Sri Lanka’s hotel sector challenged due to increase of graded room supply: Hayleys

June 23, 2015 (LBO) – Sri Lanka’s Hayleys, a hotel operator says the hotel sector is challenged due to increase of graded room supply as several new domestic and international players expanding capacity. “The increased supply of graded hotel rooms has led to severe price competition and margin erosion, particularly given the prevalent shift in spending patterns of tourists,” Hayleys told shareholder in its Annual report 2014/2015. “Furthermore, the dearth of trained industry personnel to support the anticipated boom in tourism, may impact the growth prospects of the country’s hotel sector.” The company added. With the entrance of several new domestic and international players to the sector together with existing players expanding capacity, total room capacity increased by 1855 to reach 18,078 graded rooms in 2014. Meanwhile, there has been a gradual shift in the source markets for the country’s tourism sector, with arrivals from traditional markets of Western Europe declining as a percentage of total arrivals whilst East Asia and East Europe have increased its market share, led by China.

Supported by the surge in arrivals, occupancy rates at graded hotel establishments increased to 74.3 percent during the year (2013: 71.7%) with total tourist guest nights increasing by 37.

9 percent in 2014. Hayleys owning and operating 7 resort properties through the Amaya Resorts and Spas chains of hotels and 1 city hotel, The Kingsbury. The Group said in going forward the company has focused on a strategy of consistently expanding its room capacity and upgrading its properties to differentiate its offering.

Over the years, all resorts within the cluster have been upgraded from 3-star category to 4, 5-star and boutique hotel categories. Three Group hotels (Signature by Amaya, Langdale by Amaya and Hunas by Amaya) have been classified as Small Luxury Hotels by Small Luxury Hotels of the World. Data showed, the Hotels and Resorts saw a revenue growth of 12 percent during the year, supported by good occupancy levels as tourist traffic into the country increased but the sector profitability growth was slower at 2 percent, affected by losses stemming from Amaya Beach, Pasikudah, which was added to the Group’s chain of hotels during the year. Future Outlook “The short to medium term outlook for the country’s tourism sector is encouraging, and the Group’s focus on expanding capacity and upgrading its properties over the last few years has allowed it to position itself as one of the country’s leading leisure sector operators,” the company told shareholders in its 2014/2015 annual report. The company will add another green player to its hotel chain while adding an apartment complex for its city hotel.

“The next financial year will see the addition of an eco-lodge to our portfolio and also capacity expansion in the city hotel through combining an apartment complex as an option for long stay guests,” the company said. “Over the longer term, we are well positioned to further expand room capacity given our land bank of close to 30 acres in coastal areas of the country."