The proposed increase in electricity tariffs is likely to increase operating costs of the hotel industry with the hotels segment likely to witness cost of electricity increasing by around 20%, due to unit costs on all three slots being revised upwards, a recent research report warned. According to a Quarterly Update (3QFY13) of Asian Hotels & Properties (AHPL) by Asia Wealth Management Co. Pvt (Ltd), as hotels have energy costs in a more fixed form, there is a tendency that margins could be affected.
“However, the overall impact depends on the percentage of electricity cost in the total cost structure.
Further, most of the large hotels including AHPL have also have adopted energy saving systems so that the revised rates would not have a drastic impact on its cost structure”, the report said.
Meanwhile, the report said that despite the increase in tourist arrivals for 2012 occupancy rates of the star category hotels which were continuously below the expectations during calendar year 2012 witnessed a setback.
As per the data published by the SLTDA the average occupancy rate of the country as at the end of November 2012 was 70.1% against 82.9% recorded for the corresponding period last year. Furthermore, total number of registered tourist hotels increased to 269 units at the end of November 2012 from 256 units in November 2011.
“The reduction in occupancies would be presumably due to the recessionary pressures in largest source markets such as Europe, which has resulted in a reduction in the number of nights tourists spend in the hotels. For the 9M 2012 foreign guest nights in Colombo City Hotels declined 8.4% YoY”, Asia Wealth Management report stated.