Thank you for receiving us today. Can you give us some background information in terms of the Hilton Jaic's historical background and when it started in Sri Lanka, and also what is the Jaic's structure in relation to its sister company the Colombo Hilton?
We have been in operation for three years since 1997. We are the newest "kid on the block" so to speak. The concept is a little bit different than that of an ordinary 5 star hotel since it's an apartment hotel. However, we operate like any other 5 star hotel. The facilities consist of a little less than 200 apartments, which we rent on short term as well as long time basis. This concept as such is unique. The size of an apartment cannot be compared to an average size room and no other place can offer this facility giving us a competitive advantage. There is plenty of diversity with the apartments. We have one-third which are 2 bedroom apartments, and about two thirds which are 3 bedrooms. We also have 8 penthouses. We are a fully fledged 5 star hotel with all supporting facilities e.g. 24 hr. room service, daily house keeping services, three restaurants, a very popular bar, shopping mall with 16 shops, take away shop, beautiful health club, pool, squash and tennis, bell boy concierge facilities, car park facilities, we have a ball room, outside catering, business centre facilities, maybe on a little bit smaller scale but you name it and we have it. However, our challenge is to continuously increase our marketing efforts to make sure people are aware of this concept. For a company like Hilton as well as the Owning Company to have this type of concept is highly profitable. The Hilton JAIC Tower is fully owned by foreign investors, by a Japanese company called Japan Asian Investment Corporation. We are one of the largest foreign Investment projects in Sri Lanka with 90 million US Dollars approved by BOI, fully owned by JAIC and operated by Hilton International.
Hilton Colombo and Hilton JAIC Tower are from an owning point of view two different entities. Hotel Developers, which has the government as the biggest shareholder, plus 2 Japanese Companies being minority shareholders which own the Colombo Hilton. Hilton JAIC Tower is fully owned by the company already described. Both properties are managed and operated by Hilton International. Both General Managers have a direct reporting line to Singapore that is our headquarters for the Asia Pacific Region. Both of us have the power of the brand name, which is "Hilton" providing us with a lot of brand recognition and obviously we capitalize on that to the fullest extent. There are however, a couple of other International chains like the Taj or Oberoi, but they don't have such a strongly recognized brand name, which gives us a competitive advantage. The Hilton JAIC Tower and Hilton Colombo do have many things in common. For instance, we are combining marketing efforts on certain occasions. Our Sales Teams are exchanging their views regularly and basically supporting and complementing each other. Just to elaborate on this a little further. Should the Hilton Colombo not be in a position to take on certain business they have received, we will be given the first choice and vice versa. Having said that, it is on occasions quite challenging to stay out of each other's way in terms of competing with each other. It is a very limited market and it does happen that we approach occasionally the same customers and initially compete for the same business; however, it is our aim to avoid it. Both General Managers have been instructed to complement each other and not to compete. It is proven in the past that together I repeat, together, we are a strong force against our competitors.
We are presently in a buyers market. The average occupancy in the city is less than 50%, the main competitors being the Oberoi, Taj Samudra, Galadari, Trans Asia and Continental. Unfortunately we have reached a stage where competition does not take place on quality of product, it is almost entirely driven by rates. I could easily make a statement that if we compete purely on quality, the two Hilton's of Colombo, would out perform any other Hotel on the island. We have a situation where the customer is extremely price conscious and unfortunately willing to compromise on quality in order to save US$ 10/- or US$ 20/- per night. Our two properties are far more superior to any other recognized Hotel in Sri Lanka and we do drive our marketing efforts towards quality but it does not always work. So in order to stay competitive, we do have to compete on rates as well to a certain extent.
How many staff do you have?
Approximate 250 persons.
What is your impression on the development of tourism in the country and what changes do you foresee for the future?
Tourism in Sri Lanka has been in a very difficult situation during the last few years. The Hilton JAIC Tower is not necessarily competing on that particular Tour Segment due to its concept. We are more into long staying guests and Corporate Business. It is not worthwhile renting out apartments for Tourists due to the rate structure in that segment. However, we do occasionally get requests from Travel Agents and we decide on ad-hoc basis whether or not to accept it; just to reiterate that it is not our core business. As you may be aware the political situation in the country is fragile; the war has taken its toll. During the first 6 months of the year 2000, the war escalated in the North and we had several bomb attacks and shootings in Colombo resulting in a dramatic drop in tourist arrivals. Furthermore, several foreign governments issued travel warnings and advised citizens to particularly avoid Colombo. These warnings are still in place. It has gone to such an extent that in Japan for example Sri Lankan companies who are related to Tourism are not allowed to advertise in newspapers/magazines, due to the situation which is obviously detrimental to business. The future depends very much on the ability to overcome these problems, but in particular the war. There are continuos efforts under way by the government to initiate peace talks, it must however, be said that the recent initiative by the Norwegian government has not brought the expected results. Although the City of Colombo has been remarkably quiet over the last 8 months, which is certainly a positive sign, but on the other hand the fear remains that the LTTE might be in a position to strike at any time. So as a conclusion, peace is essential to restore confidence. All of the above mentioned, do not necessarily encourage foreign investors. It must also be said that the International Press has been detrimental in the past towards realities in Sri Lanka, because we are only on the map if there is a bomb going off in Sri Lanka. Other than that nothing is reported about the positive things in the country, like the cultural heritage, the beaches etc. So in general the awareness on Sri Lanka is negative due to the International Press. On the positive side we had the famous English Cricket Team on a tour through Sri Lanka in March this year with a large number of spectators arriving from England. These fans have truly enjoyed their stay: they had a great time and have discovered that this country is beautiful and quite frankly I personally could not agree more.
| It is indeed one of the most beautiful countries I have been in; the people are genuine and friendly; country has beaches: some are among the most beautiful beaches in the world. It is diverse, it is rich in cultural heritage, there is an abundance of wild life; so basically the ingredients for a top class holiday destination are there.
