without them. We bear the risk and with COVID-19, some of us are paying the hotels while we are not paid by tour operators. So, we see animosity being created by the Chairperson.”
Fernando noted that the SLAITO does not even have its tourism product to promote nor vehicles and is just an association throwing its weight around. SLAITO responded and said that members have their vehicles and hire them. “Some of us have our hotels too but we think and work as DMCs. Putting up hotels is not a big task but selling rooms is not easy.”
They questioned whether other Associations had a product to promote.
“The loyalty and reliability we have towards Sri Lanka as the destination that is offered by our principle operators together with SLAITO cannot be matched by the OTAs. How many OTA offices are here in Sri Lanka? None! But during the war, the inbound tour operators worked hard. When there is a national crisis, those bloggers and OTAs will vanish,” they asserted
On the allegation that SLAITO does not embrace OTAs around the world, SLAITO added that OTAs can close the doors if they want to on the product but the DMCs make sure that the client will come to a certain hotel on trust and faith stakeholders have in them. “Those OTA are working on smartphones. On online booking, the client can cancel and choose a lower rate hotel with the same comforts which is very unhealthy. Truly, the DMCs are on the decrease but still, about 50% are using it and it’s not completely dead. Their market is still huge.. We do embrace them and there is a mixture of OTAs and DMCs we work with,” SLAITO said.
The Chairperson claims that SLAITO does not do any joint promotions collaborating with OTAs to which SLAITO responded, saying that that they support OTAs and their traffic but to keep in mind that they don’t promote Sri Lanka. “OTA promotes cheaper hotels and these hotels are listed right on top and Sri Lanka is never in their top list all the time. The OTAs open the platform to the entire world but are not partial to Sri Lanka. There is a difference and we have our partners in other countries. We cannot treat our partners shabbily and we cannot recommend unauthorised hotels that have no insurance. Bloggers and the OTA care tuppence about this.
SLAITO said they have a right balance with the OTAs too but OTA needs to be subsidised however because they are not promoting the destination per se.
If the authorities are the regulators they must see the interest of all the parties than supporting a segment of the market, SLAITO urged. They said that at the SLTDA board, SLAITO has only one member represented by Tilak Weerasinghe and even if they oppose certain moves it is approved by the Board. Similarly, in the Convention Bureau and Hotel school, SLAITO has one member on the Board, however on the Sri Lanka Tourism Promotion Bureau board, SLAITO has three members.
Fernando rejected to offer the European Union (EU) fund Euros 3.5 million to SLAITO. She told SLAITO that the EU grant of Euro 3.5 million cannot be transferred overseas to support German and French tour operators as it is not prudent to remit foreign exchange overseas at this stage. She further noted that the fund will be used to support the SME sector and promotion of Sri Lankan Indigenous Wellness including Ayurveda and Hela Wedakama that will benefit all our citizens in line with the President’s Manifesto.
SLAITO claimed they did not restrict it to Germany and France only. The money from the EU is meant to stimulate their income as well but the Chairperson has given the impression that we are trying to hijack the money that has come to the Government of Sri Lanka.
To obtain that fund, we had set rules that any DMC clients who could use the funds should be working with tour operators based in EU countries and they should generate the numbers and based on the numbers to pay them from the fund. The reason why we wanted some fund was because tour operators in the EU have the reach and are aware of consumer behaviour and which consumers to target as well. They also know the channels to increase numbers as in the post-COVID-19 period, competition is going to be rife. That money is not going to be sent back to the EU. Her statement is deceptive.
Relaxing visa fee
The Chairperson also pointed out the relaxing of visa fee last year after the Easter attacks the Government lost Rs 6 billion as revenue and she blamed SLAITO for proposing it once again. She said there were more than 100,000 travellers to Sri Lanka between July and December 2019 and all those arrivals were free because SLAITO advised relaxing the visa fee. SLAITO had again proposed to relax the visa fee between September to November of 2020 which Fernando disagreed claiming that guests who cannot pay USD 35 as visa fee were not worthy of visiting Sri Lanka in the first place.
She also argued that Sri Lanka has been placed as a cheaper destination for nearly 40 years from the time the war ruined the tourism and now it’s the time to pitch high and make the destination as a high-end tourist destination. It’s now or never, she said.
SLAITO said it was the hoteliers who wanted a visa waiver for a short period of three months beginning next month as an inducement as the market was facing a slump. “It is not only Sri Lanka but many countries have relaxed regulations,” they said.
On the office space regulation, the Chairperson had rejected SLAITO’s call that any tour operator can do business without a specified office space. Fernando said “A travel agent’s guideline was an inbound tour agent should have a 250 square feet office space with a reception hall etc and she rejected those guidelines. Why do we need such restrictions?
SLAITO responded saying that they wanted to repeal those regulations as well and had already given a proposal at the request of previous Chairman Kishu Gomez in 2019.
Pay hike for tour guides
SLAITO also accused the Chairman of offering a per day pay hike to tour guides without consulting them. “We were planning to increase the tour guides pay before the Easter attacks and then planned to renew it later. But with COVID-19 pandemic everything stalled. Meanwhile, the Chairperson promises them an increment of USD 35 undermining the rupee value. If we pay them in US Dollars, then the others in the business would also ask for a pay hike at a crucial time like this.
SLAITO said Sri Lanka cannot take off at once but in a gradual process. After the war ended, USD 69 was the amount spent by a tourist per day and in 2018 it increased to USD 180. “It’s bringing consumers to Sri Lanka and it’s not a business like selling tea or spices. The destination will not take off if the infrastructure is not in place. There are no direct flights to Sri Lanka besides the UK. If we are to attract high-end tourists we need to fast track them,” he added.
SLAITO also claimed that high-end travellers are those who were the first to run away at times of crisis but backpackers come all the time and later come with their families.
On the Promotion Board there were six private sector persons but there was a lack of global promotion in the past years, Fernando claimed. SLAITO noted that under Ranil Wickremesinghe’s Government, a tourist task force was put in place and Merrill J. Fernando was President while persons of the likes of Dileep Mudadeniya and Malik Fernando were members. “They were the brains behind ‘So Sri Lanka’ hence they could answer that question,” SLAITO noted.
In the last four-and-a-half years, five chairmen were at the helm but none of them was permitted to work effectively to mend Sri Lanka Tourism, she claimed. She also noted that there was malpractice and even human smuggling was being carried out by Sri Lanka Tourism. What did SLAITO as a Board member do about it, she queried in the interview. SLAITO responded saying Malik Fernando was on that Board too and he should be able to answer that question better than SLAITO.