Big Idea: Doors Open – Airbnb in Sri Lanka

“Airbnb is not a disrupter, it’s an opportunity” says Manesh Fernando, the charismatic general manager of Hilton Colombo.

Manesh Fernando has been General Manager of Hilton Colombo since 2013. In 2018, he was awarded Best General Manager – Asia at the World Luxury Hotel Awards.

Fernando’s vision is to turn Sri Lankans’ love for big houses into a revenue stream that benefits the individuals, and ultimately, the industry as a whole. “It is not an asset if you don’t make revenue out of it. Take at least one room in the house and join the sharing economy.”

A view like this might be controversial at a time when hoteliers are sensitive to growth in the supplementary accommodation sector. However, Fernando is looking at the bigger picture. The type of visitors who are looking to stay in budget guest houses and homestays today can be hotel guests of the future, provided they have an experience that makes them want to return to Sri Lanka.

To suggest that people should just open up rooms in their home would be rash. Quality matters, as Fernando, who has spent 21 years with the Hilton chain, knows well. A sudden glut of low-quality options would not be of benefit to the individuals hosting nor to the industry as a whole, which could be affected by the knock-on impact from poor reviews.

What’s needed is finesse, says Fernando. Sri Lankan’s love to look after people, but those who want to open up their homes need to be educated on how to provide the right level of service. With experience in developed markets like Singapore and Australia, and developing locations like Vietnam and Malaysia, his view is shaped by a breadth of experience that includes serving as director of operations at four different Hilton properties.

The hotels industry could create the facilities to teach people how to look after their guests when they come to the house: how to ensure that standards of cleanliness and hygiene are met, how to make the linen and bedrooms smell nice, and how to welcome guests upon arrival.

There is already a gap between the number of students that existing hotel schools can train and the volume required to support the growing sector. Established hotels could offer training as part of a community project. The private sector could get involved in training individuals and families on the basics.

An approach like this, Fernando points out, would distribute the wealth from tourism across all levels. The multiply effect would be felt all over. Local employment opportunities would be created for cooks, cleaners, guides and drivers. Increased household income facilitates increased spending. With higher income, these families hosting guests may afford to spend at hotels, either on stays or dining.

The positive impact for the hotel industry has the potential to be multifold, including for manpower. Meeting and greeting tourists would improve the foreign language skills of hosts. Science has shown that it is easier to learn new information in low-stress environments when the mind is relaxed. The joy of connecting with visitors from all over the world is what many people love about the hospitality industry. Exposure to this experience, and to hosting, could encourage more young people to seriously consider a career in the industry.

Growth in the non-hotel sector and sites like Airbnb have made some in the industry nervous. Won’t this increase competition and put a further squeeze on hotel prices? Why should we encourage more to enter the market?

For one, any destination needs to provide diversity in its offerings. Not every guest can afford to stay in a 3, 4 or 5-star hotel, and not every guest would want to. The guest who is happy to pay $200 for a boutique hotel room is different from the guest who looks to pay $20 for a homestay. Providing comfortable and clean accommodation at a low price point is an important offering for a different segment of travelers, be it backpackers or a digital nomad looking to experience village life for a few weeks.

Second, as Fernando points out, it’s already happening. Tourists are already making the choice to stay in guest houses and homestays, despite formal hotel options being available to them. They have been doing so for some time.

Over the last seven years, the proportion of foreign guest nights spent in supplementary establishments has averaged at 25%. While this is a marked increase on 19% in 2010, since 2011, the percentage has been relatively stable, ranging between 23.6% (2012) and 26.9% (2017).

In the four years since 2014, the proportion of foreign guest nights spent at tourist hotels averaged 53.7%. For supplementary establishments, the average remains 25%. Deducting these sectors from the total foreign guest nights leaves the Other category (for whom there is no formal data available) calculated at a 21.3% share.

SLTDA data shows consistent demand for supplementary establishments. This is unlikely to change anytime soon. The rise in digital technology and apps will continue to increase freedom of choice and make independent accommodation options more accessible. Tourists will always choose accommodation based on their needs.

Budget travelers have an important role to play in the tourism eco-system. If guests experience comfortable facilities and great service in a homestay or guest house, they can be converted into repeat visitors to Sri Lanka, potentially returning with an increased spending capacity that is of benefit to all. If they experience dirty toilets, untidy rooms and a lack of hospitality, will those same individuals choose to come back as higher spenders in 3 or 10 years?

When asked about those who worry about business being taken away from hotels and hurting profits, Fernando is quick to retort, “Competition makes you sharper”. However, perhaps these types of one- or two-roomed accommodation offerings should not be viewed as competition at all. Demand for this type of accommodation has existed for some time. Why not make the most of it for the benefit of all?

Graph showing foreign guest nights by accommodation type: Tourist hotels, supplementary establishments and other.

Hospitality Insider Issue 4