However, the problem is that the country and our industry are under developed to a huge extent and in order to have it developed you need peace and funds, both of which are not there at the moment.
In order to be internationally recognized Sri Lanka needs more international Hotel companies committing themselves towards investing in the country and thereby assisting in the development. Competition is healthy and as a result will push the quality to higher levels eventually. Even we as Hilton would not mind to see in the long run the Sheratons, the Peninsula's, the Hyatt's or Shangri La's in the country, and this kind of commitment would certainly assist in the development of Sri Lanka to become a Prime Destination for tourists in Asia.
At the present moment of time: country is perceived as a cheap tourist destination.
When talking about development you have to see that the domestic transportation system is very poor, roads are narrow and jammed, it takes about 3-4 hours to reach your resort from the airport. There is no domestic air transportation in place due to the war situation, so a functioning infrastructure system is essential if you want to become competitive.
The majority of the resort Hotels do not exceed the 3 star level compared internationally, with a few exceptions for instance, the Kandalama Hotel and Culture Club which are both located within the cultural triangle. If you look at the beach Hotels Taj Exotica and Light House are probably the only hotels of truly international top standards.
Another factor is the cleanliness of the beach areas, which are very poor. Most of the beaches are beautiful but are extremely dirty: no body really looks after them. There is a problem with Beach Boys, where holiday makers are constantly approached which raises questions about the general safety. As I said before, the country is beautiful, there is certainly a future for tourism but we need to make a lot of efforts with the support from the Government, the Ministry of Tourism and the Ceylon Tourist Board. It is late but not too late. Countries like Thailand or even Indonesia are good examples of what could be achieved if everyone is pulling at the same string.
They are top decision makers and businessman that will be reading about Sri Lanka and the possibilities it offers for foreign investment. As Manager of one of the main hotel in Colombo, What would be your final message to our readers?
The ball is pretty much in the government's hand now. They need to restore investor confidence. They need to encourage foreign investors to come in and there is no doubt that we need more international companies committing themselves long term to Sri Lanka. The BOI should be one of the driving factors. There is a situation where the existing Labour Law does not necessarily encourage foreign investors. There is a common opinion among the business community that adjustments to the set Labour Laws will have to be made. Taxes are high; GST of 12.5% has been introduced last year and further increases are apparently planned for the latter part of 2001. All enterprises have to pay a National Security Levy of 7-1/2%, which had been increased several times over the last couple of years.
The currency is unstable: the Sri Lankan Rupee is being floated on a free market at the beginning of this year causing concerns among the business community. Inflation is obviously rising and it is officially already over 15% over the last few months. So if you depend on an important product/s, like we do in our Hotels, we obviously have issues that are affecting our bottom line negatively. Moreover the country is suffering from an energy crisis. The badly needed monsoon rains have not materialized creating a dramatic shortage in the water reservoirs across the island leaving most of the hydro power plants dry. Most of the time we have to run on generator power, which is generally not a problem, however, due to several price increases over the last 12 months for diesel and other fuel, amounting to 90%, add further burdens to us, as far as costs are concerned. It is now much more expensive to operate the generator rather than getting electricity from the main grid. All these facts are making it increasingly challenging to run business profitably. It is a bit of an obstacle course at the moment and you really have to be a master to get over it. There are certainly opportunities in the country, which our company has realized long ago and I can reassure you Hilton International does have a 100% commitment towards Sri Lanka, despite of the difficult trading conditions. On the other hand, and as I said before, it is now very much up to the President and her government to make things happen. There are indeed good examples of companies who have made remarkable improvements over the last few years, for instance the transformation from former Air Lanka to an almost privatized airline Sri Lankan Airlines. They have done an excellent job and go on expanding their business. There are positive signs within the Ceylon Tourist Board. The Chairman, who has been appointed at the beginning of this year, has wealth of experience and has got a lot of international exposure and his input will have a positive impact on the development through our industry. There are efforts under way to reach an unity among the 4-5 star hotels within the Colombo City Hotels with the objective to lift over all quality and subsequently average rates and it is no secret that by adding quality and value, you would be able to attract a different clientele who are willing to pay additional dollars which again, will benefit, not only the private enterprises, but also the supporting industries and will add to the general foreign exchange of the country.
In order to boost the industry the Tourist Board urgently needs funds for advertising and promotions and will have to get from the government, one way or another.
NOTE: World Investment News Ltd cannot be made responsible for the content of unedited transcriptions.
|
